Selling Real Estate On A Shoestring - Hire An Agent Or FSBO?

If you’ve ever sold a home, or even thought about selling your home, then you probably know the dilemma. Hire an agent and give up 6% of your hard earned home equity??? Or do you try to save money by doing it yourself, even with the mortgage payment clock ticking?

Maybe you have an aunt Mary, or an uncle Jack, and so the choice is a simple matter of family politics. Or a high school buddy, who you once promised that if you ever sold your house you would give them a call.

If this is the case, and your decision to hire an agent is made, then the best thing you can do is to negotiate a reasonable commission, and/or get an appraisal and use this as the basis for a performance based incentive.

Of course you’re wondering, what is a ‘reasonable commission’ and ‘performance based incentive’?

Naturally, the definition of a reasonable commission depends a lot on who you ask. Some of the things you should ask your agent are how much marketing dollars are they committing to your house? How many open houses are they going to do? Are they doing any staging or redecorating? You want to make sure that your agent is going to go the extra mile for you, and the best agents will be sure to do so.

Now what if you really don’t have a lot of equity to give up? Then you might want to consider a performance based incentive. The way this can work is that if you get the house appraised for $220,000, then the listing agent might get 3% if it sells for more then that, or 1% if it sells for less then that. Doing this ensures that the listing agent is substantially motivated to get a price above your appraisal.

On the other hand, for people who are experienced home sellers, and are willing to do more of the work themselves, there are some more options, including ‘FSBO’ and ‘Flat Fee MLS’. Both of these methods have the potential to save you even more money, but they are also inherently riskier.

The FSBO option, or For Sale By Owner, is just what it says. The homeowner does all of the work of marketing, showing, staging, negotiating, and completing the enormous pile of paperwork. This option tends to work best for experienced home buyers and sellers, and in certain markets where there is a strong FSBO segment already established.

If you are seriously considering selling your home yourself, then there are many excellent books on the subject, and you should certainly do your homework. Some real estate attorneys also offer services to help with FSBO transactions, and make sure all the contracts and paperwork are in order.

Another option, that has become more popular in recent years, is the Flat Fee MLS service, which is a hybrid between FSBO and using a traditional full service agent. The Flat Fee MLS service allows a homeowner to list there house in the Multiple Listing Service, which is the real estate agents most powerful marketing tool. However, you still need to offer a commission to the buyer’s agent, which is typically 2-3% and only half of the 5-6% that most traditional agents charge.

Additionally, Flat Fee MLS brokers in most areas will allow you to retain the right to sell your house on your own, though you may not be able to have a For Sale By Owner yard sign out front. However, the reality is that in most markets, the vast majority of houses are sold via the MLS. In either case, with a Flat Fee MLS listing, you still need to be prepared to do much of the closing paperwork and/or inspection arrangements by yourself.

Thus, the best choice really depends on how much experience you have, and the amount of time and energy you are able to commit to the home selling process.