For Sale by Owner VS Realtor.
Are you thinking about selling your home on your own? Are you thinking, should I use a Realtor to sell my home or should I sell it on my own? Well, we’re going to talk about that. Let’s get right into it.
Selling your home is one of the biggest transactions you will have. So you want to make sure when you sell the home, you probably want to maximize your profit. I’ve been selling homes for quite a while and one of the things I’ve learned, what the sellers want is two or three things that they want. They want the most money. They want to sell in the fastest time, and they want to know how much money they can get as fast as they can. So considering these three or four items, let’s look at the advantages and disadvantages of selling your home on your own.
Let’s talk about the pros or the advantages of selling your home on your own.
Advantage 1.) You’re going to save a lot of money on the commissions that realtors charge. Typically, historically, the commissions have been 6%. Obviously, they can be anywhere from 4% to 6%. I’ve even seen 7% and 8%. But regardless, let’s say on a $500,000 home, if you pay a realtor 6% commissions, that’s $30,000. On a house in Orange County, for example, a typical home or a medium home price of a home is a million dollars. And if the seller pays 6%, that’s $60,000. That’s a lot of money if you really think about it. But at the end of the day, if you’re selling it on your own, you could save the $60,000. Of course, that’s assuming you sell it at the asking price and you paying somebody 6% or you’re going to pay 6% to an agent.
But the end of the day, if you sell it on your own and good luck to you, you could save 6% or 4%, which is a lot of money, and that adds to your net profit. And one of the reasons you are selling it on your own is to save commissions. And that will help you do that.
Advantage 2.) You can sell your home on your own timeframe. What do I mean by that? Usually when you end up listing your home with an agent, you will probably end up listing it for 90 days, 60 days, or 120 days, or even 180 days. So once you list the property with the agent, they want to make sure that they sell the home within that time frame. So they’re going to, “push” you to sell the home as fast as they can. They’re going to set it up and have the marketing ready, have the open house day schedule ready. So you’re going to work on their schedule.
But if you sell it on your own, you can show it when you want to. Assuming you have enough time to sell your home there’s a certain time that you have, you can show the homes at your convenience. You can have an open house or not have an open house or have them at your convenience. So the advantage of you working on your own to sell your home is that you can set your own time frames as far as when to close, when to market it, when to show it, when to do an open house, should you choose to do that, so you’re not pressured on the agent’s time frame.
Advantage 3.) Agents may have access to the escrow companies, title companies and all the vendors. Well, in your case, if you’re selling it on your own, you have access to escrow companies. In California, we use escrow companies, and I know in the east coast and some midwest states, they use attorneys that help you close the deals so that when you do sell it on your own, you have access to these.
You can call an attorney or call an escrow company. And if you’re not sure on the process and which is selling a home is a lot of big process, a lot of time consuming process. So if you’re not familiar with the process and all the paperwork and all the disclosures, attorneys may guide you. Escrow companies may or may not guide you, depending on the legalities and the liabilities in that state and city. Regardless, you have access and you have some guidance from escrow companies and attorneys to help guide you through the paperwork, do it in a timely manner and fill out the appropriate papers that needs to be filled out when you are selling a home. And believe me, in California, in Orange County especially, there are at least 20 or 30 forms we have to fill out when we sell a home.
So the advantage is there’s escrow company and attorneys that will help guide you through the selling process, which is pretty complicated.
Advantage 4.) In today’s market, with the digital age and the Internet age and the social media age, you have access to a lot of advertising venues,which means you can go to websites like or Forsalebyowner.com, or you can go to Zillow.com, and you can advertise your listing with pictures there. So you have access to that which you did not have 5-8 years ago. So you can expose your listing to a lot of buyers directly. You can also go to social media sites if you’re familiar with Facebook and TikTok and Instagram or Snapchat. You can advertise your property as there as well. So that’s an advantage.
Word of caution, there’s a lot of security issues, so you have to be careful how you advertise. Nonetheless, you have access to advertising at a minimal cost. Of course you can buy a sign in open house signs and all that. And in addition to that, the digital age of marketing, you have all to it. So you can expose your property, your listing, the price to as many buyers as possible and also to as many agents as possible, because I’m sure that the agents may want to show your home even though you’re selling it for sale by owner.
They may bring a buyer to you and you may want to negotiate the commission you want to pay the buyer’s agent if you want to cooperate.
Advantage 5.) I know in the past when a lot of the for sale by owners started selling, they were priced very high, not less, always high. But these days with so many tools, online tools where you can do free market evaluation of your property. There are websites again, you can go to Zillow or Redfin or Opendoor and lots of websites out there where you can put in your address and lo and behold, in two or three seconds you get a home evaluation.
Of course, as you have heard, the estimates have been off a lot of times. In fact, I never use Zillow to do an estimation because 90% of the time they are way off. Either they’re too low or too high.
But what you could do is go to five or six websites, online websites, do evaluations and then make a judgment and evaluation on how much your property is worth based on those valuation, based on the condition of your property, based on the location of your property and then come to a more accurate evaluation than when you had to do it before, when you did not have these tools.
The other thing a lot of for sale by owners have done and do at this time is that over the years or over the months where you are thinking about moving or thinking about selling, you keep track of what’s happening in the neighborhood. If there’s an open house, you can go to the open house, talk to the local Realtor, overlook at the evaluation of the home prices, ask the Realtor what’s happening in the market and get an evaluation of the local neighborhood trends that’s happening in your immediate neighborhood. And based on those facts, you can come up with the price. So the advantage of selling on your own is that you have so many evaluation tools other than those talking to realtors and looking at their postcards and open house signs and the free material that you send all day or every month. So you have a lot of access to your tool.
So let’s get into it and let’s talk about the cons about selling your home on your own. And sorry to say that, but I may have a few cons or a few more disadvantages to talk about than the advantages. But I want to be fair to you. Let’s talk about the disadvantages or the cons of selling for sale by owner.
Disadvantage 1.) Statistically home sellers or for sale by owners net less or end up getting less money selling on their own than using a realtor, even after paying 4% or 5% or 6% commission. According to NAR(National Association of Realtors), 90% of all the homes sold are sold to realtors.
Not only that, a survey was done by a title company, I believe it was the first American Title Company or Chicago Title company a few years back. And they stated that for sale by owners end upnetting less, 11% less than if they use an agent. And the reason why they ended up getting less money is, number one, they end up paying a buyer’s agent commission, which could be 3%.They could not negotiate the repair terms or other terms and conditions, so they lose out on that. And more for sale by owners end up incourt or legal trouble than you use a realtor. So those fees add up.
So on average, for sale by owners lose 10% more than if they were to use a realtor. So that’s the biggest disadvantage of selling it on your own. And that’s the stats saying that according to the National Association of Realtors and the National Title Company.
Disadvantage 2.) When you get these buyers coming at your door knocking and saying hey, I want to buy your house, I want to take a look at your home. Most of these buyers statistically are what we call a B class buyers or C class buyers, or they are sharks looking for deals.
Well, what do I mean by B or C class buyers? Well, here’s the thing. It does not cost any money for the buyers to look for homes. The buyers pay 0% commission to the buyer’s agent, at least in California. And typically, when the buyers are looking for homes without an agent, there’s a few reasons why they do that. Number one, they may not be really motivated. They are looking for bargains. And number two, the biggest disadvantage is that they are not well qualified.
So a lot of the realtors themselves don’t want to work with these buyers, or they’re too picky or they’re looking for deals or they’re not reasonable to buy a house, so the agents don’t want to work with them. So these buyers end up looking on zillow or for sale by owner and going on those websites and going directly to the sellers. So that’s a disadvantage that you may not get the best buyers that are out there. You may be getting B or C class buyers or sharks or investors. They know that you don’t know how to negotiate as much as agents do, so they come directly to the seller or for sale by owners and try to negotiate them down and win over the for sale by owner. And a lot of times that does happen where the sharks and investors win over the for sale by owners. Statistics has shown that.
Disadvantage 3.) A lot of the for sale by owners don’t know all the current legal local disclosures and laws when selling a home. On a side note, only 8% of all the realtors out there sell more than four homes per year. But a lot of the agents who sell most of the homes sell an average of 20 or more homes per year. So the agents who are working out there, who are successful out there and know what they’re doing, knows all the disclosures.
But when you sell it on your own, you may not know all the disclosures. And believe me, especially in California, because I’m in California and I’m sure in other states, there’s a lot of disclosures that you have to provide, the seller has to provide to the buyers. These are disclosures like is there lead in the house? Is there a death in the family? Have you had any repairs, any plumbing leaks? All these needs to be disclosed on proper forms. Are you in a fire hazard? Are you in a flood zone, are you in an earthquake zone? A lot of disclosures that has to be disclosed and as I mentioned earlier in the advantages is that a lot of the times the for sale by owners end up netting less. And one of the reasons is because they get into legal trouble or disclosure issues which they did not let them know, so they end up making less money.
So when you work with a realtor, they know all the local disclosures. The latest disclosures, I myself have been selling homes for years and years and years and every two or three of them are no disclosures coming out and have to keep up with it. So it’s hard enough for me to keep up with all the disclosures and the new laws and the requirements and the codes when selling a home, let alone how difficult it is for the for sale by owner who may sell one or two or three or four homes in their lifetime. We sell, at least I sell on average 15-20 homes per year for the last 20 years. So I’ve had a lot of transactions. So I know other disclosures in the local area. So a disadvantage is that you may not know all the disclosures which you are supposed to disclose in writing to the buyers.
Disadvantage 4.) You may want to sell your home on your own timeframes. But in this internet age, in this social media world and the time that we are in, when somebody calls me, for example, an agent or buyer or seller, I call them right back. You call them 5-15 minutes later and they’re disappointed.
Same way if a buyer calls you the for sale by owner or texts you or send you a message on Facebook, if you’re advertising on Facebook or Instagram, you are required or hopefully fast enough to respond to them, because if you don’t respond to them, they will ignore you or not come back to you. So timing is very important, not only when it comes to response time or they may call you and say I want to see the home today at 04:00. And you may be at work and you cannot come and be ready to show the home. Or they may want to come on a Sunday morning where you are going to go out fishing or go to the lake or go to your mom’s or somewhere. And now you have to stay home. And sometimes they don’t show up.
So the disadvantage is you have to work on the buyers time where if you had an agent, the buyers would call the agent and the agents would make all the arrangements to show your home. And you can do your fishing or going to the lake or going to your family, or with the kids to the movies or whatever. So the disadvantage of working on your own is that you have to give up your time for the buyer’s time, which may be qualified or which may not be qualified.
Disadvantage 5.) You have a lot of security issues. What kind of security am I talking about? Well, there’s a lot of security issues. If somebody comes and knocks on your door and say, hey, I saw your sign, I want to see the home, would you allow that person, the stranger, to come into your house, or would you not?
If I’m an agent and somebody calls me, I would ask the buyer, are you pre qualified? Do you have the down payment? And I would make an appointment to show the home, hopefully your home. But if somebody walks into your house and you are for sale by owners, that knocks on the door. Most for sale by owners, and I’ve talked to a lot of them, end up showing the house because they’re desperate to show the house. Now you’re letting a stranger in the house. But here are other security issues.
Number one, you don’t know if they’re pre qualified or pre approved. So you don’t know if it’s right buyer. You don’t know if the buyer is looking for a house. Let’s say your house is listed for $500,000, and maybe they’re looking for a house for $400,000. So is it the right buyer for you to let them in? That’s another disadvantage.
The other issue is the buyer may come and take pictures of your personal pictures. They may get your WiFi access. They may come and steal your medications, which happens all day long. It happens with agents when they do open houses. They may take pictures of your statements lying on the desk while you’re doing something else. So there’s a lot of security issues.
But if there’s one reason I would tell for sale by owners not to sell on their own is because of the security issue, which is getting more and more of an issue. Because any buyer that comes in the house has to be approved, has to be vetted, has to be proven that they have the down payment, and they are motivated buyers to buy the house in your neighborhood, in your price range. We don’t want strangers in your house with me as an agent bringing in, let alone you on your own, getting somebody in. So it’s very fearful today in this world that we live in, they may know everything about you, about the house. They might have gone on Facebook and checked your profile out. So that’s a big, big no no and a big, big disadvantage.
Disadvantage 6.) For sale by owners may not know how to negotiate as much as how realtors may know how to negotiate. Realtors do this all day, every day. Almost every day they are talking to buyers every day. They’re talking to sellers every day. They’re talking to lenders, they’re talking to vendors, so they know what’s going on in the market. They know the market trends. So an offer comes into you.
Let’s say you are lucky enough that you got an offer. How do you negotiate? What if he comes in and says he wants to move in 90 days and not in 30 days? What if he says that, hey, I’ll buy your house and pay you the $500,000, but I have to sell my house? How long are you going to wait for that? What if he comes in and says, hey, I’ll buy your house, but I want you to replace that fence because it’s falling apart? Or hey, your yard is all dry. If I buy your house, will you put a new lawn?
A lot of things come into play. So it’s more than just the price, it’s the qualification, the terms and conditions, and who does it favor to. And I’ve noticed that and as I mentioned to you earlier, when it comes to negotiations for sale by owners end up losing 10% more than they’re listing with a realtor or a real estate agent. But that’s the biggest disadvantage that they have, is that they don’t have the negotiating know how and the negotiating prowess as much as realtors have because that’s what they do all day long.
As you can see, I ended up talking more cons than pros of selling for sale by owner. I’m sorry about that, but that’s how it came out. So if you want to sell your home, good luck to you. If you need any resources, please direct message me.