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Realtor vs. FSBO – Which Is Better For You?

Realtor vs. FSBO

Confused about real estate

Is it better to sell your home yourself, or get help from a real estate professional? Ultimately this is a personal decision, but let’s take a look at the pros and cons.

As a seller in this market, you are no doubt aware that the competition is fierce. (If you are not aware of this, you can stop reading now and go find a Realtor.) As with any competitive atmosphere, you have to set yourself apart from the competition to get noticed.

As a Mortgage Banker, the biggest problem that I see with buyers right now is CHOICE. You would think that would be a good thing, but in fact, there are so many choices for buyers (because of the flood of homes for sale), that many of them find themselves overwhelmed and frustrated. This leaves them like a kid in a toy store with strict instructions to only pick one.

The number one reason that seller’s want to handle the transaction themselves is cost. A real estate commission is typically between 5% and 7% depending on your area of the country (in North Florida it is usually 6%), so the natural instinct is to handle the transaction yourself, and save the thousands of dollars. Here are some things not always considered by a seller handling the transaction themselves:

  • A FSBO (For Sale By Owner) house will not be shown by a Realtor representing a buyer unless there is “Agent Participation” in the form of a fee. Agents work on commission only, and to assume they will show your house knowing that they won’t get paid is naive and unrealistic. This means that the buyer will have to find you on their own. The only way for that to happen is through advertising, which costs money.
  • Nationwide statistics show that the average sale by a Realtor is 16% higher than a FSBO. Take away the commissions to the Realtor, and you still come out ahead in net proceeds.
  • When selling a home, you are dealing with contract law. A mistake made on the contract could cost thousands more, and if you refuse to make good on the contract, you can (and probably will) get sued by the buyer for what is called “specific performance”.
  • If you owe more than the house will sell for, you can find a short sale specialist that will sell your home and negotiate with the bank on a lower payoff to make the transaction. In most cases, the lender will pay for the Realtor fees in this transaction, and many of them will not allow a short sale transaction at all without a licensed Realtor involved. You can find a local short sale specialist here if you owe more than the house is worth.

Whats Your Home Worth?

Now that we have looked at the bad, lets take a look at the good. There are situations where it may be to your advantage to sell FSBO. These situations are rare, but they do happen:

  • If you already have a buyer, and an agreed upon price, you may be able to justify selling FSBO. This could be a friend or family member that wants the house, and both parties are getting what they want out of the deal. To avoid the contract law issues discussed above, contact a local Real Estate Attorney to get some help with the contract. They will often do this for little or no fee if they also perform the closing and provide the title insurance (they have to make money somehow).
  • If the market is so hot that you have buyers coming to you to sell even if you don’t have it listed, you may be able to justify a FSBO. Remember though, that is very unlikely in the current economy, and you still need to contact an attorney about the contract issues. In addition, make sure that you have an accurate assessment of the market value of the property, it is worth the $350 you would pay to an appraiser to avoid losing thousands to a savvy buyer.

Overall, your best situation will be with a Realtor. I will discuss choosing the right Realtor in another post.

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2 Comments»

  furgy wrote @

I was curious where your data came from on the statement made in the article about a homewowner receiving 16% more on their house going with a realtor vs FSBO

  mtgmanfl wrote @

That statistic was provided by the National Association of Realtors at http://www.realtor.org. That will appear one sided, but being in the mortgage business for 12 years, I can say that you will get more exposure to more buyers with a realtor than by FSBO.

That said, a bad realtor is worse than no realtor at all. Do your homework on the realtors in your area that are selling homes. Just because someone has a license does not mean they know how to sell homes. Also, be prepared to take the advice about pricing. It may not be what you want to hear, but if you really want to sell, you will have to price it accordingly in this buyers market. If you are just trying to see what you can get, don’t even waste your time or the Realtor’s time. You would be better off waiting 12 to 18 months for the market to even out.


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