For Sale by Owner
Before you decide to market your home For Sale By Owner, it is important to understand the costs as well as the potential savings.
As median home prices continue to rise, more home owners are debating whether they want to pay an average of 6 percent of the selling price to a real estate agent. Before you run out and purchase that For Sale By Owner sign, however, make sure you understand the potential costs as well as the savings.
Savings Aren't What You Think
First, take a look at the savings. Using a sales price of $300,000, 6 percent, or $18,000, may seem like a large savings. And it is, if you actually save that amount. But it doesn't make sense for buyers to go through the process without the help of an agent since, for them, the agent's services are free. You are legally obligated to pay the buyer's agent half of the expected commission rate, so your savings have now dropped to $9,000.
Now, lets look at the costs that are normally paid by your agent. The Multiple Listing Service, or MLS, is a database of available properties that is used by agents. There are many flat-fee MLS listing services, costing around $300 for a basic service. Now add in signage and flyers and expect to spend at least $500. Then there's the combination lock ($100) and advertising in local real estate magazines and newspapers. Advertising costs increase with time, but say you've decided on a budget of $1,500. You are now only saving $6,600.
How Much Is Your Time Worth?
A cost that most people disregard is the amount of time that is involved. Open houses take the greatest amount of time. Most are held during the weekends, often both Saturday and Sunday. Since there seems to be a debate over their effectiveness, you might choose not to have any, but you still have to show the house to people at random hours of the day, and the running around associated with printing and advertising takes time as well.
Mind those Forms
The biggest headache, however, lies in your legal responsibilities, which are state-specific. Although there are books that outline the process, making sure all the forms are properly filled out without help can be tricky and worrisome. Then there is the contract itself, with offers, counter offers, contingent offers; the list goes on.
Discount Agents as an Alternative
An alternative to using a full-service agent is to hire a discount agent. Discount agents provide most of the benefits, but charge a flat fee or a percentage that is lower than the going rate for full-service agents. In addition, a discount agent offers you peace of mind by guiding you through the process while making sure you avoid the pitfalls.
Selling a home is an emotionally draining experience that is more complex than it seems. While you may feel that agents do not provide good value for your money, you owe it to yourself to weigh the time expenditure and potential legal difficulties against a realistic picture of your savings before you decide to sell your house For Sale By Owner.