Do you need to hire a real estate broker to sell your home?
The short answer is no. Much to the chagrin of the National Association of Realtors (a lobbying group that has approximately 700,000 real estate agents as members), there is no law that requires you to engage the services of a real estate professional before advertising your property for sale. You are entirely free to sell your own property and represent yourself in the negotiations.
Of course, that isn’t the answer you’ll get from most real estate agents. They will usually tell you professional representation is the only way to go. They will say your property will sell more quickly (often true), for more money (probably true), and with a lot less hassle (possibly true).
But the reality is that in some communities, as many as 30 percent of homeowners successfully sell their properties without using the services of their local real estate agent or paying a hefty commission.
These resourceful sellers usually have copious amounts of patience and time. Within the industry, homeowners who sell their own homes are usually referred to as FSBOs (pronounced “fizz-bos”). The acronym is composed from the first letters of the following phrase: for sale by owner.
Why would you want to sell your home without a broker? It usually comes down to money. The brokerage commission is far and away the sellers largest cost of sale. The average brokerage commission ranges between 5 and 7 percent of the sales price of the home.
If your home sells for $100,000, your broker’s commission is $5,000 to $7,000 right off the top. If your home sells for $300,000, you’ll pay the broker between $15,000 and $21,000.
That’s a lot of cash. FSBOs are generally home sellers who do not want to pay a full broker’s commission though they might be willing to pay a half or partial commission to a buyer’s broker. Or, they might be willing to use a discount broker who would charge a low, flat fee.
It’s fine to try to save the brokerage commission when you’re selling in a hot seller’s market. And, certainly we’ve been in one for the past five years.
But if you try to sell in a buyer’s market — where there are more homes for sale than there are qualified buyers to purchase them, you may run into trouble.
Home sellers in a buyer’s markets need all the exposure they can get. Despite tremendous growth in the Internet, the single best exposure you can buy (with your commission dollars) is being listed in the local Realtor multiple listing service (MLS), which will then get uploaded to various top home-shopping Web sites.
Selling on your own means more than simply cashing a bigger check at the closing. FSBOs must also take over the responsibilities of the listing agent in addition to the regular responsibilities of a seller. A FSBO must advertise and market the property, attend all showings, follow up with the buyers or buyer’s brokers, and thoroughly check out any buyer who makes an offer to purchase the home.
Those of you who choose to sell on your own must take care of the mechanics and paperwork of selling in addition to keeping your home neat and clean, doing any major or minor repairs, and maintaining the exterior of the home.
FSBOs say saving the 5 to 7 percent commission is worth all the extra work. And in a seller’s market, where a well-priced home is going in a matter of hours, or even minutes, we’re not talking about an extended period of extra time.
But if it were that easy every time, a whole lot of real estate agents would be out of business.
Currently, more than 70 percent of all existing homes (this doesn’t include new construction) are sold with a broker’s help. Though some industry observers say the number of FSBOs is rising, the majority of homes will probably be sold by the real estate brokerage community.
Why? First, most sellers don’t have the time or energy to manage the sale of their home themselves. They’re too busy working, raising their families, or caring for aging parents to be on call for every buyer who wants to see their home. And in a slow or dead seller’s market, similar to the one experienced by much of the country in the first few years of the 1990s, most sellers will want to take advantage of the broker’s resources, professional network, and contacts.
Another reason sellers often turn to brokers after trying unsuccessfully to sell the house themselves is price.
Most sellers, at least initially, overestimate how much their home is worth and underestimate a home buyer’s ability to recognize its true value. A good broker should help you set a listing price that is close to market value by providing you with comps (the sales prices of homes similar to yours that have recently sold in your neighborhood).
Do you need a broker to sell your home? If your neighborhood has only a few homes for sale but a lot of buyers who want them, then you may not need to hire a broker to handle your sale.
On the other hand, if you don’t have the time, organization, patience, or talents necessary to turn a looker into a buyer, or if your neighborhood has too few buyers for all the homes on the market, then you may want to start investigating various real estate agents and the brokers they work for.
May 21, 2000.