Is It Easy to Sell House Yourself
The idea that you can sell your house yourself sounds great in theory. Grab a for-sale sign, put in some elbow grease, and you'll save thousands in commissions as a reward for your hard work. Now that's empowering. Some would even call it American.
When you consider that most people wouldn't blink at using DIY tax software or getting rid of a piece of furniture through Craigslist, you'd think this whole solo home-selling thing would be crazy popular by now, too.
So we were surprised digging into stats on selling your house yourself, also called For Sale By Owner or (FSBO — pronounced "Fizz-bo") that these assumptions weren't true. In fact, only 8% of sellers pursued the FSBO route in 2020. Before you put out the for-sale sign and make your open house flyers, here are five facts to absorb:
1. Over half of FSBO sellers know their buyer, compared to 8% of all sellers.
The world is small and the FSBO world is smaller yet. The National Association of Realtors (NAR), which has been tracking FSBO vs. Realtor industry data since 1981, reports that FSBO sellers predominantly sell to a friend, family member, or neighbor.
As of 2020, 51% of FSBO sellers knew their buyer, compared to 8% of all sellers. In addition, 22% of FSBOs occur in a rural area where residents may be more likely to know one another, compared to 15% of general home sales.
This indicates that while the FSBO route is rare, it's even more rare to forgo a real estate agent's help when you don't already have a buyer lined up and ready to go.
Unless you're planning a deal with your BFF or favorite sibling, you'll need to actively market the home on your own — a task which 46% of FSBO sellers are able to skip thanks to the chummy aspect of many of these sales.
If you do have a buyer in mind, you should know the pros and cons of selling a house to a friend and expect to at least pay a real estate attorney to handle the paperwork.
2. Independent research shows that FSBOs sell for 5.5%-6% less on average.
An agent may earn an average commission of 5.8% of your sale price, but they're also going to help make sure you don't leave a dime on the table.
The data bears this out: According to NAR, homes sold for a median price of $242,300 in 2020. By contrast, FSBO sales sold at a significant discount of $217,900, while agent-assisted sales sold for $295,000.
Concerned that NAR, as an organization representing Realtors, would bias their data? Independent empirical evidence further supports the trade organization's findings.
Researchers at leading real estate data source Collateral Analytics, now owned by Black Knight, looked at numerous geographic real estate markets, including Phoenix, San Diego, and Boston from 2016-2017 to study the price differential between FSBOs vs. traditional agent-represented sales.
Their report concluded that the gap in "selling prices for FSBOs when compared to MLS sales is remarkably close to average commission rates." On average, the study found, FSBOs sell for 5.5% less, and in some cases nearly 6% less, than agent-assisted sales, indicating that expertise real estate agents bring to a sale often more than makes up for their cost.
3. The internet hasn't made FSBO any more popular.
Real estate agents have been around for over 100 years. But the dawn of the internet — and the new real estate tech tools that emerged from it — prompted a lot of real estate agent doomsday headlines in the early 2000s. The assumption was that online home valuation and property search would put agents out of a job.
In dramatic contrast, the percentage of Americans who use real estate agents to sell homes has only increased. According to NAR, FSBOs accounted for 15% of home sales in 1981 compared to just 8% today. It appears the dizzying amount of marketing tools and information overload on the internet has only cemented the value of the agent as guide and navigator.
4. Inspection requests from buyers can be over-the-top brutal.
Casey Samson, a top-selling agent in Vienna, Virginia, warns that no FSBO sale is going to be a walk in the park. But the home inspection step especially can be daunting for a seller who is emotionally attached to their home and will be overwhelmed by whatever the inspector finds.
To paint a clear picture: One of Samson's sellers received a home inspection report with 115 items listed.
115!
However, Samson was able to reduce it dramatically to just three fixes, all of which were legitimate safety issues.
"We threw out all the 'wear and tear' items because basically the price of the house reflected wear and tear," says Samson. "We negotiated it down any safety hazards and anything that's broken — but that's it."
5. Your job experience doesn't translate to selling expertise.
Even for a seasoned negotiator, selling a house yourself can be tough. In our research of FSBO sales, we came across an interesting story in The Washington Post from 2019. The post reported that Mithun Mansinghani, a lawyer who is now Solicitor General for the State of Oklahoma, tried selling his former D.C.-area house himself.
Hoping to save about $40,000 to $50,000 in commission, he paid a fee to list his home in the MLS. He also held open houses but didn't get much traffic. After 30 days with no offers, Mansinghani hired a real estate agent, who "paid for himself" by selling the house within weeks at Mansinghani's full asking price.
6. Pricing a house is an elusive process, to say the least.
An online pricing tool can give you a ballpark range of your home's value, which may be more or less accurate depending on whether your home is fairly distinct or part of a cookie-cutter development.
But even if you can pinpoint your home's fair market value, an agent is going to bring a layer of pricing strategy that's tailored to your market and property.
"With the price, you're trying to drive as much traffic into the house as humanly possible, creating the most contracts, which offers you the highest price and the best terms," Samson says.
For example, he recently sold a house that he was sure would appraise for $760,000, but he listed at $750,000. His research and experience showed that the buyer pool at $750,000 and under was much larger than that of buyers looking for a house above $750,000.
"If I went on at $760,000, I would lose 80% of my market," he says. "We got massive traffic. Fifteen contracts. And $100,000 over list price. … Would I have gotten $850,000 if I put it on for $760,000 or $775,000? There's no way."
The right real estate agent matters
Selling a house yourself isn't the norm and it certainly comes with challenges. The research shows that unless you're facilitating a sale where you already know the buyer, you're much better off hiring a real estate agent who can do your property — and price — justice.
That said, not all real estate agents are created equal. HomeLight data shows that the top 5% agents across the United States on average sell homes for as much as 10% more than the average real estate agent. If you need help finding someone you can trust to deliver a satisfying sale, we're here to help you get started.
Header Image Source: (Terje Sollie / Pexels)
Source: https://www.homelight.com/blog/sell-your-house-yourself/
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