So you’ve decided to sell your home but not quite sure if you should try selling yourself or should just give it to a Real Estate broker. Where to begin? It’s confusing I know but don’t pull your hair out just yet.
As an IL Real Estate broker and investor, I have a unique perspective on the process built from questions and concerns I have received from clients and prospects over the years.
There are several pros and cons to consider before deciding which route to go with and I can assure you this article is not about amping up any one particular side if you’re thinking I may be biased.
As you all know, neither method guarantees a sale but knowing what to expect upfront can be very beneficial.
Before researching for hours on the latest techniques and strategies on how to sell your house yourself or reviewing dozens of agent profiles, think of a few adjectives (or nouns) that best describe you. Maybe not all the time but in the context of home selling or anything that requires considerable effort and time. For example: Ambitious, Confused, Savvy, Negotiator, Lazy (You can admit it), Self-Starter, Busy, Confident, Strong-Willed, Cautious, Curious, Frugal, and Intelligent (no one ever says Dumb J) to name a few. The reality of it boils down to some of the traits you currently possess and or are willing to acquire. Of course it’s probably best to ask a family member or friend the honest truth about an adjective that describes you since we all tend to think of ourselves highly. So if we’re completely honest and or our friends/family are honest with us, where do you fall? If it’s more on the complimentary side of things (Self-starter, Confident etc), selling your-self may very well be for you. While helpful, I don’t expect you’ll have made your mind up on which way to proceed from that alone which is why the next step is to weigh the pros and cons of each.
What are some of the Pros of selling your home yourself?
- You save commission.
- More price flexibility
- You are in more control of the process
- Better negotiating position
- Deal directly with buyers (Can also be a con)
- You can be assured buyers are qualified upfront
What are some of the Cons of selling yourself?
- Market exposure
- Small buyer pool
- You price wrong
- Scheduling walk throughs
- Process in general
- Dealing directly with buyers (Can also be a Pro)
- Unqualified buyers
- Lack of experience and knowledge
Now let’s break these down in more detail:
- You save commission. That’s the number one reason people don’t list. When you are looking at a typical listing commission of 4-6% for every $100K sale price, you’re giving up $4-6K. It’s a lot of dough better spent somewhere else. While the listing agent usually only sees half of that (less broker split) and the buyer’s agent sees the other, it’s still a considerable amount of money that’s not going in your pocket. Understood.
- More price flexibility. This ones goes hand in hand with saving commission. When you’re not giving up $6-12K on a typical sale, you can afford to be a little more flexible should you chose. I realize the point of selling yourself and saving commission is not to give it all away during the process but you will no doubt be asked to take less when someone finally makes an offer. Having that extra cushion may allow you to take a slightly reduced offer or fix a few things at the buyer’s request that you may not have had the ability to if you listed.
- You are in more control of the process. If you like being part of the process and knowing what is going on at all times, you’ll definitely like selling your home yourself. While an agent should always keep you informed of progress while selling, you may not necessarily have a true sense of what’s going on. Did you really receive 15 inquires in a week or 25 walk throughs during an open house? I’m not saying agents will straight out lie but it’s possible some of those numbers are padded to assure you they are doing their job. The point is not only will you have a more insightful view of progress during the sell period, but if something is not working, you’ll be able to fix it right away and try something else (marketing for instance). One great way to remain in control is to ask the buyer to sign an “Authorization to release information” (Just Google it to find a copy online). By having them sign and providing a copy to the buyer’s lender, you’ll be able to contact the lender at any-time to check on underwriting, appraisal, etc. This is huge and something agents normal do on your behalf.
- Better negotiating position. Too many times the agent is controlling the negotiations which is why deals can fall apart (amongst other reasons). Yes sometimes it’s also why it remains in tact. You can work almost anything out if you really want to sell and they really want to buy. Getting on the same page directly with the buyer can be very helpful which I’ll speak more to in my next point. What terms or incentives can you provide upfront or which ones will you not need to offer at all? Buyers working with agents demand a lot and it being presented by an agent comes across more as of a demand than an “Ask”. If you sell by owner and no agent ever comes into the picture, it’s very likely the buyers will not ask for anything other than a slightly reduced price and or to have a home inspection. When working with a buyer not being represented, the price you agree on is what you both feel it’s worth rather than an agent telling the buyer how to offer.
- Deal directly with buyers. Being on the same page with your buyer is critical for a smooth transaction and for everyone to feel like a winner after all is said and done. Having the ability to speak directly to the buyers will often keep them from asking for more concessions such as your shower curtain or picture of your aunt Maggie (If you think I pulled those out of thin air think again J). The point is that you are just as likely and maybe more so to strike a deal when working directly with the buyers.
- You can be assured buyers are qualified. Don’t agents do that you’re thinking? Yes and no. Some agents may never worry about qualifying new buyers out of assumption that it will not be a problem. After all if they’re driving a Mercedes when they arrive they should be able to get a loan right? Wrong (Well not always anyways). Most agents (me included) will qualify new buyers early in the process but not necessarily from the start. It’s a tough conversation to have when a potential buyer calls on your listing and the 1st thing you ask is if they’re pre-qualified without that buyer calling another agent to see the home. I’ll usually always show the 1st house at request and once I have met them and get a feel for their situation, I’ll offer to have my loan officer call them to get them pre-qualified. It’s possible they want to make an offer on the 1st house I show them (unlikely L) but they could and at that point the contract would stipulate a time-frame in which a pre-qualification letter must be produced (usually 24-48 hours). So when does this come into play for you? Well if you ensure your prospective buyer is qualified upfront, you can save yourself a lot of time and headache even before negotiations begin. Does this mean you shouldn’t show your home to buyers unless they produce a pre-qualification upfront? No and I wouldn’t recommend that because you will scare off buyers not currently qualified but able to get qualified. Instead politely ask your potential buyers at the time of showing (should they express interest) if they have a lender in mind and if not MAKE SURE you have someone whom you can refer them to keep the process rolling. Qualify your buyer after the showing but BEFORE the negotiations starts if possible. If you do not clearly spell out deadlines (pre-approval and conditional approval- 2 different things) in your contract you risk losing out on other potential buyers only to find out your current prospects can’t fully qualify 30-45 days into it.
Pheww. I know that last one dragged on. Now to discuss some Cons:
- Market exposure. This is probably one of the biggest reasons to employ an agent or not sell yourself since we are talking about Cons to this technique. Agents get to take advantage of the Multiple Listing Service (MLS) which you have no doubt heard of. The MLS is a huge database and syndication service (sends to sites like Zillow, Yahoo, Trulia, Realtor.com, etc. automatically) that contains thousands upon thousands of property data cards of sold and active properties across the country. There are ways to get on the MLS without employing an actual listing agent or full service brokerage but that may be best for another discussion.
- Small buyer pool. This one goes hand in hand with market exposure. It’s estimated that 90-95% of all buyers across the country use a real estate agent to shop for properties. This makes sense because most buyer’s agents get paid by the seller not the buyer. Why not have an agent represent your interest and find you a deal? I would how about you? Because the MLS listing pool is so large it directly affects the size of the buyers looking who are not represented. Your job is to figure out where the 5-10% of those buyers hang out which can be tricky.
- You price wrong. One of the most important aspects of listing any property for sale by owner or with an agent is price. If you value your home too high it will just sit until you price it accordingly. Let’s face it that could be awhile since everyone thinks their home is worth more than it actually is (me included). The problem with this scenario is time and motivation. The longer your home sits on the market, the more stale it becomes and the more likely you’ll be much more motivated to take less than you would if you had just priced it right from the start. If you price your home too low you’re likely to get a quick sale if that’s what you’re after but it may not sit well to find out a house very similar to yours sold for 15K more the week before and you just didn’t know (due to public info release timelines) until signing on the dotted line. If you’re unsure how to price your home, you’re going to need to research public records sales you think are similar to yours, get an appraisal, or free market analysis through an agent. Valuing your home correctly is an article in itself but hopefully you get the idea that you shouldn’t just price your home with that gut feeling you just had.
- Scheduling walk throughs. This one is really not that bad but then again some people don’t like showing their homes themselves. Who better to speak to the updates you made or history behind something cool and ecliptic? That said, if you don’t like meeting with buyers and are never home, this one is really going to sting. Unlike a property that’s listed and can be shown by the agent using a lockbox, you need to be around when the buyer beckons. Scheduling appointments can sometimes seem like a chore especially when the buyer doesn’t give you much notice. “Hi Mr. seller, we were passing through town and wondered if we could stop on in and take a look?” Sound familiar? When selling yourself, be prepared to take on showings like that unless you clearly put “By appointment” only in your marketing (yard sign etc.). If you do and someone still requests to see you’ll have to make the call whether to re-schedule and risk losing out on them ever coming back to see. More than likely though if they are serious buyers and not just looky lous, they will be willing to come back at a more convenient time.
- Negotiations. While negotiations can bring more compromise when selling your home on your own, they can also be very draining and time consuming. Do you have what it takes to stand your ground when the buyers asks for a 10K price reduction (or 50K)? Or when they ask you to kindly throw in your fridge or riding mower? Some buyers just don’t know when to stop asking and will take the change in your pocket if you let them.
- Paperwork. You love it as much as I do I’m sure. Expect to have a fair amount of paperwork you either need to review or sign. Not having it in writing could be a big issue later so ensure anything that gets agreed to upfront or during the process is properly documented. While there is a lot, there is probably much more needed when an agent is involved to ensure all parties are covered. Since an agent will not be able to hold your hand and highlight the key points and locations to sign, it will be your responsibility to ensure all the main points are covered and or disclosed. Some of the agreements needed include the purchase and sales agreement and disclosures (may depend on state you’re in). If you’re unclear about the exact forms required, contact someone who may have just been through the process or the Title Company. Sometimes you can even get free or fairly cheap copies of contracts through the Title Company or attorney you will be using to close the transaction at. If you get something online, ensure they are state specific and or have a real estate attorney review them first.
- Process in general. There are many moving parts that make up the transaction and honestly it can be a little overwhelming if you have never gone through the process. From valuing your property, marketing, negotiating, going through inspection process and repairs, working with title-company or attorney, preparing your home for re-sale (decluttering, staging, etc.), working with buyer’s agent and more, you need to familiarize yourself with all the moving parts upfront in order to complete a smooth transaction (what’s that?) without aging 10 years in the process.
- Dealing directly with buyers. While this can be advantageous many times, it can also be tricky and sometimes a complete disaster. Some buyers and sellers are better not to talk to each other at all. They come into the negotiations thinking they are Samuel Jackson (The Negotiator movie) and have pre-conceived ideas about what they need to get to be happy with the transaction. Unless you understand there is going to be some give and take on both sides, you may want to leave it up to an agent who has much more experience in that area. If you think you can handle it, stay calm and don’t rush into making any hasty decisions. Just because they low-balled you does not mean you turn them away without making a well thought out counter of your own. First offers are just an invitation to start playing the game. Keep that in mind.
- Unqualified buyers. Since I talked about this one to some length above, I will not go into much detail other than to say they can waste lots of your time should you let them.
- Lack of experience and knowledge. Your lack of experience shouldn’t prevent you from trying to sell your home on your own. However, if you are not willing to acquire it upfront and along the way, be pre-pared to have nothing to show for it 12 months down the road. There is so much good content out there relating to this subject I’m sure you can piece it together and come out okay in the end if you’re willing to put the time in. Your understanding could costs you thousands of dollars in mistakes if not.
The above is not an all-inclusive list but rather the main ones I have seen/heard. I did not list Pros and Cons of listing with an Agent since they are almost the complete opposites of each other. For example Pro of listing with an agent would be Market exposure; Price right and so on. If you have other Pros or Cons for either side and would be willing to share, please leave a reply so I can make this list even better.
Well hopefully you have gained some insight into some of the pros and cons you should consider when deciding to sell by owner or list with a real estate agent and maybe even know which way you’re leaning. If not flip a coin (just kidding).
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My very best,