Admittedly, before venturing into real estate as a profession, selling a home without representation crossed my mind a few times. Now, I frequently take calls about For Sale By Owner (FSBO) listings and inquiries on properties where the buyer only wants to talk to the listing agent because they are representing themselves. Having peeked behind the curtain to see the intricacies of the real estate transaction, I’m glad to have hired a real estate agent to guide my way to the closing table.
Selling Your Home without a Real Estate Agent
When selling your home, the “commission carrot” can cloud your judgement and tempt you to go it alone. A good real estate broker will provide value that far exceeds the fee charged at the closing table. Here are the three main steps in the home selling process where utilizing a professional can most benefit you:
The biggest mistake owners make is setting the listing price incorrectly. They usually base their pricing on the internet, typically by Zillow’s Zestimates. Big mistake. Nearly 25% of Zestimates are off by more than 10% from the sale price. Zillow even states in the fine print that these estimates are a starting point for determining value. Overprice your home, and the phone might not ring after your listing goes live. Underprice it, and you may leave money on the table at closing.
A savvy home owner will hire an appraiser and use that to justify the list price. However, appraisals are ordered by banks to justify sales price, not determine market value. Market value is determined by a willing buyer and seller consummating a sale via an exchange of money. In a fast paced market, such as the one we are seeing in Denver, relying on an appraisal may not work.
So how do you accurately determine value? Recent sales are how real estate agent determine what your home is worth. This is a dynamic number that literally changes hourly based on changing sales data. The best source of information is from the Multiple Listing Service (MLS) which can only be accessed by real estate professionals. Real estate agents also use their expertise from being in the field working with buyers and sellers, getting a true feel for the demand, urgency, and homes on the market.
So, you’ve decided to accept an offer from someone who is represented by a broker. Great, you just saved 50% of the commission fees, and the other broker does all the paperwork! Sounds like a sweet deal doesn’t it? Did you know there are multiple places where the buyer can walk away from the deal and keep their earnest money, leaving you to start the process over? Did you notice that because of language in the contract they just wholesaled your property and made a quick $30k? Did you notice that you are paying for expenses that are typically the buyer’s? Or that you agreed to pay their closing costs? More surprises can be there! A knowledgable real estate broker knows Colorado’s real estate contracts and how to use them to benefit their clients.
Staying Under Contract
Most deals that fall apart do so during the inspection phase, which typically happens early on in the transaction. Do you know how to proceed if that happens? Do you know what your requirements are if the contract falls through because of a material defect? Here’s yet another benefit of having your real estate agent: how to keep the contract from falling apart and how to move forward if it does.
Buying A Home
You may think it’s a no brainer to purchase your own home and save some cash by not hiring a real estate agent. Keep in mind, though, that the commission is negotiated prior to the listing broker placing the home on the market. If you represent yourself, the commission amount doesn’t change. Instead, the listing broker receives the full commission. There is no discount to the buyer.
The listing broker has already established a relationship with the seller, not a buyer who comes along. The listing contract typically states that if a buyer isn’t represented by a real estate broker, the listing broker may become a transaction broker to get the deal done. That means the listing broker plays both sides of the fence. You won’t have the protection of full representation, and you’re paying full price for not having that!
Benefits of Hiring a Broker
With a reputable and knowledgeable real estate agent on your team, you’ll have many advantages and benefits including:
- someone who can thoroughly explain all of Colorado’s real estate contracts
- someone who understands how to leverage contracts to help meet your objectives
- professional marketing for listing your home
- having someone professionally negotiate on your behalf
- someone who can navigate the process and understands the intricacies of documents, mandatory disclosures, and deadlines, keeping the stress level down for you.
Yes, there is a cost when using a real estate agent, but not using one can cost<i>a whole</i> lot more.