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Relying on a real estate broker or agent may be the primary way to sell a home, but there are some homeowners who opt to take the process into their own hands.
Called for-sale-by-owner, or FSBO, it’s a practice that’s at an all-time low. Recent data from the National Association of Realtors indicates that Americans selling their own homes has comprised 7% of recent home sales, the least it’s ever been. FSBO is even less prevalent in the luxury market, according to Michael Valdes, the chief growth officer of ExP Realty.
“The exceptions might be the ultra-luxury sector where marketing and calculated news stories of architectural layouts or other notable features would attract the attention of the limited buyer in that segment, which would lessen the need for a broker,” he said.
Here we look at some pros and cons of selling a home without a listing agent.
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Proceed With Caution
Selling a home themselves has always been an option for homeowners under the guise of “saving a commission,” said Jonathan Miller, the president and chief executive of the real estate appraisal and consulting firm Miller Samuel. But all of the responsibilities associated with selling your own house can become daunting.
“Home sellers have to vet people walking through their homes, and they will have to negotiate directly with a professional negotiator for the buyer, a real estate agent,” he said. “Many don’t understand the buffer the real estate agent provides in a negotiation, which probably adds to the price potentially achieved.”
It’s also a real estate agent’s job to be available to show the home even when the seller is unavailable—which can give a property more exposure than if the owner is balancing selling a house and working, Miller said.
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Miller shared that he has always used an agent himself but has contemplated going the FSBO route.
“I felt I would not be a good negotiator for my home. In fact, in 2022, my wife and I wanted to downsize and won a 30-way bidding war for the house we wanted while at the same time selling our existing home over the asking price,” he said. “Even though I’m in the housing-numbers business as an appraiser, I feel strongly that we would not have come out as well on our sales price on the sale, nor would we have won the house we always wanted without using the services of a sales agent.”
That said, in periods of low inventory like today, Miller added that it’s probably easier to sell a home on your own than in a period with extensive inventory, such as in 2009.
“But easier does not mean easy,” he said.
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Sellers May Have More Fee Negotiability Anyways
Dan Alpert, the managing partner at the New York-based investment bank Westwood Capital and a real estate industry expert, said that the real estate landscape is set to see a dramatic change because of a recent federal court decision that ends the ability of the National Association of Realtors to dictate sales transaction commission levels.
“Real estate brokers will be forced to compete for transaction volume. This will result in lower commissions and, ultimately, better net pricing for sellers,” Alpert said. “Any inclination that a homeowner may have to sell their own home will be correspondingly—and I believe, dramatically—reduced. A realtor’s principal service is driving demand to a property for sale. And while they will be paid somewhat less for doing so in the future, that is still a valuable service for sellers.”
This is especially true in the luxury market, Alpert said, because the number of potential buyers is inherently more limited. He noted that home prices remain at a level which makes it difficult for buyers using mortgage financing to justify moving to a new home at today’s higher mortgage rates. The low inventory of homes for sale keeps prices high despite the higher interest rates.
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“As a result, brokers saw middle market business deteriorate substantially in 2023 and are even more willing to be price competitive on commissions to pull in as much luxury end business as possible,” he said. “This business is often cash-driven and thus not dependent on mortgage financing.”
The bottom line, according to Alpert, is that the current conditions are a good time for sellers in the luxury market to dictate terms to brokers, and selling one’s home directly would generally be ill-advised.
Are the Savings Worth It?
Kelly Mangold, a real estate consultant with RCLCO Real Estate Consulting in Bethesda, Maryland, said that FSBO can save luxury home sellers a significant sum of money but warns that real estate transactions are complicated and involve many legal nuances.
“In the closing documents, for example, there are so many different clauses included that aren’t obvious or easy to understand. If you’re not engaging with a real estate agent on your behalf, you likely need to hire a lawyer or work with someone who has expertise in these contracts,“ she said. “That person will require payment. It’s unlikely to be as much as the commission on a real estate sale, but it is money.”
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Forge Ahead Only if You Have Time and Knowledge
Selling yourself without a broker is an incredibly time-consuming process but can be financially advantageous because you avoid commission fees, said Matthew Rogers, a Ridgewood, New Jersey-based lawyer whose namesake firm specializes in residential real estate transactions.
However, he cautioned that in the current market, where interest rates are high and inventory is limited, FSBO is not an opportune choice for most sellers because they may find it harder to decipher a strong offer from one that isn’t.
“You may have multiple offers coming in, and unless the seller is savvy, they may not be able to discern the best offer that’s being presented,” he said. “There is a lot of negotiation that goes on in the early stages of a real estate transaction, and sellers need to know what they’re doing, but in my experience, this is rare.”
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