July 9, 2018
July 9, 2018
For many people who are trying to sell their homes, listing the property with a real estate agent is practically an automatic decision. There are certain advantages to getting an agent to sell your home. But you owe to yourself to at least try selling your home yourself before hiring an agent.
Here are a few good reasons why.
The typical real estate commission – the fee you pay to an agent upon the sale of your home – is around 6% in most markets. That’s a lot of money, particularly if your equity is fairly slim.
For example, if your home is worth $250,000, you’ll have to pay a $15,000 commission to the real estate agent. If you only have $50,000 in equity in the property, the commission will reduce the amount of cash that you will walk away from the sale with down to $35,000.
If that won’t be enough money for you to make a down payment on your next home, selling your home yourself may help you to walk away with more of your equity.
We presume that real estate agents are experts. But while they may be experts in the general real estate market, no one other than your listing agent will know much about your property.
This is when it’s important to remember that when you list your property with a real estate agent, it’s actually being placed for sale within the local real estate community. Yes, only one agent will list the property for sale. But once that happens, you will be opening up your home to be shown by dozens of realtors all across your market area.
Those agents will know nothing more about your home than the information contained on the multiple listing services. If there is any other information that they need, they will have to get it from you.
And that’s the point. You know more about your property than anyone else. That puts you in a better position to sell the merits of your home to a prospective buyer. If you have any kind of sales experience, you should certainly put it to work on the sale of your home.
In hot housing markets, real estate agents can look like superstars – even the ones who aren’t particularly good at what they do. If you’re living in a market area where properties sell quickly, and where many properties draw multiple offers, you may not need an agent at all.
Just putting ads on popular real estate websites, such as Zillow.com and Trulia may draw all the buyer prospects that you need to get some reasonable offers on your home. And if you want to get even more exposure, you can also try advertising your property on Craigslist or even in your local metropolitan newspaper.
One tactic you can also try – which is something of a half-measure between selling the home yourself and using real estate agents – is to offer the property for sale, but include a provision to pay a 2 ½% or 3% real estate sales commission. In that way, you don’t have to pay the listing half of the real estate commission. But at the same time, you’re offering to pay an agent the full amount of their commission if they bring a qualified buyer who purchases your home.
You’ve probably heard about the “80/20 rule”. That’s something along the lines of 80% of the work is done by 20% of the people. That’s true in the real estate business, just as it is in virtually every other industry.
What it means is that some real estate agents are really good at what they do. But the vast majority are not. If you happen to list your property with one of the agents who isn’t, you may be paying that agent to do very little.
It would be more than a little bit frustrating if you end up doing most of the work involved in selling your home, but a real estate agent ends up getting the commission anyway.
How does that happen?
Once you sign a listing agreement with a real estate agent, that agency is entitled to collect a commission on the sale of your property, regardless of who sells it.
Real estate listing agreements are prepared by attorneys who represent the real estate industry, not homeowners and homebuyers. For that reason, the agreements fully protect real estate agents.
When you sign a listing agreement, you are almost always giving the real estate agent exclusive authority to sell your home. Or more specifically, exclusive authority to collect a commission. Should you sign a listing agreement for six months, then the agency will be paid no matter who sells the property within that time frame.
Here’s the dilemma. Let’s say that you sign a real estate listing agreement that will run for six months. Two months into the listing term, you get a referral from a coworker on someone who’s interested in purchasing your home. Should the sale go through and close, the real estate agent will collect the full commission, even if no agent was actually involved in the sale.
It’s not entirely fair, but it is entirely legal. And that’s a major reason why you should try selling your home yourself before hiring an agent.
Even if you’re not sure if you will be able to sell your home yourself, you should try it out for at least 30 days. In that time, do your best to actively market the property. Welcome any prospective buyers into your home, and have copies of real estate purchase agreements specific to your state. You can get them through an attorney’s office, or often online.
That brings up an important point. A lot of people are willing to try selling their home themselves, but they’re unsure about the actual contract part of the arrangement. No problem, you’re going to need to be represented by either an attorney or a title company in the sale anyway. Get in touch with one in advance, and have them help you with the legal side of the transaction. In exchange, agree to have the closing handled through that firm. Your buyers will probably welcome that assistance as well since no agent is involved in handling the paperwork.
If after 30 days you’re unable to sell your home, then go the real estate agent route. At that point, you’ll have no trouble finding an agent to take the job for you. Since you will have marketed your home yourself, you will have already been approached by dozens of agents wanting to list your home. You can then choose the agent that you think is best suited for the job.
But if you do succeed in selling your home yourself, you can reap all the benefits. And think of the bragging rights you’ll earn!