Many home sellers decide to market their own homes. They may do this themselves or use one of the many deep discount brokers that offer to assist a home seller for a reduced fee. In all cases, the seller does the majority of the work. The purpose of this article is to add some illumination to the process. Clearly our interest is that you list your home with us or another traditional broker—this article should help you make the right decision for your needs. Some people find this process easy and that is not surprising. Selling real estate is not rocket science, but it is complicated and has numerous hidden traps. People sell their own homes every day and it can be done. Scott & Quinn Real Estate can even help you along the way for a greatly reduced fee. We hope this article will assist you in making the right choice even though we believe our system works best for sellers.
If you have been to Petco Park you have seen Trevor Hoffman pitching a firm that promises to sell your home for one percent of the sale price. Companies like this have been around for years. Typically they gain the largest market share in hot sellers’ markets. During the last recession, for example, these companies fell off the map. This is only obvious as when buyers are hungrily snapping up available properties, there is a real incentive to reduce the transactional cost of transferring your home. When times are not as good, it makes more sense to hire someone to aggressively market the property. But there is no free lunch in any market. The odds are that the most you will save is one to one and half percent. And you can easily negotiate that difference with a full service broker.
We need to get something straight about the fee. I recently did a study of six months of sales of both condominiums and homes in the 92103 zip code. There were 375 closings in this period—the discounters listed six. Of the six closings, a traditional agent represented the buyer in five of the sales. Since the seller paid 3% or 2.5% to that buyer’s agent, the real fee was 3.5% to 4%. So in real terms, the chances of your home selling for 1% appear to be extremely small. Factor in the time and it looks like a wash at best.
But that is the least of your worries. I have found, and this applies to the section below, that sales, when no agent is involved more often than not miss the market. It seems some one always comes out on the short end. Not that all traditional sales are perfect, far from it. However, in terms of arriving at a fair market price the regular system functions best. Professionals in the system are not unlike market arbitragers in that they provide some degree of rationality to the marketplace. Without going out into the full marketplace it may be difficult to complete the sale or arrive at some market value. Since the sales appear to be made only when they are fully exposed in the traditional method, the spread between the two methods is considerably narrowed.
But one point is one point. If you want to do the work it may be worth it. Sometimes it is better to have a dispassionate agent at work that may bring in more net dollars. The professionals have more negotiating skills and business knowledge that will allow you to play on a level field. Experience does count and can result in a smoother and more profitable deal.
The major difference from the example above is that a true FSBO does not list the property in the Multiple Listing Service. It should be noted that there are some brokers who will insert the home in the MLS for a fixed fee similar to the service provided by the discount brokers. Some independent brokers will often provide this kind of service on some ala Carte basis.
There are two issues to be concerned with. First, the amount of items to be disclosed to the buyer grows each year. Real estate transactions over time will have some affect on global warming. And this is a moving target, changing with the ever-growing onslaught of litigation. You should obtain the services of a transactional real estate lawyer to insure that you have complied with all of the current disclosure requirements.
Second, you need to make sure your price is market correct. Appraisals are of little use. Local professionals will give you the best idea. Be sure that when you place the property on the market you allow the home to be available for a reasonable period of time. Often sellers under price their home and sell too quickly to some buyer’s agent who recognizes the bargain at hand. Be patient and allow the market to adjust your price. Beware of the guy who shows up early Saturday morning at your doorstep with an offer. He is figuring you for a sucker.
Once an offer is made there are several other considerations. If the offer comes from an agent you can essentially get a bit of a free ride. That agent will end up doing your work for free as that agent is responsible to see that the buyer has been provided with all of the proper documentation and diligence. If your offer comes from an unrepresented person, you should then consider hiring a transaction lawyer to guide the transaction. This is really in your interest.
Escrow companies will not provide these services. Twenty years ago escrow companies readily facilitated these kinds of transaction. Today they do not. The contract, for example, is only referred to in the instructions. Their role in the transaction has become more limited in this sense. It was possible twenty years ago for the buyer and seller to arrive at an escrow company and get the transaction completed. Not any more.
It is entirely possible to handle this important transaction as a principal. You can also do your own taxes, repair your car, mow your lawn and paint your house. Selling real estate is nothing more than another service provided by professionals to the general public. It costs money to retain qualified professionals in any field.
I will leave you with this thought. With a little extra training, a recreational licensed pilot could probably fly a commercial aircraft with you on board from Los Angeles to Boston. But if there was a problem with the aircraft or with severe weather en route, whom do you want at the helm; a highly paid pilot with 50,000 hours of flying time or an amateur?> I would like to receive Jim’s Market Report monthly (no charge)