Selling a home? If so, you might be asking yourself what are your options? FSBO vs REALTOR® (or sell your home yourself vs use an agent). Selling your house is one of the most important decisions which anyone engaging in a real estate transaction has to make is whether to work on his/her own or hire an agent. Both homeowners and real estate investors have the option to choose between 1) selling their property on their own, known as For Sale By Owner (FSBO), and 2) working with a real estate agent. If you are about to make this choice, you should consider the pros and cons of selling on your own compared to hiring an agent.
FSBOs: The Pros
No Agent Commission
The most obvious advantage of selling FSBO vs REALTOR® is that you don’t pay an agent a commission fee. In most housing markets in the US, the typical real estate commission is 5-6%, split between the seller’s agent and the buyer’s agent. Importantly, this fee is usually covered by the property seller. This means that if you go for the FSBO option, you will make an additional profit of 5-6%. This amount of money is significant for people who are selling their home to replace it with a new house as they can put the saved up money towards the purchase of their new home. This sum is also important for real estate investors whose long-term return will automatically go up if their sale costs go down. This 5-6% of the sale price could be the difference between making a profit and making a loss when selling an investment property.
Being Fully in Charge
When you decide to sell your home with an agent or a broker, you transfer to him/her not only the majority of the responsibilities associated with this task but also most of the decision making. While you have the ultimate say in who the next owner of your property will be, you are generally not very involved in the selling process.
The opposite is true in the case of a FSBO. You, as the property seller, have full control over the process including the marketing of your house for sale, setting the price, the staging, the open houses, the viewings, the communication with interested buyers, the negotiations, and the ultimate sale.
An experienced real estate investor would like to be fully involved in selling his/her investment property as he/she has the necessary skills and knowledge to succeed with the transaction. Moreover, the investor is ready to put all the energy and efforts necessary to sell at the highest possible price as every dollar counts for his/her return. Meanwhile, for an agent this is just another deal.
Knowing Your House Best
Whether you are a homeowner or a property investor, you know your home for sale the best. You’ve lived there or you’ve managed it for a number of years, and you know the ins and outs of it. You are familiar with the most attractive features of your house, and you know how to bring the attention of potential buyers to them. In addition, you are aware of the problems with your property for sale and can somewhat conceal them, without being misguiding. This means that you are the best possible person to market your house during open houses and viewings. This is an important benefit of going for a FSBO vs Realtor.
Working at Your Own Pace
When you sell by yourself, you can move forward in the process at your own pace. Naturally, a real estate agent would be in a hurry to sell your home as soon as possible in order to move to the next deal. This might not be in congruence with your timeline, and it might actually compromise the best possible outcome for you.
FSBOs: The Cons
No Access to MLS Listings
The major drawback of selling as a FSBO is that you, as a regular homeowner, don’t have access to the MLS database. This means that you cannot list your property on this most popular platform for selling and buying homes in the US. Of course, you can have an agent list your property for you on MLS, but you will have to pay a fee for this service, which will eat into your profit. Not having access to the MLS will make marketing your real estate for sale significantly harder. That’s arguably the biggest hurdle of selling your home without a realtor.
No Real Estate Network
Real estate is very much a people’s business. The most important factor for success in the real estate industry is whom you know and who is in your network. Real estate agents and brokers take years to build a solid network of property buyers and sellers as well as other professionals and ordinary people who are of help when they have to sell a house. You, as a homeowner, do not have the luxury of a strong real estate network, which will further complicate your marketing efforts.
If you are a real estate investor with a few years of experience in the business, chances are that you already have a network. This makes an FSBO more feasible for an investor than for a homeowner.
Poorer Negotiation Skills
Unless you work in sales, you probably don’t have much experience negotiating prices. Exactly the opposite is true for agents who survive and thrive in the business just because of their ability to negotiate the best price for their clients. This means that once the time to negotiate the sale price with interested buyers comes, an agent will be able to get you a much better price and terms than you can get on your own. Indeed, the difference between the price you can get and the price an agent can get for your house will usually exceed the 5-6% agent commission on a typical real estate transaction.
Once again, if you selling your investment property and have done that a few times, you might have the necessary negotiation skills and experience to score a good sale price. However, first-time homeowners don’t usually have what it takes to make the most out of their sale.
Taking More Time
Selling as a FSBO vs REALTOR® generally takes more time. After all, real estate agents are professionals who sell properties for a living, and they know how to be efficient. This means that if you are in a hurry to buy a new home or to invest the sale money in a new investment property, you should work with an agent. This will significantly shorten the time your property spends on the market.
Moreover, the number of days on the market has a direct negative impact on the selling price. The longer your home stays listed for sale, the more you will have to drop the price before you find a buyer. Buyers get suspicious about why your home has spent so many days on the market if everything is perfectly fine with it, so they will not be willing to pay the initial asking price.
Dealing with Legal Issues
The last major con of selling real estate on your own is the legal issues related with it. First of all, you will need to go through a number of legal procedures and sign legal texts which might not make sense to someone outside the real estate world. This is of particular concern to homeowners and less so to property investors who are more likely to be familiar with the terminology.
Furthermore, many locations require an attorney to participate in the sale of real estate. This is something which your agent can help out with as he/she is bound to have real estate lawyers in his/her network.
As you can see, both selling your house on your own and with an agent has advantages and disadvantages. However, generally speaking, it is a more reasonable choice for homeowners to work with an experienced realtor when considering if selling FSBO vs REALTOR®. When it comes to real estate investors, their choice should depend on their previous experience, their personal skills, and their strategy: active investments vs. passive investments.
Daniela Andreevska is Marketing Director at Mashvisor, a real estate analytics tool which helps real estate investors quickly find traditional and Airbnb investment properties. A research process that usually takes 3 months can now take 15 minutes. We provide all the real estate information in easy to understand visualizations.