Save 6% of your Home Price when Selling For Sale by Owner
Real estate transactions typically involve two agents:
1. the listing agent: represents the seller
2. the buying agent: represents the buyer
These agents provide a service and need to put food on the table, so compensation in the form of commissions are involved. In residential real estate, commissions for the transaction are usually 3% to the listing agent and 3% to the buying agent. If listing agents can find a buyer without a buying agents help, they get both commissions (a conflict of interest you should try to avoid, as a side note). Real estate commissions are negotiable and can vary, but rarely do. The real estate company to which the agent attaches their name usually takes a small cut of the commission as well.
It’s been this way for a LOOONG time.
But times have changed. And the need for such agents (particularly listing agents) is less now than ever before, with the rise of internet and all of the data it provides. Sites like Craigslist, Zillow, and Trulia have made buying or selling “for sale by owner” (FSBO) much easier. Information is no longer a barrier to being able to buy or sell by owner.
Buying agents can shuttle you around and get you in to homes outside of showings, which can be valuable. And if you are interested in a home that is being sold through a listing agent (vs. FSBO), you might as well work with a buying agent to get representation. But listing agents? Unless you’ve already relocated to somewhere far away or don’t have time to do showings (which they would kick you out of your own house for anyways), I just don’t see the value. And in markets like we have right now where homes are selling almost as soon as they are listed, due to limited supply. If you are under-water still or worked hard to gain equity in your home, why give away 3% or 6% on a platter?
Selling FSBO is Not as Scary as it Seems
I bought my first home for sale by owner. Three years later, I sold FSBO as well.
I had a bit of equity in the home – about $13,000 (on a $140,000 home). I got asking price within a few months, in a slow market (about a year before the 2008 crash), from a buyer who was not represented by a buying agent. Had I decided to go the traditional route and paid real estate agents 6% of the purchase price, instead of walking away with $13,000, I would have paid the realtor $8,400 and only netted $4,600 on the sale. For them to put a sign in the yard, list my home on a MLS, and doing an occasional showing, I would have lost about two thirds of the equity I had gained through the work that I put in to the home!
So learned how to sell FSBO. And it wasn’t that hard:
- I looked at resources like forsalebyowner.com
- I cleaned up my home
- I researched local purchase prices (Zillow and Trulia provide this information, and it’s available through public record)
- I put a sign in the yard with printed off flyers
- I built a free 1-page website on Blogger with nice big pictures and interesting information on the home and lifestyle benefits of the location (even today, this is more than most listing agents do – their websites usually suck!)
- I listed the house on Craigslist and put a link to the website I had built
- I did a showing every other Sunday
- When I started getting offers, I printed off proper contracts, which I found online
I received a ton of interest and two offers. The title agency (whose fee is paid for by the buyer at closing) took care of the rest.
The process (both when buying and selling FSBO) was so seamless that I could not imagine going the agent route, again, unless I was already out of town.
The average home sale price in the U.S. is $298K. That means that the average seller is handing over $18K to real estate agents. And if you’re doing this every 5 years or so, the price for being average can be exceptional.
For Sale By Owner Discussion:
- Have you bought or sold for sale by owner (FSBO)? What was your experience? And how much did you save?
- What fears do you have about selling your home for sale by owner?