It sounds so good: sell your house yourself and save thousands of dollars on the real estate commission. But, is it really a good idea? More important, is it really true? Will you really save money or is it possible you’ll end up losing money?
In the video below, our broker, Greg Kurzner, discuss 10 problems you’ll likely encounter if you decide to sell your house yourself. These are the pitfalls that you probably have not considered.
If you prefer to read, the video transcript is below the video.
Hey, there. It’s Greg Kurzner with Era Atlantic Realty. And today we’re going to talk about the ten pitfalls that homeowners encounter when they’re trying to sell their homes themselves, or what’s called for sale by owner
1. Can’t Advertise on the Multiple Listing Service
The biggest one, the most obvious one, is that when you’re for sale by ownering, you don’t really have access to the wider potential buyer market that most agents have access to with the Multiple Listing Service (MLS). And a lot of agents, in addition to the Multiple Listing Service, have large buyer databases that they reach out to when they have a property that fits.
So as a for sale by owner, you’re limited to signs, you’re limited to Zillow, some of these other potential marketing efforts that you can use. But you can’t use the MLS, and so that limits your potential buyers and obviously the demand is going to be less.
2. Negotiating is Challenging
The next thing that I think is so important is that real estate is complicated and negotiating contracts, knowing how to negotiate and knowing what to negotiate really makes a big difference. And unless you’re in the real estate industry, real estate agents know what to negotiate and how to negotiate. And that can save you money or it can make you money depending on if you’re buying a home or if you’re selling it. So for sale by owners, when they negotiate on their own, risk giving away the store, risk not including certain key items to a contract that could make or break the deal.
3. Easy to Price the House Wrong
The next most obvious thing is how to price the property. And when you hire a real estate professional, they are going to bring you a comparative market analysis and they’re going to be able to give you the kind of information that you need in order to give you a good guide on how to price your property. Not only about what the value is, but also should you price the property above the market, maybe a little below, and try to get multiple offers or where the range of pricing needs to be in order to attract the maximum number of potential buyers. So pricing often for sale by owners, we see overpriced their property and it sits on the market and it loses steam. And then a lot of them also will underprice the property and in that case leave money on the table. So they think they’re getting a lot of activity, but they’ve actually underpriced the property and given it away for less.
4. Marketing and Showings are Hard
After pricing, the next problem most for sale by owners face is the marketing and showing problem. Just like with the MLS, agents have access to a lot of marketing tools that the average homeowner doesn’t. And social media accounts just set up for marketing photos, marketing videos, drone videos. These are all things that agents do as a professional courtesy and to help improve their chances of selling.
And most homeowners don’t have access to these or if they do, it costs them a lot more money to employ them. And then on the showing side, it’s difficult to allow people to get into your home and look around and talk freely and comfortably: “Hey, do we like this?” Or they don’t want to insult you if you’re walking around with them. Sometimes they’re not as open to discussing the problem, if there is one, or expressing interest if they have it. And so you have to kind of leave them and let them be in the home. But if you’re the seller, you have to be there. So that creates a problem. And most times, people don’t stay as long and they don’t really look as carefully as they would if they were with their agent.
5. You Pay Out of Pocket for Marketing
Another key thing to do is recognize when you’re marketing on your own, you’re going to have to pay for professional photos, drone photos, signs, all their marketing materials out of your pocket. And these things can be several hundreds of dollars that typically an agent will include when they’re earning a real estate fee that you’re going to have to pay up front.
6. Preparing Contracts is Complicated
So another thing that is a challenge for sale by owners is to know all of the legal ins and outs of selling a real estate asset. So, yes, you live in your home and you’re familiar with your home, but to sell it is completely different. Real estate agents have access to standardized contracts that have been looked over by attorneys and that are transacted on a regular basis. And you may not have access or legal ability to use those types of contracts, which have the kind of language that you need in them to protect you and to make sure that you don’t miss something really important in the sale.
7. Not Properly Disclosing Can Get You in Trouble
The same thing also applies with disclosures. So there are certain things that you have to disclose about your home if you know them. And if you don’t disclose them, it could create some legal liability for you. So your real estate agent can provide those disclosures, can coach you through how to prepare them, and also what to say and what not to say so that you’re in compliance with the law and you don’t end up with a big lawsuit or not disclosing something that could potentially crash your deal.
8. You May Still Pay a Real Estate Commission
So far, what I’ve mentioned doesn’t scare you. But what is the purpose? You’re trying to avoid maybe paying as many fees or higher commissions to agents by marketing yourself. And the truth is that about 92%, 93% of all sales transactions are transacted with real estate agents. So even though you might not be marketing your home with an agent, the buyer of your home might be represented by an agent. And in that case, you may end up being brought an offer by an agent for their buyer, and that agent is going to be looking for you to pay them a real estate fee.
And why would you do this? Well, if that agent’s buyer’s offer is the best offer you get, then it may make sense for you to go ahead and accept that offer and agree to pay that agent the real estate fee. And part of why that’s the case is that agents control the vast majority of the buyers in the market. And in order for you to get that buyer to buy your house, you may have to deal with that agent.
9. Handling Repairs Wrong Can Cost You Money
So one other consideration is once you have a potential buyer and they put a contract on your property that you like, then they have to do their inspections, they have to do their due diligence, and that’s where you can end up with problems. So if their inspection shows that certain things need to be repaired, how do you go about repairing them? How do you negotiate to repair those? What is and what isn’t critical for you to negotiate and agree upon? These are all questions that your agent, with all that experience, can help you through. So that you’re not fixing everything possibly that a buyer may want on their wish list, but that you’re also fixing the important things so that your buyer doesn’t get spooked about your home and want to cancel their contract.
10. For Sale By Owner Nets You Less Money
So why for sale by owner? Well, it’s for one of two reasons. Either you’re trying to save money and avoid paying a real estate fee, or you want more control over the transaction. If you’re trying to save money, for sale by owner, typically and historically isn’t the right way to go. Believe it or not, for sale by owner sales transactions net less than agent represented transactions. And not just a little less, a lot less.
Typically it can be between 10% to 20% less. So that real estate fee and other selling expenses that you’re trying to avoid by for sale by ownering, you’re actually giving up in lower sales purchase pricing, and other kinds of negotiation giveaways that you end up with. So think twice about for sale by ownering if your goal is to save money, because typically you won’t.
So if your goal is control, I get it. But you wouldn’t defend yourself in court unless you are a lawyer. And you certainly wouldn’t perform surgery on yourself unless you were a doctor. And even then, I’m not sure how you do that effectively. So, rather than have the illusion of control, of being in charge of everything yourself, try to find a qualified professional that can guide you through every step of the real estate sales transaction that you have confidence in has your best interests and your fiduciary interests in mind. And better off to do all of that, you’ll end up netting more money and your transaction will be smooth and flawless.
I’m Greg Kurzner with Era Atlantic Realty. And thanks again.