For Sale By Owner 

Many home owners like to try to sell their home themselves in order to save the realtor fees. Many have sufficient knowledge to do a sufficient job, and many do not. The concept of saving a commission is good, but the reality is that it is a very challenging job.

Realtors are paid for their expertise and knowledge of the real estate transaction business, the contracts, the market place, and the other services they offer. In most cases, that knowledge and service will net a seller more than they would otherwise save in commission. In fact, buyers are aware that there is no commission being paid, and the first thing they expect is to have the commission passed along to them, in addition to the lowering of the asking price.

As an example on a $300,000 home, a hypothetical 6% commission would be $18,000. Assume the buyer is willing to pay 95% of the asking price. That would be $285,000. However, that is not the price they expect to pay. Since it is customary for the seller to pay the commission, the buyer will expect to have the commission of 6% of $285,000, or 17,100, dropped off the price also. The bottom line is the buyer will expect to pay $300,000 less $15,000, less $17,100, or $267,900. In the above example, if a real estate agent sold the home for the same price, the homeowner will have netted more. You see, out of the $267,000 the homeowner also had the expense of whatever fees were paid to a company for listing on the MLS, the sign, lockbox, flyers, etc. And the cost of all of the marketing efforts, which may have been around $2,000. Plus having to do all of the work himself without the guidance of an agent to help keep the transaction on track.

This information is here for the benefit of anyone who desires to sell their home on their own. There are several avenues a For Sale By Owner (FSBO) can utilize. One can locate a company who, for a flat fee will place your home on the local MLS. This puts your home where it can be found by all realtors in the area. A home on the MLS is required to state the dollar amount or percentage amount of commission that is to be paid to the sales agent who brings a buyer for your home. A look through the local MLS system shows that the majority of commissions offered to buyers agents are around 3% Agents typically have buyers sign an agreement to pay them a commission in the event that a seller does not offer a commission. So if a listed home offers a 1% commission instead of a 3% commission, then the buyer will have to pay the difference of 2% to the buyer agent. The buyer may elect to not view that home for that reason. So if a home is on the MLS it may only be of value if the commission rate is within the ball park of what others are offering.  In addition to paying a flat fee to be listed on the MLS, the fee for service companies will have upgraded charges such as additional fees for a yard sign, a lock box or flyers. These extra fees do add up. All commission fees are negotiable, but if we learn that most full service agents are charging 6% then we can use that number to show how the real estate agent fees are divided up.

Contrary to popular belief, the agent does not get the entire 6%. In a typical scenario, with a hypothetical 6% commission, 3% of that will go to the agent who produces a buyer. Ninety-nine percent of the time, that will be an agent other than the listing agent. That leaves 3% for the listing agent. What many people do not realize is that real estate agents are independent contractors, which means that they are responsible for all of their expenses. They are not on a salary, and only get paid when a sale closes escrow.

Out of that 3%, approximately one third goes to the agents broker. Another one-third goes to cover the agents operating expense; automobile, auto maintenance, gas; marketing material to find clients, such as those letters and post cards that people receive; and the magazine ads; plus the cost of marketing your home. That leaves about one-third of that 3% for the agent to split with Uncle Sam. If the home is a $300,000 home, that one-third of 3% will be $3,000 of which around $1,000 will go to pay taxes. The agent will get to keep $2,000 as payment for the services rendered.  

Here are some of the functions that the real estate agents perform, and that you will perform when selling your home yourself.First, you will be responsible for all of the marketing of your home to the public. One avenue that will not be available to you is to send email and flyer notices to the thousands of agents, and their offices, in the area.

You will have to rely on your knowledge to determine the market value of your home. Market value is what buyers are willing to pay, not what owners believe their home is worth. If a home is not priced at the current market value, it will not sell. You will also be responsible for taking all calls from your sign, showing your home, holding open houses, and deciding when to get a home inspection, termite inspection, etc.

Once there is an offer, you will be responsible for knowing and negotiating the contract, and I advise you to work with a real estate attorney with the contract when you’re selling on your own because there are so many items in there that can cause litigation later.

You will be negotiating by yourself with a buyer, or the buyers agent. The buyers agent will have fiduciary duty to the buyer and will not be able to assist your side of the negotiating table.

During escrow, time is of the essence, and any missed deadlines can cause a lost buyer. Many homes fall out of escrow because of missed deadlines.

Something to consider is that many people who look at homes are what we call lookie-loos. They are not interested in buying at all; they just want to look at houses for one reason or another.  As a FSBO, you will not be able to pre-qualify these people before they show up at your door. You will get some serious buyers, or neighbors who may tell a friend about your home, but you will get your share of the lookie-loos.

Agents have to spend time and money to take buyers around, so they will qualify these people first. They are not going to drive people around the city if they are not serious about buying a home. Consequently, the benefit is that any buyer that is brought to your home by an agent is a serious buyer. They may not end up buying your home, but the agent will have viewed it and may find another interested buyer.

If you are selling your home by yourself, I hope you will find information on my website that will help you. Visit my other web site at www.ValVistaLakesHomes.net where there is more information for FSBO home sellers.

If I can be of further assistance, please do not hesitate to contact me.