Selling your home by owner, also known as For Sale By Owner (FSBO), is appealing to some in this exceptionally robust market. Not dealing with agents is nice, but can money be saved selling a home by owner? About 7% of homes nationally sold without a listing agent, of those over half were between parties that already had the transaction arranged. Data shows that around 25% of FSBOs don't sell; and for those that do, they sell between 6%-26% less than agent assisted homes. Consider…
Buyer Agent Interaction
Some buyers' agents may be less inclined to show FSBO properties to their clients, knowing they will be doing double work, may receive a below average commission or even no commission. This might limit the pool of potential buyers for the property. Agents work much better with other agents as all sides understand the process. Dealing directly with a seller can complicate access, negotiations, resolution of challenges that occur and even coordination for closing, moving and similar events. The loss of a listing agent effectively doubles the workload of the buyer’s agent, something some may look to avoid.
Homeowners selling without an agent are not required to pay a buyer agent. Most will offer something close to or on par with typical buyer agent commissions. So paying the buyer agent takes a healthy chunk off the top. Around the greater Atlanta area, most buyer agent commissions average around 3%. However, a buyer agent working a FSBO is effectively handling both sides of the transaction and many have no interest in that. Assuming a 5% listing commission on a $400k home, the total commission would be $20k; assuming 3% or $12k goes to the buyer's agent, the seller "saves" $8k not using a listing agent. That's if a buyer and buyer agent engage and consummate the deal.
Competition and Exposure
FSBO sellers cannot compete with agents when it comes to listing exposure, that is not debatable. Competition drives up price. Research indicates that there's a brief 6 to 8 second window to engage or lose a prospective home buyer browsing online. Captivating visuals are crucial, including proper lighting, staging, angles, and descriptive narratives, all aimed at attracting the most likely buyer. Photos taken with cell phones or by photographers from Fiverr don't suffice. Advertising through social media and public websites falls short compared to the efficiency of the MLS. Proactively marketing to agents is virtually unattainable. Don't count on relocation buyers; global relocation companies don't have their clients scanning "for sale by owner" listings for properties. The visibility to potential buyers is simply insufficient.
The Real Estate Agent Problem
There are far too many real estate agents. The industry thrives on agent fees; the main concern is agents paying their numerous monthly fees. 80% of agents are out of the industry in less than two years, but more consistently arrive. The public distaste for the industry is largely deserved. However, professional agents are out there and while they make things look easy and mundane, a significant amount of effort is expended. The challenge for these professionals is overcoming the public perception of agents and the sheer number. So many sellers and buyers feel somehow obligated to use a family member, friend or acquaintance even if they intuitive know they are unqualified. Failure to properly qualify an agent falls directly on the seller or buyer. Need more? Consider all of the "disruptors" that were going to simplify the business - Zillow, Redfin, Opendoor....all in the trash heap as they completely missed the mark on how each transaction is different.
Money Lost Selling by Owner
Penny wise and pound foolish. So, when it’s all boiled down, can money is saved by not using an agent to sell a home? Using the above example and straight math, the listing commission of 2%+- would be saved. Distaste for the industry aside, reams of data show the typical FSBO sells for 6% - 26% less than an agent assisted home. The net to seller with an agent is likely better than without. It's as easy as understanding competition; the more that see it the better the odds of a higher price. Competition brings better results for home sellers. Agents better negotiate contract items and concessions, better handle things like time frames, personal property, post close occupancy and the myriad of other possible issues. Probably better to hold your nose and deal with agents.Posted by Hank Miller on
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