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1. Money
About 3 years ago, a reporter with Good Morning America decided to do a story on the merits of selling a home as a "for sale by owner". The merits this reporter provided were pretty much the same as those mentioned above. There was nothing really earth-shaking about the story to those of us in the business of promoting the FSBO concept except one little statement. That statement was that real estate agents as a profession make more money on an hourly basis, for the time worked, than any other profession. That was earth shaking. Think about surgeons, attorneys, bankers, and engineers? All those professions are considered to be high-income jobs, many of which require many years of specialized education, and yet all are subordinate in income to the real estate agent on an hourly basis.
The source of this income is part of the equity that sellers have accumulated in their homes when a home is sold using a real estate agent. Real estate commissions are generally deducted from the seller's proceeds at the closing. The seller retains those dollars if they are a Private Sale. Keep the numbers simple when determining whether or not you want to be a Private Sale or sell with a real estate agent.
The following is an example of a $300,000 home selling as a Private Sale and selling with a real estate agent with a contracted 6% real estate commission.
| Selling Private |
Selling with an agent |
| Gross Sale Price - $300,000 |
$300,000 |
| Advertising Cost - $595 | None |
| Commission - None | $18,000 (.06 x $300,000) |
| Net Proceeds to Seller $299,405 | $282,000 |
Another way to look at it is if someone buys a home and pays $300,000 for it, it would take that homeowner over 6 years of monthly payments on the principal on a 25 year mortgage at 6% to equal the $18000 in real estate commissions. That's 6 years of your principal payments that the real estate agent received at the closing table. Finally, remember the earlier comment on hourly earnings of a real estate agent? If the agent had spent 20 hours dealing with this home from listing contract through closing, the hourly rate of the agent would be $900.
2. Security
Do you let people that you don't know, roam through your home? I doubt it. Why then, would you allow it to happen when you're trying to sell your home? Do you really believe that a real estate agent is going to take the same precautions to keep your home as secure as you would? Admittedly, most real estate agents are concerned about your possessions and your family's security, but never as concerned as you are.
As a Private Sale, you control who goes and comes in your home. Prior to allowing anyone to tour your home, you should know their name, address and phone number and have made some effort prior to the appointment to verify that they are who they say they are. If you think all real estate agents do that, you are sadly mistaken.
When your home is listed, generally a key box is placed on the doorknob and any agent who wants can enter your home whenever they want. Because of a history of problems, the key box used by many agents now can provide a list of the agents that have been in your home. Terrific, after you've had a problem, you may be able to go back and find the responsible party. Your objective should be to not have a problem in the first place.
As a Private Sale, the seller is in control. As always, good common sense should prevail. For example, potential buyers should not be provided too much information about the security system in a home. There is no need to go into detail, only the basics and then very limited. For instance, if the security system has infrared zones when it's in the vacation mode, then that's all that needs to be said. No explanation should be provided on to how to set the vacation mode or the location of the zones. If it's a monitored security system, then that's all that needs to be said. The best approach is to have the crime statistics of your neighborhood available and a short explanation as to why the security system is adequate. Control is the key, and when a Private Seller is in control, they are responsible for the security of their family and their possessions.
3. Knowledge
A home has been on the market for three months and it hasn't sold. Why? If the home has been listed with a real estate agent, then the seller is told that the price is too high. Forget that when the agent took the listing, the seller was told that the house should sell at the list price. Well, it didn't and chances are, it is priced too high.
The one advantage human beings have over the rest of the species is the ability to think and learn whatever we want. People should certainly apply this attribute when dealing with their finances. Prior to placing a home on the market, get informed. Know the value of the property. If necessary, have it appraised. Do not rely on anyone else when you're dealing with the largest investment of a lifetime.
As a Private Sale, again the seller is in control. If it's priced right and the home hasn't sold, then there's a reason. Ask the potential buyers what they did and did not like about the home. Sometimes you can do something about the problem and sometimes you can't. If offers have not been made because the roof is in disrepair or the carpet needs replacing or there are navy walls in the master bedroom, then those are solvable problems and the seller can solve them quickly. If offers have not been made because the house faces the wrong way or the kitchen is on the wrong end or the two-car garage needs to be a three-car garage, then those are not solvable problems. Know why the home is not selling and adjust accordingly.
You rarely get this kind of information from a real estate agent. All you generally hear is that the house is priced too high.
4. Time
In most real estate transactions, time is of the essence. The seller has a timetable. As a Private Sale, you have more flexibility to adjust your timetable, if you desire, in order to meet the needs of the buyer. The same is true of the buyer; the buyer may adjust their timetable in order to meet the needs of the seller. At any rate, the time it takes to complete the transaction is determined by the parties most affected, the buyer and the seller. When a real estate agent is involved, there are three parties to satisfy and three time tables under consideration and guess who's in control, the real estate agent.
Go back to the example cited under "Money". The $300,000 Private Sale home certainly has more flexibility than the $300,000 home that is listed with an agent. In the example, the Private Seller has $18,000 worth of flexibility. Using the same example and assuming the seller is under pressure to sell the home, the seller can reduce his sales price $5,000 and still come out $13,000 better than he would have had he sold using a real estate agent. A Private Sale has that flexibility. A Private Seller can price at the market value and allow the time for the home to sell that the market requires, or they can undercut the market in price, probably sell it faster and still take more money away from the closing versus selling the home with a real estate agent. Selling faster and walking away with more money is a good reason to say… No Agents Please!
Private Real Estate - Homes for Sale by Owner
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