If you are considering selling your house, you have a few major decisions to make. Do I sink some money into the house in the hopes of making it more attractive and valuable? What's a good starting price to list your home for? And possibly the most important decision: Should I hire a real estate agent, or attempt to sell the house myself?
This last question will most likely have the largest financial impact on the sale of your home, either in a positive or negative way. The 6%-7% commission you can expect to pay out to a real estate professional is the equivalent of almost $20,000 on a $300,000 house. That seems like a lot of money, and it is, but before you decide to go it alone, there are a few things you need to consider.
While it is certainly true that saving the commission would be nice, it doesn't always work out this way. Oftentimes, buyers realize a home's listing price is inflated by the expected cost of commissions, so they take this into account when making an offer on a "for sale by owner," or FSBO property.
It is also the general consensus that FSBO sellers tend to overprice their homes, while a real estate agent has the knowledge of the local market and does not let emotion and attachment dictate the listing price of a home.
All real estate agents cost about the same, so it pays to find one with a great deal of experience selling your particular type of home. An agent will have good knowledge of the neighborhood and knows how to market your home based on comparable listings and sales in the area. The knowledge the right agent will bring to the table would take the average FSBO sellers years to acquire.
Another form of expertise a real estate agent will bring to the selling process is his/her negotiating skills. Negotiating with potential buyers is tough enough as it is, and almost impossible to do objectively when you have an emotional attachment to the property in question.
Buyers can also feel intimidated knowing they are dealing directly with the property's owner, and not a neutral third party. A good real estate professional will help negotiate price, closing procedures, and any concessions that need to be made, and with your best interests in mind.
The fact that FSBO homes can't be listed on the multiple listing service, or MLS, because MLS organizations are open only to professionals, is almost worth hiring an agent all by itself. The MLS is the No. 1 resource used by real estate professionals to match potential buyers with properties. They also can't use such valuable websites as Realtor.com, which will greatly limit the exposure the home gets.
Also, agents have generally built up a great network of contacts. They can tell you the best people to go to for home repairs, moving companies, and other useful vendors.
Broader group of potential buyers
All of this networking and experience means that your home is shown to a much larger group of potential buyers than it would be otherwise. More exposure means more potential buyers. Hiring a real estate agent does not necessarily mean a higher selling price, but it definitely increases the chances of a quick sale.
If you insist on going it alone...
If you are absolutely convinced that trying to sell your home on your own is the best course of action, make sure you do it right. You have to price your home correctly, making good use of comparable properties in the area and possibly by getting an appraisal. Take advantage of the advertising options that are available to FSBO sellers, such as newspapers, FSBO services offered in your area, and home selling websites such as Zillow, which allow FSBO homes to be listed.
There could indeed be a valid reason for believing that selling your own home is the way to go. For example, maybe your area has a particularly hot market right now, and houses are practically selling themselves. With a little patience and a lot of homework, it could work out, but make sure you know what you're getting into first.
Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends Zillow. The Motley Fool owns shares of Zillow. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.