What do you tell people who aren't sure if they want to sell themselves or use a Realtor?
Selling by owner is definitely an option. Research shows that only 6% of the time does a seller successfully sell their own home. Most people that sell by owner are not doing it because they dislike real estate agents, they just don’t want to pay our fee. They think if they can sell without a Realtor that they will net more money.
Does a seller net more money if they sell it by themselves?
That's a loaded question. To be able to answer that, there are a number of questions that must be asked and here are just a few:
- 1) How quickly did they sell the home?
- 2) Where did they have it priced?
- 3) Did they price it correctly?
- 4) Did they underprice it?
- 5) Was a Realtor representing the buyer involved?
- 6) What were their marketing expenses?
- 7) Are they going to hire an attorney to do all the paperwork?
Once I have answers to all of those questions, I can tell you whether the seller netted more or less by selling the home by owner. Ultimately the studies have been completed and have shown that a seller actually nets more money using a real estate agent. A real estate agent should be able to create more demand by exposing the property to many more people than a “for sale by owner” can. More exposure creates more demand. More demand creates higher sales price. Higher sale price = more money in the sellers pocket.
I guess a lot of sellers don't save the commission even if they sell it themselves?
Let's say that I have a buyer and I think that buyer is a good fit for a “for sale by owner” home. I'll call that seller/owner and I'll say, "Hey, if I have a buyer that is interested in your home can I show it to them and will you be willing to pay me a 3.5% commission?" When we list a property we normally charge 7%. Most home sellers will say, "Sure. I'll give you 3.5%." They look at it like they're saving 3.5%.
Other times let's say that we have a buyer that's really serious. We showed the buyer the house and they're really serious. I may in conversation say to a seller, "This buyer's really serious. What would you take for the home?" Typically just like that I can get a seller to go down 5%. After asking just two questions, I just got the seller to drop 8.5%. We're only charging 7%. I don't know that they're really netting more money selling by owner.
What about seller’s expenses? Are they non-refundable?
When a seller hires a real estate agent we market the heck out of their home. They don't pay us a penny until the home actually sells. If a “for sale by owner” tries to sell on their own, they have to pay for all the marketing up front. They have to pay regardless of whether the home sells or not.
Do buyers generally want an agent involved?
Many buyers do want an agent involved because around here, sellers pay all of the commission. Why would a buyer not want an agent involved if they do not have to pay for it? Who is looking out for the buyer’s best interest when they are dealing directly with a seller? Some buyers think that they will get a better deal if an agent is not involved. It is usually the opposite. Many “for sale by owner” homes are overpriced and many times a buyer over pays when buying directly from an owner. A good agent will educate a buyer on home values and give the buyer data of what other similar homes have sold for in that area to make sure the buyer is not over paying.
If a seller does find a buyer on their own do they still need to have an attorney involved?
Typically yes. The buyer definitely would need an attorney involved to go over the contract etc.
If a seller will not pay a buyer’s agent, doesn’t that add more work/responsibilities for the buyer when they do not have representation?
It absolutely put more responsibility on the buyers. Buyers are smart. They know that the seller is saving a 7% commission. They feel like they should benefit from that also if they don't have representation. Many times, buyers write an offer 3.5% lower then what they'd normally offer. They feel that if the seller is benefitting from not having to pay an agent that they should benefit also.
What about the length of time? Does it take longer to sell for “sale by owner” or with an agent?
Typically it takes a FSBO seller longer only because agents can get them a lot more exposure then they can get themselves.
Other things to consider:
How does a FSBO know who is looking at their home? Is it a true buyer? Do you want to be alone in your home with a stranger that you don’t know much about?
Is a seller comfortable asking the buyer to send them a pre-approval before looking at the house?
Is the seller using all the proper disclosures required by the state of Illinois?
What if the seller somehow misrepresents the house? (Wrong square footage etc) Could they get sued?
Are you available to show your home anytime a buyer wants to see it? Can you leave work?
Will you ask for feedback? If yes, do you think the buyer will be honest with you?