The following is a reprint of my column that appeared in Frontiers In L.A. magazine on September 14th, 2010
I’ve been thinking about listing my house for about a year now. I’ve considered several different options, from ‘For Sale By Owner’ to a discount brokerage that just lists it in the MLS, to full-service brokerage that will handle everything for me. With your being an agent, I feel like I know which way you’ll point me, but can you give me, in your opinion, the pros and cons of each?
—Hunter, West Hollywood
Hi, Hunter. As an agent, when I’m giving a listing presentation, I’m often asked this question. Let me say first, of course I get why someone would want to sell their home off the grid and save the commission money that would ordinarily go to an agent, I really do. And when I’m asked, I lay the facts out and let the seller decide. I do occasionally lose a seller who decides to FSBO. However, of those, many end up calling me after they’ve tried it and not gotten desired results.
First, let’s break down the duties and benefits of a real estate agent (or Realtor if they are a member of the Realtor trade organization). An agent goes through extensive training and ongoing education to be able to sell your home or represent you in a purchase. Your Realtor will help you set an asking price, market the property thoroughly and will help you prepare the home for sale. They’ll also make recommendations for minor improvements and repairs, screen buyers, prepare all paperwork and disclosures and handle negotiations both during the offer process and the inspection process.
The typical fee for a listing agent with a full-service brokerage is between five and six percent of the home’s final sales price. There are discount brokerages that will do it for anywhere from two to four percent. Typically these companies don’t perform all the marketing and other services of full-service brokerage (but it varies from one company to another). When the market was white hot a few years ago and things were selling as soon as they hit the market, these companies were popping up everywhere. Now that we’ve transitioned into more of a buyer’s market, the pendulum has begun to swing more towards full service.
The pros of a FSBO should be obvious. No commissions to pay. If you can successfully get the home sold, that’s a lot of money you’ve saved. Statistically speaking, about 15 percent of the homes sold in the U.S. are sold by the owner. That said though, nine out of 10 owners who attempt a FSBO ultimately end up calling in an agent, usually for one of the following reasons: either it didn’t sell in the amount of time they’d hoped, they didn’t price it right so they got little activity or once they got started they realized they didn’t know all they needed to know about selling a home. There are a lot of disclosures that have to be provided, and a seller is put in a very vulnerable position legally by attempting to take this part on without professional help. Do you know how to pre-qualify a buyer?
Many sellers doing FSBOs do choose to open up their buyer pool significantly by paying a service to have their listing uploaded into the Multiple Listing Service, and do offer a commission to the agent who brings the buyer. Bear in mind that in that situation, you have a buyer who is being represented by a professional, leaving you to fend for and negotiate on your own behalf.
If you are considering a FSBO, you should be committed to the time it will take to get the home sold. Successfully selling a home is a full-time job. There will be the necessary marketing and advertising, fielding calls, facilitating showings, holding open houses, etc. And that’s before you’ve even seen an offer. By hiring a professional, you get to go about your daily routine and live your life while the agent handles everything. Very rarely is a homeowner savvy enough to know the value range for their home, and they often either underprice, leaving money on the table, give away the store in negotiating repairs or overprice, resulting in no offers.
There are several great websites that serve as valuable resources for those considering doing a ‘For Sale By Owner.’ The most popular ones are forsalebyowner.com, fsbo.com, homesbyowner.com. Those offer great assistance and community for those looking to go it on their own.
The bottom line is that often (not always), you will come out equally or possibly ahead by letting a professional price the property for you, handle the marketing, showings, etc., letting them negotiate on your behalf and letting them take on the legal responsibilities that you would have taken on. It really depends on how much you’re willing to take on, and your level of commitment to getting your home sold.
Jefferson Hendrick is an L.A.-based realtor with Keller Williams. Contact him with questions, concerns and real estate inquiries at firstname.lastname@example.org or facebook.com/jeffersonhendrickrealtor.