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The idea to sell a home by owner, rather than listing with a real estate agent is enticing to many. Often it is driven by the idea of gaining or saving more money from the sale by cutting out the agent’s commission.
If you choose to sell your home by owner and you want to give your home maximum exposure in the market, you will need to make time to do all of the activities a full-service agent would otherwise do for you. Some people have the time, inclination, and know-how to do this, however, many people are surprised when the transaction takes an unexpected turn and they don’t have the experience to be able to make a quick and educated decision on what to do. This can lead to loss in money, time, hair, and even a sale!
If cutting commission is the driving factor it is important to first understand what normally happens to that money after a sale. For example let’s say the sale is $500,000 and the commission is 5%, or $25,000. The listing agent is from Keller Williams and the buyers agent is from Prudential.
- The $25,000 commission is given to Keller Williams for distribution.
- They give 1/2 of it, $12,500 to Prudential.
- Both Keller Williams and Prudential split their respective $12,500 with the agents who were involved in the transaction. If they are on a 40/60 split the agents will each receive 60% of the $12,500, that is $7,500.
- The agents then have to use some of that money to pay for their business, usually about 30%, or in this case $2,250.
- This leaves your listing agent with $5,250 pre-tax, or 21% of the commission.
But what happens if you don’t use a listing agent? You have a few choices. You can severely cut down on how many people come see your house if you won’t work with buyers who have an agent. If you want maximum exposure, you can agree to let buyers come with an agent, but be prepared to pay a commission to the buyer’s agent. Since in this case you are only working with one agent it is understandable to offer half of the 5% commission from the above example, or 12,500. Now you are saving yourself $12,500, but you need to do the job of the listing agent.
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It is very important to understand what that entails before venturing out to do it. If you don’t succeed at selling your home on your own you might go back to square one and list with an agent. In that case you are still paying the commission and you will have paid additional money from when you marketed your home on your own.
Here is a snapshot of what a full service agent would do when your home is on the market.
*A $ symbol shows what activities cost money either to you or your agent
- Help establish a fair market price
- Organize and prepare all required paperwork including contracts and disclosures
- $ Suggest ideas for staging to make the home look big and inviting (can be free)
- $ Commission photography and a virtual tour of the property
- $ Display a for sale sign on the property
- $ Post the listing on the Multiple Listing Service (MLS)
- $ Syndicate the listing to multiple websites
- $ Write a blog post about the listing in a well fed blog dedicated to real estate (can be free)
- Advertise the listing on Craig’s List
- Advertise the listing on social media platforms dedicated to real estate, such as the agent’s Twitter feed or a Facebook Fan Page
- $ Advertise the listing in a regular newsletter that is distributed to a database of people in the area who are interested in real estate.
- $ Create and print brochures to give to potential buyers
- $ Send Just Listed postcards to a canvas of neighbors
- Schedule and attend showings
- $ Host an open house
- Send email updates about the property to agents that have indicated their clients might have an interest in the home.
- Adjust asking price as needed following an established formula
- Help negotiate offers
- Hold earnest money
- Coordinate contract to close activities
- $ Communicate with the lawyer to see he has what he needs and discuss additional negotiations
- Attend the inspection
- Meet with the appraiser to discuss comparable properties
- Attend the closing
- Offer advice and solutions every step of the way
Whether you decided to list your home on your own or hire an agent to represent you it is important to carefully consider all the pieces that are necessary in marketing your home for maximum exposure. Real estate transactions are big and stressful. By taking the time up-front to prepare yourself and get started on the right foot you can save yourself time, money, and stress!
For information about real estate in Chicago or resources in your area please contact us and sign up for our free market report!