“I’m going to sell my property as a FSBO (For Sale By Owner) because I don’t want to pay the high commission for an agent to list it.”
If you’ve ever pondered this yourself, or are just curious how a professional real estate agent would respond to this type of statements, here are 7 reasons why it would be better to have a real estate professional represent you in selling your property vs. trying to do it on your own.
1. EXPOSURE:
In 2019 the National Association of Realtors, NAR, did an extensive study on FSBO’s and found that 89% of home sellers worked with a real estate agent to sell their home. And 88% of buyers purchased their home through a real estate agent or broker which clearly demonstrates that agents dominate the real estate market and the more competition a listing is exposed to, the more someone is willing to pay.
For example, despite the fact that FSBO homes sold more quickly than agent-assisted homes, with 77% of FSBO’s selling in less than two weeks, it was often because the homes were sold to someone the seller knew- meaning the home was not exposed to the open market for the seller to see what the market would bear and potentially get a higher sale’s price. According to the NAR report, FSBO’s typically sold for less than the selling price of other homes, with the median selling price of a FSBO being $217,900, significantly lower than the median selling price of an agent-assisted home of $242,300.
In today’s market where there is an extreme lack of inventory it is crucial that a property is exposed to as many potential buyers as quickly as possible so that a seller has the greatest potential of receiving the highest competing offers.
Exposure is also critical with properties that have unique characteristics that would benefit from being exposed to a wider range and larger pool of potential buyers, as well as the opportunity to benefit from a professional Realtor’s experience of what to highlight and what not to tout about the property’s uniqueness.
Specific types of exposure are also vitally important when selling properties that have multiple potential uses, like advertising a property for sale as a single-family residence, but maybe also as a land development play for a builder, or even creating an assemblage with other neighboring property owners to promote to a developer. This type of exposure for a property that has multiple potential uses is most effectively done by using multiple MLS systems all at once including CoStar which is the MLS system that commercial real estate agents have access to.
And of course when discussing exposure, the white elephant in the room that should be mentioned is that real estate agents representing buyers usually don’t use any other source of searching to find their clients homes other than the MLS systems and that’s because according to NAR, 91% of of homes were listed on the Multiple Listing Service, and most Realtors have an aversion to search engines like Zillow because of them being notoriously bad for being up to date. And in a market like our current one, days and even minutes matter. There is nothing more frustrating for a buyer’s agent than having a client call them excited about seeing a new listing hit the market on Zillow only for them to call on it and find out that it went under contract 3 days prior.
An additional white elephant for FSBO’s that warrants mentioning is that buyer’s agents, which again represented 88% of the buyers in 2019, often warn their clients about working with FSBO’s. Two of the big warnings that agents often give are that, one, FSBO’s tend to be ignorant sellers, meaning they lack knowledge, information and awareness about the real ins and outs of selling a home and getting the transaction closed, and as a result can be difficult to work with. Two, FSBO’s oftentimes don’t pay any or all of a buyer’s agent’s commission. Thus the buyer will have to cover the commission separately, oftentimes out of pocket.
2. MARKET EXPERTISE:
The Collins English Dictionary defines expertise as a special skill or knowledge that is acquired by training, study, or practice. And Researcher Lyle E. Bourne, Jr. of the University of Colorado, Boulder and his colleagues in an article published in the journal Frontiers in Psychology explained that “Expertise is consensually defined as elite, peak, or exceptionally high levels of performance on a particular task or within a given domain.”
I consider myself handy around the house. I can change out a faucet, install an electrical outlet, paint a room or two, but if I needed to run a main water line or install a septic tank, I’m hiring a professional plumber to do it for me because of their expertise. When I was flipping houses and needed to run new electrical throughout the main breaker box, I hired a professional for their expertise. When I bought my house and needed to paint all three levels, inside and out, I hired professional painters to do it because of their expertise.
There is a reason why people pay for professional representation in so many aspects of life. It’s because their expertise is worth it! And real estate is no different.
And even if a real estate agent is newly licensed, and has just begun their career in real estate they have far more advanced knowledge, training and/or skill than a homeowner who has little to no training, not to mention that they have a team of readily available experts to assist and back them up, such as their broker, coach, mentor, sponsor and/or their group or team leader.
3. PROFESSIONAL MARKETING:
A good real estate agent will have had hours and hours of training on how to professionally and effectively market their client’s properties. They will have the tools and resources to do it better than an individual selling their own home. And the simple fact is, people will pay more for things that are professionally marketed than they will for something that is not.
A perfect example of this is a yard sale. Even if someone had a brand-new Rolex watch they just bought from a jeweler, still in its original box, with the receipt in the original fancy jewelry store bag, they would never expect to get what they paid for it or what it’s worth at a yard sale! Why? Because it’s not being professionally marketed and it’s being sold by the owner.
Like it or not, people not only find it prestigious to buy an item that is being sold and marketed by a professional but also expect to pay more. While on the other hand, there is a negative stigma associated with buying a product from an individual, and so just like with going to a yard sale, when buying a FSBO, a buyer will expect to pay less than full retail.
Or, ask yourself this. Why would a star All-American college athlete hire a sport’s agent to represent them when going pro? Shouldn’t their talent, reputation, experience, and marketability speak for itself? The answer is simple. The athlete and their family know that no matter how desirable or promising the athlete is, every professional organization out there that would want them on their team recognizes that the team will not only have to pay more for the athlete if they are represented by an agent, but also that all the other terms of the signing contract will be negotiated with the athlete’s best interest in mind.
A more sobering example might be when someone is going through a costly divorce or expensive business acquisition. It would never be advisable for one of the parties to negotiate the terms of either of those contracts without retaining an attorney to give them legal advice. The odds are never in the favor of the party not represented by a professional.
Professional marketing matters in real estate no matter what the market conditions are, or what shape the property is in.
4. LEGAL PROTECTION:
This is one of the biggies. Real estate transactions are complicated and have very strong legal ramifications if they go wrong. There are Purchase and Sale Agreements, (PSA’s), with complex terms and definitions. Amendments that must be written correctly so that they communicate exactly what needs to take place, when it needs to take place, and what happens to either party if it doesn’t. Contingencies with a myriad of precise details and timelines that must be adhered to, and that at times can interlock, overlap, or even render portions of the PSA invalid. Disclosures that if not filled out correctly could open the door to lawsuits and even property loss.
5. VENDORS & ALLIED PARTNERS:
Real estate professionals have allied partners they regularly use and trust like closing attorneys, appraisers, lenders, professional photographers, stagers, surveyors, etc. They also have lists of vendors they can refer to their clients to help them get their homes ready for sale, or address any concerns a buyer might have after the buyer has had the property inspected during due diligence like painters, electricians, plumbers, HVAC, roofers, handyman, etc. Having readily available access to these types of trusted professionals can make or break a closing transaction.
6. FRUSTRATION AND DEAL FATIGUE:
Despite there not being any concrete statistical evidence to show just how many FSBO’s end up listing their homes with real estate professionals, it is widely believed among most agents, especially those who call on FSBO’s to solicit their business as a listing agent, that a large portion of FSBO’s do in fact eventually list their homes with agents. This is often due to the fact that either the FSBO realizes they got in over their heads, didn’t realize how much of their personal time would be involved in selling their home themselves, or they get tired of dealing with unqualified and/or unscrupulous buyers.
7. WORTH THE COMMISSION:
Professional real estate agents bring so much more to the table when listing a property than just taking a few photos on their phone and putting them into an MLS system.
They do in-depth market analysis and property comparable research to advise their clients using their personal experience, market expertise, special training and sometimes even advanced certifications on what the right listing price should be. They spend hours correctly inputting the myriad of details about the property into multiple different MLS systems to expose the property to hundreds of listing websites and hundreds of thousands of potential buyers around the country and even the world. They market the property on multiple forms of social media like Facebook, YouTube, Instagram, Twitter, oftentimes paying for boosting posts about the property as well as marketing on personal, team and broker websites. They refer and oftentimes work directly with vendors to help get the property ready to list. They often pay for professional photography, drone imagery, video, and sending out mailers. They place professional looking signage out in front of the property, install a realtor lockbox that records every showing and who opened the lockbox. They manage all showing times often through a dependable and safe technology system that tracks all those that have requested showings of the property. They sometimes hold open houses and/or meet with potential buyers and their agents at the property. They review and negotiate offer contracts- sometimes deciphering between the many nuances of multiple offers that come in all at one time to determine which is in fact the best for their seller, negotiate amendments to address concerns after inspections, and make sure all critical timelines and terms of the contract are adhered to. They manage the entire process from contract to close including reviewing the final settlement statement for errors, and showing up at the closing to make sure all goes well and the transaction actually closes according to plan.
Hopefully you now see how a professional real estate agent earns every penny of their commission. Why then would anyone risk so much by trying to sell what is likely their largest asset and wealth builder, their home, on their own when a professional real estate agent does it so much better for so little?
There is a reason why you pay more for a gallon of milk at a convenience store than at a grocery store. The time saved and convenience is worth it. There is a reason why you hire professionals and experts to represent you. It’s worth it. There is a reason why you hire an attorney to keep you out of trouble or give you legal advice. Because it’s worth it. And there is a reason why you hire a professional real estate agent to represent you in selling your home. It’s worth it!
By Tony Morris, Realtor
The Meridian Real Estate Group