Are you asking yourself “Should I use a real estate agent to sell my home?” Obviously this article is posted on a real estate agent website, so you probably already know my short answer will be ‘yes’. But this blog will do more than answer the question; it will also give reasons why the answer is ‘yes’.
Many people consider going it alone when deciding to sell their home or other real estate property. Of course they do. Real estate agents make a commission from any sale they are involved in, and if you’re looking to maximize your return on the sale, or if you need to cover loan pay-offs and other expenses, the first cost of sale considered is the one cost that may be the most expensive and the one you think you can do without- the real estate agent.
First, real estate agent’s commissions are anywhere from 4% to 10% of the total sales price of the property, depending on the type of sale and what was negotiated.
Well, consider this: REALTOR®, or a real estate agent’s commissions aren’t exactly what they seem. Let’s say you sell a house for $100,000, and you negotiated (yes, you can negotiate the sales commission with your agent when you list the property) the commission to be 6% of the sale. So how much does the real estate agent make when the property sells? Six thousand dollars, right? Wrong.
The sale of the property nets $6,000 in commissions, but that money gets split up a few different ways. Let’s say that the buyers also had a real estate agent that had searched, and toured, many houses and neighborhoods with their buyer(s). That agent, and their broker, are customarily entitled to 3% of the sale. So now your real estate agent that listed and sold your home is bringing home $3,000? Think again.
Most agents work for real estate brokers. A real estate broker provide all kinds of things to a real estate agent, like guidance, office space, Errors and Omissions insurance (E&O insurance), marketing benefits, etc.. But most importantly, brokers provide a real estate license to work under, because without it a real estate agent cannot by law work in the industry. Depending on what the agent and broker negotiated, most standard starting commission splits are 50/50 for new agents. Some agents pull in more of a split.
So now the real estate agent is taking home $1,500. And after you consider that real estate agents must pay taxes from that commission, and also any type of medical insurance from themselves (brokers do not provide medical insurance like an employer does) and any other expenses of doing business, that commission could be $1,000, or less. Assuming that selling four houses in a month is a good month for an agent, you can start to see that real estate agent’s pay is not all sunshine and roses.
And after all this, if a buyer’s agent brings you a buyer to your FSBO, they will want their 3% commission still; maybe more if you are dependent on them for contracts or advice.
If you believe you can market your For Sale By Owner (also known as FSBO) property to buyers yourself, you’ve obviously got mad Internet skills. If you don’t have these skills your home for sale will get very little traffic. The National Association of REALTORS® estimates 90 to 95% of all buyers start their home search on-line now. Think about it. When you need a dentist, do you start your search in the phone book or newspaper anymore? When you got your car smoged, how did you find that smoke check station? Most of us do these types of inquiries on Google or some other search engine these days. It’s too easy not to do it that way. And home searching is the same way. That’s why sites like Trulia, Zillow and Redfin have popped up over the past decade.
Your home for sale needs to be marketed heavily on-line, with the most effective websites and savvy marketing techniques. Any agent worth their weight in salt knows this and applies it to their efforts. In fact, if you find an agent that doesn’t employ on-line marketing, you may want to consider finding a new real estate agent.
There’s also another reason for considering a real estate agent as opposed to FSBO: The MLS, also known as the Multiple Listing Service. This has become an industry standard among active REALTORS®. MLS systems have shored up many inconsistencies that come with groups contributing to a massive database, and most times this is how a buyer’s agent makes a connection with a listing agent that has entered their client’s property into the Multiple Listing Service.
You can find agents and brokers that will enter your home for sale into the MLS for a flat fee, usually about $500-$600, but you only get the basics, and once the entry is done you are on your own. Plus, if the property does not sell before the listing expires, you’ll need to pony up another chunk of change to extend the listing.
CONTRACTS, DISCLOSURES AND REAL ESTATE REGULATIONS
Now if you can handle marketing your own house for sale, the only other real hurdle is the contracts, right?! There are many contracts and disclosures during a real estate transaction. And even if you are not employing an agent, you’ll still need to make all the appropriate disclosures required by state and federal real estate regulations. If not done properly, you could expose yourself to litigation, which make cost you dearly for many years to come.
I’m not saying you, or anyone else is not smart enough to handle this type of contractual obligation as a seller, but you’d better be prepared to have every t crossed and i dotted. If you are not absolutely confident you have all aspects of the contracts and disclosures covered, you may want to reconsider hiring a competent real estate agent.
Real estate agents, brokers and REALTORS® also act as good buffers from lookie loos that aren’t really interested in buying and will just waste your time.
And, a good real estate agent can give great price guidance about where to start the list price, and any adjustments that may need to be made. And the negotiation skills of a good agent can save you time, money, headaches and even a sale!