When you sell your home, carving off a piece of that big check and handing it over to a real estate agent is an unpleasant moment. It’s hard to resist wondering whether you could have sold your home yourself and kept the agent’s commission. There is an alternative that lets you DIY – For Sale By Owner or FSBO, pronounced “Fizzbo.”) According to the National Association of Realtors, about 1 in 12 home sales are FSBO.
By cutting out the middleman, you avoid paying thousands of dollars to a selling agent. But selling your house yourself can cost you a lot of time and introduce new headaches and risks. And you might not save you as much money as you think. Here’s how to tell whether the FSBO path is right for you:
How much money are we talking about?
The U.S. average commission in 2013 was 5.38%, according to the Los Angeles Times. So a seller with a $200,000 home would pay about $10,760 to real estate agents, typically split 50/50 between a buyer’s and seller’s agent. “I support sellers who want to give it a go, because there’s real money on the table,” says New York-based real estate attorney Michael Moshan.
Still, saving 5%-6% seems like a good idea; unfortunately it’s not that simple. Here are a few reasons why:
- While FSBO lets you eliminate the seller’s commission, you’ll typically still have to work with a buyer’s agent; otherwise, no one will bring clients to see your house. That 5%-6% ends up more like 21/2-3% – or about $5,380 on that $200,000 home.
- Without a seller’s agent, your house may not sell for as much. A seller’s agent posts your house on a Multiple Listing Service (MLS), available to licensed real estate agents, exposing it to many potential buyers than you’re likely to find on your own. And that increased demand can drive the price up for agent-assisted sales vs. FSBOs. Avoiding a 2.69% agent’s fee isn’t such a great deal if it means your final selling price 10% lower.
- Finally, some real estate agent fees are tax deductible. “Commissions you’ve paid for listing or selling the house reduce the taxable profit” at tax time and reduce your tax bill, explains Rob Babek, a CPA at Marcum LLP. No commissions, no extra tax break.
How much work will it take?
Here’s where you’ll need to consider what your time is worth. Because FSBO will require time, legwork and brainwork.
- First, you must decide on the asking price for your house, which will take some research into the market. A seller’s agent with easy access to listings and databases can get you listings for comparable homes in your area – known as comps – to help you arrive at a number more efficiently.
- You’ll also need to photograph your house and perhaps record a video tour. A seller’s agent can handle both chores, as well as recommend how to stage the house to maximize its appeal to buyers.
- Selling a house involves numerous hurdles – from filling out paperwork to arranging for inspections. You’ll find yourself navigating the complex and unfamiliar terrain of home inspectors, appraisers, attorneys, closing costs, tax implications, etc. While a seller’s agent may not take all these jobs off your hands, a good one will help you understand the process and connect you with trusted professionals.
- Showing the house means making perhaps dozens of appointments to walk potential buyers through it and always being on call. “I’ve seen many sellers become miserable (because of) the time commitment alone – having to show their apartment 100 times to 100 strangers picking over their taste, their stuff, their design choices,” says Moshan.
So FSBO is never a good choice?
No. Complex though it is, FSBO can pay off. Here are some final tips to help you decide:
- If you’re not using a seller’s agent, your networking and negotiating skills will be critical. If you have a large personal network and are an effective negotiator, FSBO may be right for you.
- Certain circumstances make FSBO less challenging. If you’re close to a lawyer, accountant or interior designer, their expertise can compensate for the lack of an agent’s. If an adult in the household works part-time or has a very flexible work schedule, the time commitment of showing the house becomes less tedious.
- You can also try to approximate the services of a seller’s agent, although some may introduce new costs. To determine your listing price, check comps at Zillow.com or Realtor.com, or search your county’s tax assessment office for recently sold houses. For about 1% of the sale price, you can pay an online “discount broker” to list your house on an MLS where buyers’ agents can find it.
- And to make sure potential buyers are qualified BEFORE you accept a purchase offer (which takes your house off the market), require pre-qualification letters from their bank that certify they can meet the proposed financial commitment.
Is selling your own house right for you? If you’re energetic and have the time, if you’re on top of paperwork and don’t mind research, and if you’re a good salesperson and negotiator, you may be able to make it work. But if the thought of managing all these details makes your head spin, there are professionals to handle them – for a price, of course.
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