FSBO or Agent?
To FSBO (for sale by owner) or not to FSBO? That isn't the question that Shakespeare had in mind at the time, but many sellers are thinking that right now. With the current state of the market; low inventory, homes selling quickly, etc; many sellers may be enticed by the notion of selling on their own. In this market, they figure "what the heck? Homes are selling quickly, and for top dollar, I don't need any agent!" You need an agent now more than ever in this market! Does selling by owner really save you money in the end? Do you really gain that saved commission back? Let's look at it a little more closely.
Saving That $$
Since saving the commission is typically the driving reason behind selling on your own, let's start there and break down the actual savings.
Most real estate agents will charge 6-7% for commission. Typically it gets split, 3% goes to the buyers agent, while the listing agent keeps the remainder. Some markets will vary, but let's just stick with 6% for easy numbers.
So as a seller, one of the first things you need to ask yourself of whether or not you are going to work with a buyers agent? The National Association of Realtors estimates that better than 90% of buyers will bring a buyers agent to the table for negotiating. If you aren't willing to work with a buyers agent, you are eliminating a large pool of prospective buyers. For the sake of this section of the article, let's assume you are willing to work with a buyers agent. By agreeing to work with a buyers agent, you have already cut your commission savings in half. Instead of saving 6% on commission, you are now only saving 3%. What does this mean for the transaction? This means you are now paying a trained real estate professional to negotiate AGAINST you! This person is going to negotiate on the buyer's behalf to get the best price possible. Then they are going to negotiate to get the inspection items taken care of, any appraisal issues, and push you along the process as quickly as possible. Keep in mind, you are selling your home to save commission, and many buyers look at FSBO's because they think since you are saving the commission, they can get a good deal and save themselves some money! Both parties can't save the same the same commission.
Let's look at the numbers. The average median home price in Grand Rapids is around $192,000. 6% of that is $11,520. 3% = $5,760. So by agreeing to cooperate with a buyers agent, your savings are now down to $5,760. Keep that number in mind as we go through the rest of this article.
Marketing
So sticking with the average sale price of $192,000, and you being willing to work with a buyers agent, your commission savings are currently $5,760. But how did you get that buyer to your door? You must have marketed it somehow right? Did you pay for the listing packet for fsbo.com? Depending on your area, that's typically at least $200.00, and if it doesn't sell in the first 30 days, make sure your credit card has room, because you will get charged a fee to continue your listing.
- After the FSBO.com listing packet, $5760 - $200, your savings are now $5,560.
How did you take pictures? Almost every buyer will start their search online nowadays. And with first-impressions typically formed in a matter of seconds, you can't afford to miss buyers because of bad pictures. Did you dust off the old Kodak digital camera? Iphone? Do you have a wide-angle lens? If you have a photographer come in and take professional photos, plan on spending anywhere from $100-200. We will say $150 just for a round number. By the way, depending on the picture quality and add-on features like videos, you could be spending upwards of $500+ on photos. (most agents will pay out-of-pocket for professional photos)
After photos, $5,560 - $150, your savings are now $5,410.
Newspapers are archaic, but can still be an effective way to market your home. The cost of an ad, with ONE picture in the Grand Rapids press, for 28 days, is $227.
After newspaper marketing, $5,410 - $227, your savings are now $5,183.
How much is your time worth? You are setting up all of these items yourself, only to pay an agent to negotiate against you. The US Dept. of Labor says that the average hourly rate paid to US workers is around $22/hour. Every transaction is different, clients are different, but let's look at an average transaction and the time that goes into it:
- Listing - 8 hours. This includes researching sold comparables, signing listing documents, prepping the home, ordering/scheduling/taking listing pictures, uploading the listing and documents to MLS/FSBO.com
- Marketing - 4 hours. This includes internet/newspaper ads, sign creation and placement, flyer/print marketing ordering and placement.
- Showings - 10 hours. This includes 3 hours for an open house (one hour of prep, 2 hour long open house), 14 showings (as a FSBO, you are typically there for the showings) averaging 30 mins/per, equaling 7 hours total.
- Pending period - 27 hours. Servicing the transaction once you are under contract. 2 hours for offer negotiation and signatures. 4 hours per week servicing the transaction from start to finish (inspections, appraisal, title work, scheduling, closing), and the average pending period is 45 days or 6 weeks. 4 hours X 6 weeks = 24. 1 hour closing. Keep in mind, this is an ideal situation and a low estimation on all accounts. In difficult transactions, I have spent upwards of 100 hours on a transaction from start to finish.
- Total hours spent = 49 hours. 49 x $22/hour = $1078. Previous savings of $5183 - $1078 = $4105. Savings are now down to $4,105 after servicing the transaction from start to finish.
So your initial expected savings of over $11,000 has dwindled down to just over $4,000, and you have spent some of that savings on aspirin and stress-relievers! Many stats from NAR (National Assn. of Realtors) show that by listing with an agent, it is estimated that your home will sell for more than if you listed by owner, anywhere from 10-12% more. So you save $4,000 to sell your home for less money and more stress?
If you do the math:
That's a $13,443 difference!! Now this may not always be the case, but in the vast majority of cases, you will net more with an agent than without!
Why not let an experienced agent like myself take the burden off of you. Chances are, selling homes, is not your full-time job. So you are trying to juggle all of the above while working full time. Real Estate is MY full-time job! I can show you how I can get more money for your house and still put money in your pocket after it is sold!
But I had a bad experience with Another Agent...
I will be the first one to say that not all Realtors are created equal. Many in this market think that just taking mediocre pictures and putting the home on the MLS will get it to sell. Chances are, in this market, it will sell. But then you might not ever hear from the agent again. One and done. But this is where the professionals separate themselves from the rest. My goal is always to create lasting relationships. There is no substitute for quality service. Yes, I could do the same thing. Just slap a quick listing up on the MLS and collect a commission in 45 days. But, what if I marketed the home extremely aggressively? Spent money out of my pocket for professional pictures, floor-plan mapping, and YouTube videos? What if, instead of 3 offers and a couple thousand over list price, my aggressive marketing could bring 14 offers and get you $10,000+ over list price? What if my processes and follow-up made the transaction seamless and stress-free? What if I catered my marketing plan and my business to fit your individual situation? I build my business on referrals. I don't get those by just working for a commission, I get them from working for my clients. I say again, not all agents are created equal.
But I have bought/sold my own home before...
That's great if you have, but the market is a lot different, and much more competitive than it was in the past. I compare it to fixing your car. 20 years ago, yes there were a lot of things on your car that you could probably fix yourself. But your new car has so many more computerized components, do you really trust yourself to not mess up your car's computer just to save yourself a few hundred dollars? I don't. I take my car to a professional. I would rather pay a couple hundred more dollars than risk doing more harm than good and costing me more money in the long run. For instance, in real estate, if there is an error in the slew of paperwork somewhere, such as the purchase contract not written with the right language, you could be on the hook for a lot of money down the road. Many agents carry E + O insurance (errors and omissions) to cover us should there be an issue.
The bottom line is, there are pros and cons to selling your home on your own, but a good real estate agent is worth their weight in gold. I would always suggest consulting an agent prior to any real estate transaction, and hire one that is willing to work within your situation. Your home is one of the biggest investments you have, let a professional (like myself!) help you! Check out the infographic below for additional info!
