Over the past few months I’ve noticed several homes for sale pop up in my neighborhood, and virtually all of them have a “For Sale By Owner” sign in the yard. It is understandable for people to dislike paying 6% real estate commissions, but I think if more people would stop and do the math they would discover that FSBO listings often lead to less profit and added carrying expenses for owners.
For Sale By Owner Does Not Guarantee Higher Profits
FSBO listing signals a better deal to buyers. When potential buyers see a for sale by owner sign in the yard they typically expect to get a better deal because the selling party is not paying real estate commissions. Unfortunately for the seller, this often means their offer is less than 6% of the real estate commission, meaning their initial asking price is less than what the buyer would have netted had they simply paid an agent to list their house.
Homes sold by owners typically sit longer. Without the benefit of being listed in MLS, and having a network of real estate agents marketing your home, it could mean higher carrying costs from additional mortgage payments. Assuming you still owe money on your mortgage, the amount saved in real esate commissions could easily be eaten up by three of four additional mortgage payments that might not have been paid had the home sold quicker with the help of a real estate agent.
High-quality real estate agents earn their commission. Homeowners may be turned off by the idea of paying commissions to an agent to sell their home. But high-quality real estate agents are worth every penny. They lead homeowners through the home selling process, help assess real estate values for setting a list price, navigate contractual real estate terms, market your home to potential buyers, coordinate showing your home to buyers, negotiate concessions from the buyer and utlimately, the final selling price.
For sale by owner listings can be profitable in markets where homes are selling fast, or in situations where homeowners have a network of potential buyers already identified. However, this might be the one spot where it makes sense to spend a little money to get a better deal, and protect yourself throughout the selling process by having an advocate on your side of the transaction.
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