Some people think that in a down market, the last thing they should be doing is paying a 6% commission to sell their homes. But going it alone and doing a "for sale by owner" isn't a good idea right now. Here's why.
SEE: 6 Tips To Sell Your Home Faster
Your Home Isn't Going to Sell Itself
"I think many people have it backwards when it comes to real estate commissions and the marketplace," says Jim Olenbush, owner of Cantera Real Estate, a residential brokerage in Austin, Texas.
You might think that a down market would be the time to ask hungry agents to lower their commissions in order to earn your business, but Olenbush says that isn't the case. In a booming market, homes can sell themselves regardless of what an agent does. "When the market is terrible, you might actually need an incentivized professional working hard to sell your home," he points out.
You Need a Professional's Opinion on Your Home's Condition and Appearance
As a long-time resident of your home, you can't see it in the way potential buyers will. You're so used to the things that are cluttered, outdated and in disrepair that you've become immune to them. Also, unless you've been actively shopping for a new home, you don't know what the competition looks like either.
A good real estate agent, on the other hand, will walk through your home with you before you even put it on the market and tell you what needs to be cleaned up, put away, repaired and upgraded, if anything, and if it will pay off. He or she will also have specific knowledge of what buyers in your area love and hate, and can suggest how to play these aspects of your home up or down.
A real estate agent's experienced and unbiased opinion on what repairs and upgrades are worthwhile and how to stage your home will help you to attract buyers and get top dollar.
Good Agents Actually Earn Their Fees
Agents with a proven track record can sell your home for more money in less time. The extra money you get from a higher sales price and the decreased carrying costs from selling your home faster can easily pay for the agent's commission, and then some.
"In this market, it's more important than ever to hire a full time, full service, experienced professional to list your house," says Wendy Slaughter, an agent with Howard County, Maryland-based REMAX Advantage Realty. "Yes, values are down and sellers have lost equity. But there is more competition and less volume. Buyers are slow to make a decision and getting financing is a challenge," she adds.
Slaughter says sellers need an agent who will provide quality marketing services that lead to more showings and who has a proven track record of selling homes faster and for more money than other agents.
"You get what you pay for," Slaughter says. "This is not the market to base your decision on commission alone."
You Don't Know What You're Doing
In trying to sell your home on your own, you could fail to sell it or even get ripped off. If that happens, taking over an agent's traditional duties to save the commission fee isn't going to help you come out ahead.
As a home selling novice, you don't know all of the steps it normally takes to get a home sold. Also, how much do you know about real estate and contract laws and customs? Unless you plan to use some of your commission savings to hire a real estate attorney, you're putting the buyer in a great position to take advantage of you. You could even be setting yourself up for legal troubles down the road, long after the deal has closed.
You're Not Going to Save as Much as You Think
With the traditional 6% commission you pay when you sell your home, typically only 3% goes to the seller's agent. Even if you avoid paying the 3% by selling your home yourself, you'll probably still be paying 1 to 3% to the buyer's agent. So you're not really going to save 6%.
If you aren't willing to pay the buyer's agent, either, it could be a deal killer. You'd have to convince buyers to work without an agent, which could raise all kinds of red flags. The result is that you might limit your pool of potential buyers to experienced investors who aren't afraid to represent themselves.
The Bottom Line
When you're faced with selling your home for less than what you want or need because of a poor real estate market, paying a commission may seem like adding insult to injury, and cutting out the agent's commission might seem like the most obvious way to reduce your losses. However, the many valuable services a real estate agent provides can give you the edge you need to sell your home faster and get you the money you need.