There are plenty of articles stating why homeowners should never attempt to sell by owner. But most of the studies and statistics are generated by the National Association of REALTORS®. And as baseball player Lou Piniella said, “Statistics are like a bikini--they show a lot, but not everything
.” Or then there is Mark Twain who famously stated, “There are lies, damned lies...and statistics.
So what is the best strategy?
To find this answer, we asked consumer advocate and relocation expert, Lindy Chapman
to share her unbiased and honest opinion on how to create a selling strategy that works best for you.
Every home and situation is unique. I've listed homes at a full 6% commission as well as helped sellers sell successfully by owner. Typically, the best strategy lies somewhere in between. Therefore, in order to protect their investment, it's critical for sellers to know the right questions to identify the right agent, best strategies, and appropriate commissions according to their individual needs.
Same Street, Different Homes; Same Agent, Different Strategies
I once left a listing appointment and suggested the owner put a sign in the front yard, and call me if he didn’t get an offer that weekend at or above the neighborhood market value of $680,000. It was an exceptional home with a stunning backyard pool and outdoor living area--finding a buyer would not be difficult. He called Monday after receiving a $700,000 cash offer for his home. I knew there was nothing of value I could offer to justify a standard commission. He was an astute businessman with time between jobs to negotiate and conduct the transaction himself. Selling by owner made sense. And even if he had listed and received a higher price a) it wouldn’t have appraised, and b) the $28-$42k in traditional commissions would have more than wiped out his gain.
In contrast, his neighbor called the next month with an entirely different situation. Though the home was just across the street, it offered only 3-bedrooms in a 5-bedroom neighborhood. In addition, the seller had invested $300,000 in upgrades and wanted to price these into the home. Unlike his FSBO neighbor, he had no desire to do the work himself. In addition, he didn’t want it in MLS, a sign in the yard or open houses! This home demanded a unique marketing strategy to 'find' a buyer who would also see the value of paying top market price. I love a challenge so listed it at 6% to compensate for my time, expertise and strategic marketing strategies--and he received an offer in 5 days for the highest price to date in the neighborhood. Two very different sellers with very different needs.
What Is the RIGHT Strategy When Selling a Home?
Not only can it be a struggle to decide whether or not to use an agent, but how does one choose? According to NAR, there are approximately 2 million real estate agents in the US -- and it seems every homeowner knows at least a dozen! But this is a business decision with one of life's biggest investments--so choosing the right strategy as well as the right agent is critical.
There are homes that are natural For Sale By Owners (FSBO). In other cases, it might be wise to use the ‘right’ agent to not only net more money but to protect your interests, save time and ensure no costly mistakes are made. But that said, if you have the time and are willing to do the work, there is no harm in trying to find the buyer before agreeing to pay commissions, especially as more and more buyers search for homes on their own.
Before listing with a brokerage, consider the following strategies. You will either find the buyer on your own--or feel less anguish about paying commissions to a brokerage. But it is important for Sellers to do their homework in order to make the highest return on both their time (FSBO is not without a lot of additional effort) as well as their financial investment.
Contact 2-3 Realtors to get a Comparative Market Analysis (CMA)
Accurate pricing is critical. Zillow’s “Zestimates” are inconsistent, but an astute real estate professional will take into account prices homes have actually sold as well as reasons behind any discrepancies in market price (sale price can be affected by a number of factors including updates, structural issues, corporate relocation buyouts, commissions, etc.).
It's also important to interview more than one agent if possible--I’ve experienced agents overpricing as well as underpricing homes by as much as 20%. If that’s the case, consider hiring a professional appraiser (a professional appraisal can be a powerful pricing tool to bring to the negotiation table!). But hopefully the interview process will help identify a trusted agent willing to put your interests above their own.
If you plan to first try finding the buyer before signing a listing agent, be honest about your intentions and also let agents know you will pay a commission if they bring a buyer (typically 2-3%). And though most agents will provide an analysis for free, consider a gift card for their time and expertise. Or perhaps write a recommendation praising their expertise as a consumer advocate and trusted advisor.
If you are an agent, respecting a homeowner’s decision to first try and sell on their own will set you apart. I've received multiple referrals from homeowners I helped without receiving a commission for clients who needed and paid for my services.
Do the work to attract Buyers
Consumers expectations are shaped today by HGTV and Pinterest. Therefore, it is essential to declutter, update and possibly hire a stager to make your home "magazine-worthy." Take a look at the home photos posted by agents. This is your competition, so hire a professional home photographer before sharing your home on social media. The cost is minor and can be negotiated in commissions if you decide to later list with an agent. Consumers will judge your home based on first appearances - make sure you capture their attention!
Share that you are selling within your Sphere of Influence
Realtors are no longer the lone access point to buyers and sellers--the internet and smartphones are a game-changer. Even when listing a home traditionally, I always suggest owners find out who they know first that might be interested in their home--then, if they find the buyer, adjust the commission.
Selling Later provides a safe platform before listing as it does not allow solicitation nor does it sell your information. Your personal social pages, local Facebook ‘mom’ groups, and NextDoor offer logical places to start. It just makes sense in todays age of technology to try and find the buyer before listing in MLS. And if you find the buyer, you can then find a lawyer or flat--fee brokerage willing to handle negotiations and paperwork, protecting thousands of dollars of your equity from unnecessary commissions.
Use caution when seeking buyers beyond your personal connections
There are other sites, like Zillow, where a homeowner can list for free or a low fee. However, these sites can open up the seller to receive calls from numerous ‘tire-kickers’ and investors looking for a bargain, as well as dozens of calls from agents asking for the listing. There is also the issue of safety if you allow unvetted buyers into your home. There are certain steps a seller can take to protect themselves and their investment--but proceed with caution.
Remember: it’s about net gain, not necessarily the highest price
Commissions are to some degree priced into the sale price of a home. But that can also be an advantage in getting a home to sell quickly by pricing it under your competition as well as using that savings to negotiate repairs.
For example, If you list with an agent for $500,000, then max commissions could be as high as $30,000. Even if you listed with a flat fee agent, you would still be strongly encouraged to pay 3%, or $15,000 to the buyer’s agent (there are ways around this, but that’s another article!). So the advantage of selling FSBO may be as much about giving a seller an edge on the competition and creating a ‘win-win’ for both the buyer and seller, then a substantially higher financial return (the example of the seller who sold for $700,000 is an outlier and not the norm).
If you don’t find a buyer, you can still protect your equity by asking the right questions before you list your home with a brokerage.
The options today are numerous--so it is important to know the questions to ask to determine if a traditional full-service brokerage or a flat-fee disruptor is needed to protect their equity. Again, it’s no longer a one-size-fits-all business. Consumers have more options than ever. And with almost 2 million agents and only about 5 million residential transactions per year, the basic law of supply and demand provides consumers with an advantage if they know how to identify the right strategies, as well as how and when to negotiate commissions.
For more information on commissions, negotiations, or to discuss your selling options, schedule a no-obligation consultation call with Lindy here