For instance, in a hot market, with a highly desirable home, For Sale By Owner may be the most profitable option, foregoing any realtor fees, and retaining much of the selling price. However, if something goes wrong, this equation could quickly turn to favor the protection of a realtor. The following chart summarizes the advantages and disadvantages of both selling methods. It uses a $300,000 home and several assumptions to explore the feasibility of both selling options. This scenario will assume that the home is already paid off and there is no mortgage. It will also assume that all taxes are paid and that no litigation results from the sale. It will also assume that the home needs no outstanding repairs as a result of the sale.
Fig.1. Sale by Realtor
Asking price of home
Realtor fees (avg. 6%)
Home Owner's Warranty
Fig. 2. For Sale By Owner
Asking price of home
Listing in MLS
Home Owner's Warranty
Lost time from work to show home
Misc Costs, copying, filing fees, gas
As one can see, it is possible to retain approximately $12,000 more by selling the house yourself under this circumstance. However, this scenario makes many assumptions that reflect perfect conditions. When considering selling their home themselves, many people do not account for the time they will have to spend selling and marketing the house. They also do not account for many of the miscellaneous costs. The amount that one saves by selling their house themselves is offset by the amount to time, hassle, and worry that they spend.
Now let us consider the worst-case scenario and the seller makes a mistake. In this case, the buyer claims that a leaky pipe was not disclosed at the time of the sale and water damage resulted from the error. Now, the seller must retain a real estate attorney. Fees for real estate attorneys can range from $100 to $250 an hour (KeytLaw.com). That can add up quick. If the case becomes complicated, 1,000 hours of work quickly mounts to $250,000. Legal fees could quickly turn a profit into a loss. Now the expertise of the real estate agent is more promising and worth every dollar.
Conclusions and Recommendations
Determining the actual costs of selling a home is difficult to determine with any certainty. However, one can make several assumptions and compare many hypothetical situations. The estimates used in this feasibility study are considered to be averages. However, there could be considerable variation depending on location, market conditions, and the overall appeal of the home.
Many sellers think that they are saving money by selling their home themselves, but they are not considering all of the costs associated with this option. There are many hidden costs involved in selling one's home by themselves. It is not as easy as it would seem at first. If the market is poor, then the sellers may find themselves stuck for a very long time. The expertise of the realtor is a valuable asset and can save the seller considerable time and money.
The worst-case scenario considers a situation where the sellers accidentally broke a disclosure agreement. This does not represent deception, but it was a simple mistake on their part. This mistake could have cost them almost all of their profits, if not create a loss situation. It is easy to say that these situations do not happen, but they do happen more than one would wish to admit. Realtors can help to avoid many of these situations.
The results of this feasibility study demonstrate that deciding not to use a realtor is a short-sided decision in terms of cost. The complexities of a real estate transaction are difficult to navigate for the average homeowner. Various homeowners have different levels of understanding in the field. Most can read instructions and follow directions. However, the realtor not only has training, they have experience as well. This advantage makes them a valuable asset to the homeowner.
Realtors have an interest in finding ways to maximize the selling price. They may see things that the homeowners do not. These little things could mean big profits or big losses in the end. It is true that the realtor is interested in maximizing their fees. However, as they seek to maximize their fees, they also maximize the selling price for the owners. The owners may have to pay a bigger fee, but they also pocketed more money.
It is in the best interest of the realtor to work for the maximum possible profits. Their expertise can be a valuable asset to help homeowners accomplish their goals. The ideal that one can save money selling their own home is an illusion. When one considers the real costs, using a realtor makes sense. Homeowners are not always able to represent their own best interests.
This study made many assumptions, but they are considered to be realities in many situations. The exact numbers would be determined by the home in question, the knowledge of the homeowners, the neighborhood and market conditions. The realtor has much information that the homeowner may not have access to, such as the temperature of the market or what types of features are current hot sellers. Hiring a realtor is the most feasible option for selling one's home for maximum profits.