I’ve sold one house in my life and I did that on my own without a realtor. Yep. For sale by owner (or FSBO).
Oh, I started out with a realtor because I was young and rather naive at the time; I thought it would be crazy to not go with a professional.
The first realtor I took on signed me up to a 90-day contract and then sat on it, doing little marketing and zero open houses.
When I asked him what he was doing marketing-wise to push my home, he showed me some fliers he had printed up at the local copy store. Other than that, all he could say was he was very busy and that he had my house entered in the Multiple Listing Service (MLS). Obviously he was juggling a lot of clients, and my low-priced starter home was probably not worth enough to justify more of his attention.
Needless to say, I fired him when our contract expired and found another realtor.
Unfortunately for me, the second real estate agent was no better – although her fliers looked a bit more professional.
Let’s Talk About Value
You know, I did a provocative hit piece last summer on the 10 most overpaid jobs and one of the professions on that list was the real estate agent.
I’m sorry, but I have a hard time trying to justify paying a realtor a commission of six percent (give or take a point) when I stop to consider exactly what I’m getting for my money. After all, six percent of a big number is still a big number.
For example, the current market price of my house is about $450,000. A six percent commission on that is $27,000. Do I really think a realtor will provide me with $27,000 worth of value? Not as far as I am concerned.
By the way, the numbers get even more absurd when I think about folks who are selling a million-dollar home. Does the amount of work the realtor provides magically increase just because the price of the home roughly doubled? No. But the commission earned suddenly becomes $60,000 for the same amount of work.
When I sold my first home I used a lawyer for a flat fee of a few hundred dollars to help out with the negotiations and the title company ended up doing most of the paperwork. I was responsible for finding my own buyer, which I did. Keep in mind this was back in 1997, well before the Internet really started to hit its stride.
So tell me again why I should pay $27,000 to a real estate agent when a real estate attorney and the title company can do most of the technical stuff for pennies on the dollar?
Heck, for that much I could replace my trusty old car (a 1997 Honda Civic) with a brand new one, pay the real estate attorney and still have thousands of dollars left over to market my house if need be.
Real Estate Agents Are Expensive Middle Men
Still, while a new car would be nice perhaps the most important thing I could do with those savings is to use it as leverage in negotiations to help sell the home quicker instead.
Let’s face it, if I’ve done my homework and priced my house correctly, any haggling between me and a serious buyer should be in the vicinity of between five and ten percent of the asking price – and not having to pay the realtor six percent is going to make coming to an equitable agreement for both parties a lot easier.
Maybe the neurosurgeon who pulls in over $500,000 annually, or your typical millionaire, can make a case that his time is valuable enough to justify paying a real estate agent. However, the further you fall down the salary scale, the more it actually makes sense to NOT use a realtor.
If I pulled in the modest sum of $50,000 per year and my agent stood to receive $27,000 for selling my home, why wouldn’t I choose to cut out the middle man and make that money for myself?
Think about it. If you could take a six-month leave of absence from your real job and devote that time to selling your own home, knowing that you would still come out ahead financially, would you? I suspect most people would.
Best of all, the odds are if you were devoting 40 hours per week to selling your home you’d have that home sold in far less than six months – assuming it was reasonably priced, of course.
How many hours do you think your real estate agent is going to spend each week actively trying to sell your home? I guarantee you, unless you’re their only client, it isn’t anywhere close to 40 hours.
And you thought the hourly rate for plumbers was high.
Even if you couldn’t take a leave of absence, wouldn’t it be worth it to try and sell your own house knowing that you could make more than half what you would normally earn in an entire year? You’d be crazy not to.
Hey, It’s Your Money
Now I realize that just because people have access to the Internet, it doesn’t make them a real estate agent. But you can also say that just because somebody is a real estate agent, it doesn’t mean that they are necessarily competent.
Thankfully, for those who are willing to get their hands dirty in order to save a significant sum of money, the resources are out there that make selling a house on your own easier than it has ever been before.
Yes, I realize some people don’t want to be hassled with the task of selling their own home. I also know there are others out there who are just plain uncomfortable with the thought of even trying. Fair enough. If that is the case then by all means go ahead and get yourself a real estate agent.
I just hope you end up getting what you pay for.
For Additional Perspectives from the Money Mavens, See…
Using A Real Estate Broker? at JoeTaxpayer
Would You Take a Realtor to Sell Your House? at Green Panda Treehouse
Should You Use a Real Estate Agent to Sell Your House? at Canadian Finance Blog
Should I Use a Realtor to Sell My House? at Fiscal Geek
And Here Are Some Handy Resources…
Here are a few sites to help you sell your house without a traditional real estate agent:
Ten Easy Steps for Selling Your Home By Yourself: A very helpful checklist for those looking to sell their own home without an agent.
For Sale By Owner: A no-commission web site that provides Internet marketing services, MLS listings, real estate guidance and information, legal forms, and live customer support to help customers independently sell their own homes for a monthly fee.
Homes By Owner: Another no-commission site that enables you to find homes for sale by owner or advertise your real estate in over 900 metro areas in the U.S. and Canada. They claim to be the largest network of FSBO experts in North America.
Redfin: Here is an option for those who are looking for a little help, but still want to save money. Currently covering 11 major metropolitan areas, Redfin is a discount on-line real estate agent. Rather than charging you 3% of the home price to sell your home, Redfin charges only 1.5%, with a minimum fee of $5,500.