For Sale By Owner - Is It A Good Idea?

Posted by Ed DePrato on Saturday, July 5th, 2014 at 2:10pm.

Wherever there’s a Realtor who will sell a home for a commission, there’s a homeowner looking to avoid paying that commission. Some people choose to sell their home privately. It’s not a new idea but is it a good idea?

The theory for a homeowner is to sell her own home without the help of a Realtor and save the commission she’d normally pay under a traditional listing services agreement. Logical, since anyone who works for a living would likely prefer to save or eliminate an expense wherever possible. If all things are the equal, then maybe it makes sense...or does it? Well, before exploring if things really are equal, let’s first look at the pros and cons of selling by owner.

Pros:

  • No commission if the home sells (unless the seller accepts an offer represented by a buyers’ agent).

Cons:

  • No professional advice.
  • Unfamiliar with what to disclose and what forms may be required in the event a deal isn’t straight forward.
  • Time commitment to show the home to buyers.
  • Buyers feel less comfortable discussing what they like or dislike when the seller is in the room.
  • No ability to offer comparables to support a sale price.
  • Difficult to qualify a prospective buyer.

Ok, the list of cons is slightly longer. But, let’s be fair and consider that some sellers will still want to go it alone and venture down the rocky road of disclosure without advice and hope to complete the paperwork properly without missing anything while attempting to keep a buyer (qualified or not) interested even if the appraisal comes in low. But what’s absent so far is the question of equality. Is selling your home on your own equal to selling through a Realtor? After all, if a buyer is willing to pay said price, wouldn’t a seller come out further ahead by selling on her own?

Sellers often forget to think about the other side of the issue - why would a buyer represent himself? Think about it. A buyer doesn’t (most commonly) pay any commission, and it’s certainly no easier for a buyer to find a home on his own. Agents know the best areas and can help steer a buyer away from a money-pit; agents can show comparables and offer an informed opinion of value – all for no fee to the buyer. So why would any buyer approach a seller direct? To really understand this one must first understand the four kinds of buyers:

  1. First Time Buyers - Generally these people are proceeding into a new area of life and moving with extreme caution – so they deal with a trusted advisor or Realtor.
  2. The Move Up Buyer - This buyer has another home to sell and is dealing with a complex set of circumstances and thus they deal with a trusted advisor or Realtor.
  3. The Tire-Kicker - This is the person that goes to every open house and ‘knows’ everything about every home... agents don’t have much time for these folks.
  4. The Bargain Hunter/Investor - These people will buy your home, but only if they can make money by doing so. They’ll need to pay 5 – 15% less than market value and these people will normally not use a Realtor in order to get the commission amount deducted from his purchase price.

The reality is that things aren’t equal. A seller has just one home to sell but a buyer has many homes from which to choose thus making the negotiation in the buyer's favor. Also, cash is king! Sellers put their home for sale to attract money from a buyer. The buyer has the cash that the seller wants, period. So although agents charge a commission – that fee is always negotiable. Because a good Realtor can qualify a buyer, help a seller make proper disclosures and expose the home more objectively and professionally, the result is a faster sale, a higher sale price and more money in the hands of the seller, even after commission. For Sale By Owner benefits the buyernot the seller.

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