Pros and Cons of Selling Your Home on Your Own
If you’re thinking about listing your home for sale by owner (FSBO), you may want to consider carefully all the advantages and disadvantages before sticking the sign in the yard. While saving on real estate commissions can be immediately appealing it can be a lengthy and complex process. The more you can educate yourself on the front-end, the better you’ll be prepared to handle the transaction and/or decide to enlist the assistance of a real estate professional.
The primary reason why most sellers will decide to sell their home on their own is to save themselves from the traditional 5-7% real estate commissions. The median existing-home price for all housing types right now is $208,300. So a FSBO has the potential of saving $10,400-$14,500 in commissions. Sellers pay the commission, so the owner can retain the commission amount. On average, most FSBO’s will still offer a commission to the buyer’s agent (if represented). The amount offered to the buyer’s agent is at the seller’s discretion. Some sellers do not offer a buyer’s agent commission and thus pass the responsibility onto the buyer.
Rather than retaining 100% of the unpaid real estate commissions, a FSBO can use that amount to their advantage by being more competitively priced. In a market with several similar listings, a $5,000-$10,000 price difference can make your home really standout. Almost all buyers of all ages are beginning their home searches online, and a competitive price may position your home to appear just below popular search parameters. Another tactic could be to use that savings and offer to contribute towards the purchaser’s closing costs, prepaids, and/or discount points.
Another advantage of selling your home yourself is that you remain in control throughout the entire transaction. You’ll be able to decide the price of your home, when it’s available for showings, when to put it on the market, when to take it off the market, and more. You’ll also be able to screen potential purchasers prior to showing your home. When it gets into the negotiating, you’ll be directly involved, and can set all terms/conditions.
One other main advantage is that you have direct and complete knowledge of the property. Buyers can ask questions easily and get immediate answers. They won’t have to speculate on maintenance items. As the owner, you’ll be able to speak from the point of view of why you love your home. It’ll be easy and natural for you to highlight all the attributes that appealed to you at the time of purchase.
Selling a property is a difficult endeavor and can take time, energy, and a lot of patience. One main disadvantage of selling it on your own is the sacrifice of time. You will need to research the market, learn legal and financial details surrounding the transaction, advertise the property, create marketing materials for the home, schedule/show the house, negotiate contracts, and more. FSBOs tend to attract buyers that are “just looking” and those appointments also can soak up valuable time.
Statistically, FSBOs sell for significantly less than agent-assisted home sales. According to NAR, in 2013 the average FSBO sold for $184,000 compared to $230,000 for agent-assisted sales. Generating an accurate list price is of utmost importance and can be one of the major disadvantages to selling your home yourself. Real estate professionals are experts in the field; they constantly look at comparable properties, and they have a keen sense of what the market is doing. Agents have been inside similar homes, and they have access to a multiple listing service to research past sales. Individual owners may not know the most accurate price to start at, when to reduce the price, and/or an appropriate price to accept during negotiations.
Another disadvantage is your emotional investment. Often times, a realtor can mediate throughout the whole transaction. They can screen feedback, offer suggestions, play hardball during negotiations, conceal motivation, and share about reasonable terms/conditions. Routine elements of the selling process can upset For Sale By Owners, and prolong negotiations before closing.
For Sale By Owners also expose themselves to a higher level of risk associated with security and safety. The majority of buyers have a genuine interest in your home; however, your home may be an easy target for theft and burglaries. Extra security measures should be taken.
Lastly, a major disadvantage of listing your home For Sale By Owner is the lack of resources available for advertising. Realtors have access to Multiple Listing Services (or several) that they’ll use to market your property to all other realtors. Some other popular marketing strategies that real estate agents use on a daily basis include signage, ads in newspapers and magazines, mailings, open houses, flyers, the internet, networking groups, company contacts, as well as past and current contacts.
These days, home searches begin online. Most MLS organizations release their listing data to appear on dozens of other websites. Additionally, realtors will often hire professional photographers to create an enticing online presence along with virtual tours of your property. You can replicate some of these services, but each service comes with a cost.
The sale of your home is a large transaction. The laws and requirements of the housing industry are constantly changing. However, if you do your homework, educate yourself as much as possible, and have the time and energy, selling your home on your own has the potential to save you thousands of dollars and give you a great sense of accomplishment. It’s not something to enter into lightly, so take careful consideration of all the advantages and disadvantages and make the best-informed decision as possible. Be sure to take a look at our other blogs for tips on selling a home.