- There are times when it makes sense to skip on the listing agent
- Skipping the agent may not save you as much money as you think
- The worst thing that might happen to a FSBO might be successfully selling
I’m a Fort Hood area Realtor.
As such, it’s no surprise that I am a believer in the value of real estate agents.
But it also means that I see behind the scenes. I know agents are expensive. And I know there are sometimes it may be in your best interest to skip on the services of a real estate agent.
This article isn’t designed to teach you everything about selling a home. It takes years of local experience for agents to even get good at that. I try to write as much as I can about what to expect selling your home in Fort Hood, but that only scratches the surface.
This is designed to just give you a quick pros-and-cons assessment of selling your home yourself, and what to watch out for.
What is For-Sale-By-Owner?
For Sale By Owner, or FSBO (FIZZ-boh), refers to any time a homeowner tries to sell their home without the assistance of a licensed real estate agent. The National Association of Realtors (NAR) estimates that approximately 8% of home sales in 2015 were FSBO sellers compared to 89% of sale completed with Realtors.
FSBOs are sometimes lumped together with other selling options like MLS only services like Fizber, iBuyer companies like Opendoor, Homevestors, or Offerpad, or anyone else who doesn’t sell the “traditional” way with a yard sign, smiling agent, open houses, and lockboxes.
FSBOs are different from “discount” or flat-fee brokerages like Redfin. Redfin and these brokerages are still real estate agents who simply list at prices that tend to be less than brokerages that advertise as “full service” brokerages.
Good Times to Not Use an Agent
Note: In every one of these cases, it is still a good idea to speak with a local agent to ensure you are making the right decision for your circumstances and understand the marketplace.
You already have a buyer
Is your tenant buying your home? Perhaps your neighbor wants to move their mother into your house and has approached you with an offer? Maybe you are just transferring the deed to a family member?
You probably don’t need an agent to do any of that. You will still want a market assessment of your home to ensure that nobody is getting the better of anyone. You can get that analysis either from an agent or a $500 appraisal. The rest can be done by a lawyer.
You are selling to an investor
This may include local real estate investors or the big institutional investors like Opendoor, OfferPad, or Zillow Instant Offers, currently available in a limited number of markets, none, to my knowledge, yet in the Fort Hood area as of this writing (our prices are too low for their business model to be profitable at the moment).
Generally, when selling to an investor, the homeowner accepts that they are not getting as much as they can from the home, but in return get a guaranteed quick sale with fewer hassles.
Remember again – talk to an agent first, even if you ultimately go through one of these alternate routes! You can at least get a market analysis and do a gut check on your decision to skip an agent.
The Savings of Selling Your Home Yourself
We’ll discuss the possible costs of making mistakes later, but for now, let’s just look at the on-paper benefits.
In the Fort Hood area, the Realtor commission comprises only about a half of the common seller paid concessions. Different agents can charge different amounts. I charge a total of 6%: 3% to my brokerage and 3% to the buyer agent’s brokerage. In theory, if there are no agents involved, you could save yourself as much as 6% of the sales price. That is $12,000 on a $200,000 home – hardly chump change!
That’s about the only advantage of forgoing an agent. In the Fort Hood area, some homeowners are forced to consider FSBO options because they may have little if any equity. It can be a struggle to massage the numbers so that the seller is not coming to the closing table owing money. Ditching the Realtor seems a tempting way to conserve money at the closing table.
Why Are Realtors Still a Thing?
- Unlike Travel Agents, Real Estate Agents are probably here to stay
- Transaction complexity and heterogeneity will keep AI away for now
- But, real estate is becoming very tech heavy
But Are Your Really Saving That Much?
We will get to the other potential costs in a moment. But even on paper, the savings may not be as much as it would first appear by skipping on a Realtor.
Paying the Buyer’s Agent?
Often a buyer may already have their own agent. Approximately 90% of buyers use a Realtor when buying a home. If you aren’t marketing your home to buyers with Realtors, then you are losing out on as much as 90% of your possible buyer pool.
It is typical for sellers to pay the buyer’s agent, but that is not required if your buyer happens to be working with an agent. You can make them pay for their own agent if they want. But if that is the case, keep in mind that a buyer is simply going to offer less, because your home is worth less to them than the seller who is paying their agent’s commission.
Especially in a market like Fort Hood where many buyers can get to closing with $0 down with the VA loan, buyers may not react favorably to a FSBO seller insisting that they pay for their own agent. My recommendation for FSBO sellers is to offer a buyer agent’s commission of 3% to the buyer’s agent.
Then, if you wanted to get your listing in the MLS, you could do so for less than 3% and instead use a flat fee agent or service, who might do it for $500 or so. Unlike traditional agents who usually are only compensated if your home sells, flat fee agents and limited service MLS listings often charge that money up front, regardless of whether your home successfully sells.
So instead of $12,000 (6% on $200,000), you are instead saving approximately $5500. While nothing to sneeze at, it’s not going to do a seller any good who was counting on the $12,000 in savings.
Headwinds of Selling it Yourself
I recommend paying and advertising a buyer’s agent commission, because that is a significant headwind to getting a home sold for FSBO sellers: overcoming agent stigma against FSBOs.
You may think it is not fair that agents are afraid of FSBOs. But it’s not just agents jealously guarding their commission. FSBO sellers have a deserved reputation for having unrealistic expectations and therefore difficult transaction partners.
As an agent, I am also most comfortable working with another agent who understands the process. That’ not my buyer’s problem, but the seller’s misunderstanding of the deal, or certain items like closing costs or how to handle common closing pitfalls, may mean that we are more likely to run into problems buying the home than we would with a homeowner with an agent.
Lastly, a seller who is paying a professional to help sell their home is more likely to be serious about selling their home. That’s good for me and my buyer.
I’ll try it for a few weeks and, if no bites, I’ll list with an agent
This seems sensible, but it also assumes the value of an agent is simply to get the listing on the MLS. While that kind of exposure is indeed critical to getting a home sold, it’s knowing the market, inside information about other agents, knowing the contracts, how and whether to negotiate repairs, and experience with the myriad of tiny moving parts of the real estate transaction that can come to the rescue when an issue arises.
How to Do It: The PACE Plan
Damn the torpedos, full speed ahead! It worked out for Admiral Farragut, I guess.
If you’re set on trying to sell yourself, then my advice is simple: do everything a Realtor would do.
All the principles of selling your home I talk about in this blog apply just as much to For-Sale-By-Owners. I won’t go into detail about every single step of selling a home, but I’ve written a fair number of articles on the process and what is important on this site. I encourage you to explore my seller articles and Fort Hood Seller Tool Kit.
The fundamentals of selling your home surround the PACE strategy – Price, Accessibility, Condition and Exposure.
Few of these principles will be any different for a FSBO. Some challenges unique to a FSBO would include:
- Shadowing unaccompanied buyers during showings (not ideal for best showing experience)
- Accommodating showings while not in town or available
- Getting your listing into the MLS
- Overcoming buyer or agent stigma against FSBO sellers
Plan for these and create a plan for dealing with them.
Texas Realtors have their own, expanded library of contracts, but the core contracts are actually promulgated by the State of Texas through the Texas Real Estate Commission (TREC). Therefore, these contracts are free and available for public use!
Having an agent who is trained and experienced with the contracts is another benefit of working with an agent. I highly, HIGHLY recommend familiarizing yourself with these contracts if you are embarking on selling on your own.
Costliest Mistakes You Might Make
Okay, so even if offering a buyer’s agent commission and a MLS only listing fee, you still would be saving $1000s. What’s not to love?
It absolutely might work out! But a single, even small mistake in a six figure transaction can wipe out those gains.
So what is the worst that can happen, going it alone?
In the Army, when planning a mission, we would describe the enemy’s most likely course of action, versus their most dangerous course of action. It was a way of planning both for how events would probably play out while protecting ourselves against a worst-case scenario.
Most Likely Course of Action
It doesn’t sell (yet).
There isn’t any good data I am aware of, but the consensus is that most FSBOs end up listing and selling with a Realtor. That is likely for the reasons I’ve already labored on regarding listing exposure and marketing. I’ve worked with some FSBOs who eventually get fed up with a lack of showings and finally list with an agent.
Most Dangerous Course of Action
There are a reasonable number of Fair Housing laws that are fairly easy to accidentally violate, even when well-intentioned. Furthermore, a contract mistake or misunderstanding can quickly turn sour in a major financial transaction. A good Realtor should be savvy about avoiding these issus.
Other costly ($1000-$10,000 mistakes) could include:
Lack of market knowledge, resulting in
- concessions that are not typical for the market
- unnecessary or even negative repairs or upgrades
Lack of technical knowledge, resulting in
- erroneous contracts
- potential fair housing violations
- legal and disclosure compliance issues
Lack of experience, resulting in
- failure to foresee complications depending on loan type
- failure to judge the quality of an offer submission
- unreasonably expectations regarding the timeline
- staging and condition fails that prevent the home from showing well
- poor negotiation of issues like repair requests, low appraisals, title issues, insurance coverage, and more
One Common Mistake That Costs Buyers
- Don’t use the seller’s listing agent as your Realtor when buying a home
- Beware a Realtor who shows you too many of their own listings
- Love a home that happens to be your agent’s listing? Ask to be referred to a colleague
My Own Experience
I’m a Realtor, so I’ve never sold my own home without a Realtor. But I have helped FSBO sellers.
One particular seller in Harker Heights had their home on the market on Zillow as a FSBO. I reached out to them and a couple weeks later they listed with me, for approximately $10,000 more than what they had it listed on Zillow for. In two weeks, we were under contract and closed a month later at full asking price.
That’s not how all FSBOs work out (many FSBOs dramatically overprice their homes), but was one of my prouder moments as an agent.
I hope you don’t feel I was bashing on FSBOs too much. But I do want to make sure a FSBO understands what they are getting into when they choose that route.
I genuinely recommend only doing it in those specific circumstances I mentioned.
But if you are going to do it, do it how an agent would do it. All the same principles still apply!
As an agent, I obviously believe in my business and my value to customers. But I also want to genuinely help folks who are exploring the pros and cons of selling For-Sale-By-Owner, and walk through how I would do it if I felt I had to. Beware the risks!