Advantages and Disadvantages of Selling Your Home By Owner

Considering selling your house on your own? Here are some pros and cons to think about!

There are many reasons that you would want to sell your house on your own. One of the main reasons that people like to do this is because they're trying to save on money. They're trying to not have to pay a commission out and collect as much money as they can. Others might be because they believe that they can sell it the best on their own because they know the house the best. There are a variety of different reasons.

 Let’s talk about the pros of selling your own home.

 You may make more money on the sale

It's very possible, especially right now in a seller's market, that you can sell your house on your own. The biggest trick is finding that buyer, right? If you can find your own buyer, you could save thousands, sometimes tens of thousands of dollars, depending on what your price point is. However, if you're solely trying to save money, and you aren’t trying to offer any money for a Realtor to bring a buyer to you, you could be really narrowing your prospects and eliminating about 95% of the market that has buyers being represented by Realtors.

 You have control of the sale

Whatever you want to do, you can do. If you don't want to put it on the internet, you don't have to. If you want to go out there and hand flyers out on the street, you totally can! You have complete control of everything that goes into actually selling your house on your own.

 You can devote your full attention to this sale

This is really good if you have, say a part-time job or you are retired, and you want to put your full attention into selling your home. You only have one house that you have to sell, as opposed to if you hire a real estate professional who usually has other clients and can’t devote every second of that time to your home.

 If you're in a high traffic area, or if there are other houses that are listed by other brokerages around you, you can use that to your advantage

You can use the other Realtors’ marketing of a house to draw attention to your house. If, for example, a neighbor down the street is selling their home using a Realtor, when potential buyers drive by to look at that house, they will also see your “for sale by owner” sign in the yard. Then they may go up and knock on the door, give you a phone call, or use their agent to see if they can coordinate a time to come in and take a look. 

 Now let’s talk about the cons of selling your own home.

 There may not be as much financial benefit as you might imagine

Did you account for closing costs? Who's paying for the title? Have you made sure that you calculated all of the other fees that could accumulate and affect your bottom line correctly?

Another big question is how did you get your listing price? Did you get it from Zillow? Did you happen to get a mailer from a real estate agent that gave you some sort of idea of what it might go for? Was it based off of all other property sales in your area? Did you go to the property appraiser website and average those out? Did you walk through comparable houses? How well do you actually know the market? How you came up with a listing price can affect how quickly your home sells.

Your listing price is your positioning price, as we call it in the industry. At what price can you list your house to position it to sell quickly? If it's not selling, there are usually two factors preventing the sale: the price and marketing.

When you do hire a real estate agent, they are professional marketers whose main purpose is to list and market your house. Their marketing can help to prevent you from having to lower the price of your house later down the road. Remember this is supply and demand, so you want to position your house to get multiple offers and drive that price up.

If you don’t have a professional marketing your home, it isn’t so easy to do, especially if you don't have an established network, like most full-time Realtors do. You could put it online…but everybody is putting it online! Your competitors, which are the other listing agents, and other for sale by owners are putting it online. The big catch, however, is that real estate websites, like realtor.com, don’t promote for sale by owners. The only houses listed on that website are the ones that are listed in the MLS, the multiple listing service, which is exclusive just for real estate agents.

Selling your home, it's hard work

It really is. It's how we as real estate agents can maintain this as a full-time job. If you have the time to do this, that's great. If not, it takes a lot of work. You have inspections and repairs. You have to get the right photos… Are you going to get a professional photographer? Are you going to do a video? Are videos helping to sell houses in your area?

You also have to be available to answer the phone any time of day. You have to be prepared for somebody to come and knock on the door, and you’ll have to be able to show the property at that time, or you could lose out on that potential sale. You will also want to make sure that those potential buyers are pre-qualified.

Then you're going to have to negotiate the price among other things. To caveat to this, if you've ever purchased a home or sold a home on your own, and you had to negotiate on your own, don't tell me emotions don't take part in that. Having a third party makes a huge difference just to be able to take a step aside and look at the whole scenario.

 For sale by owner websites, as much as they claim to get a lot of traction, only get a fraction of the market

Examples of such websites are militarybyowner.com, forsalebyowner.com, and FSBO.com, as well as many others that are out there. Unfortunately, most people getting on those sites are usually the ones that are just looking for deals and trying to take advantage of you. Or it could be other real estate agents trying to sell their services to you, which can, and I'm sure will be, annoying after a while.

 Even with your full attention, you will struggle

You will struggle to replace, essentially, what a good real estate agent could do. A good real estate agent has been out there, they've done that. They know the market. They know what is working in the market right now. The learning curve is pretty steep when you're in real estate for just one single transaction.

Now, if you've done this a couple of times before, and you're what we call a wholesaler, which is when a person buys a property (of which they typically use a real estate agent because they don't have to pay them any fee), then they maybe fix up the house a little bit and sell it as “for sale by owner”. They do this to save often half the commission, or the entire commission, and that's how they make money wholesaling. Just in case you're curious.

But know that yes, the learning curve is going to be steep, and you're competing with these wholesalers.

 You need to get a qualified buyer

What does it mean to be qualified? It means the buyer has gotten an approved funds letter, a pre-qualification letter, or pre-approval letter… in other words, they have the money to buy your house. However, you should know the difference between them and if they are legitimate. It would be a huge pain if a buyer comes through, everything seems to be great, then they all of a sudden don't have the money and you've had your home off the market for a month or two.

Speaking of buyers, you need to be careful to ensure your safety when you show your house. There are scams out there where people will actually bring two or three different people to your house, they'll knock on the door unannounced and ask to see your home. Then one will go off in one direction, and the other one will follow you around the house. What they're doing is going through your cabinets, trying to get your medicine, maybe seeing what they can steal now, or come back and steal later, those sorts of things. So, essentially, you're inviting a stranger into your house who you know nothing about, who doesn’t have a pre-qualification letter, and nobody knows that you're showing at that time. There are a lot of safety concerns, so just stay cognizant of that.

 You need to do your research to ensure that you’re legal

You’ll need to read up on your responsibilities as a seller so that you're not in breach of contract. You'll need to prepare all of the paperwork, and be certain that you understand what you need to do by moving forward in a transaction.

If not, you could be taken to court, you could get caught up in litigation, then you will have to pay a lawyer to look over everything.

 You will be a target for bargain shoppers

There are people out there who target “for sale by owner” houses because they assume you don’t have any experience and don’t know what you’re doing. So these people will see what they can do to barter with you. Again, wholesalers are some of those people.

Also know that a real estate agent, if they're not representing you on either side, only works for the buyer. So, their objective, depending on who it is, is to get the best price and the best terms available for that buyer. That's just the agent doing their job.

 You may want to consult a real estate agent or an appraiser about your pricing of your home, also known as positioning

You can invite over a real estate agent to give you a quick comparative market analysis which will give you better insight into where you should position your home based on their market knowledge and all of the comps that they pulled in order for you to see what that price range is.

If you don't really trust an agent, and you want more in-depth information, you can get an appraiser to come in. You'll have to pay them anywhere between four, five, or six hundred dollars, to come out there and do an actual appraisal to see what your house is worth. But know that an appraisal is only good for one day, and it's only one person's opinion.

The next appraiser could come through and say that it's something different, and even if you show the appraisal to a buyer, a buyer could say, “well, that's not what I'm willing to pay for it.”

Know that fair market value is what a buyer is willing and able to pay for it, and what you're willing to sell it at.

 Offer to pay agents to procure a buyer

Some agents really do just specify in buyers. They will look at everything in the market to include your “for sale by owner” because they know where to go to find all of the houses that are for sale. Just know what the prevailing payment is for these agents in your area if you're going to use their contracts and their know-how.

Brokerages have errors and omissions insurance

Most brokerages have up to a million dollars’ worth of coverage just in case something goes wrong with a transaction and it goes to litigation. Listing your house with a brokerage ensures that if something gets screwed up, it will be covered. If you sell your house yourself, you’re personally liable because your house is your own asset.

If you have any questions about selling your home, or want to get a comparative market analysis, feel free to contact us!

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