Real estate agents take care of most of the tasks associated with selling a home, some of which can be complicated or time-consuming and many of which will be unfamiliar to the layperson. According to one recent survey, 89 percent of all home sellers worked with a real estate agent.1 But with this convenience comes a price, or “commission” as it is typically known. Commission may be thought of as the fee that real estate agents get for taking care of all that’s required for a home to change hands.
The money comes out of the funds that would otherwise go to the seller, and is almost always expressed as a percentage of the purchase price. Commission rates vary from year to year and region to region, but typically hover between five and six percent. In a survey conducted in December 2020 by Effective Agents, a national firm that collects data to match home sellers to real estate agents, the average commission was 5.656 percent, down from 5.702 percent in 2019.2 On a $300,000 home, that comes to $16,950.
In this post, we’ll show you what you’ll have to do to sell a home without a real estate agent, and break down the pros and cons of the different ways of doing it.
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It’s possible to reduce or eliminate the commission, but doing so will involve extra work. Let’s take a closer look at what’s involved in going at it alone.
Determining a Price
Every home is unique, and the market is constantly evolving. Some data — notably, that compiled by Realtors — shows that for-sale-by-owner transactions have a median sale price about $25,000 lower than homes sold with the help of a real estate agent.3 Nonetheless, there are many tools on the Internet that can help solo home sellers set the right price. The Federal Housing Finance Agency’s HPI Calculator can project how much your home may have appreciated in value since you purchased it; Zillow’s Zestimate feature can estimate the value of your home; Trulia’s “Houses for Sale Near Me” feature tracks how much properties nearby have gone for.
Motivated by the prospect of a commission, real estate agents will prepare marketing materials and place advertisements for a home in various media. These techniques can attract more potential buyers, helping sell the home more quickly or driving up the price. Real estate agents will also typically arrange and advertise “open houses” that allow members of the public to visit and inspect a home. Again, however, there are alternatives for those who choose to go it alone. Depending on the real estate office, some duties of getting a home ready for sale — including “staging” and repairs — fall to the seller regardless.4 There are also companies that offer flat-fee services to make a home more enticing to buyers. One of the biggest trade-offs to consider here is exposure. For information about the Multiple Listing Service, by far the most influential home sale database, see below.
Preparing Legal Documents
There are numerous documents associated with selling a home that the seller must provide. While some of these can be complicated, there are options that will allow a layperson to do it on their own. Many of these forms are available on eForms, including a home sales agreement and a property disclosure form. If the home was built before 1978, federal law requires you to file a lead-based paint disclosure form.5 Others can be done without a real estate agent, but will require contracting with third parties. This includes obtaining a title report, which verifies that you do in fact own the home you are selling, and allows the buyer to obtain title insurance.6 Once the sale has concluded, you’ll also have to prepare a deed, which formally transfers ownership, and file it with the recorder or clerk in the county where the home is located. If you find this overwhelming but still want to avoid hiring a real estate agent, you can hire a real estate attorney to help with some or all of these tasks.
Now that you know what’s involved, let’s examine the different options for selling a home without a real estate agent.
For Sale By Owner
Like it says in the name, this means you are in charge of all of the obligations discussed above. This is the option with the most responsibility for the seller, but also the possibility to save the most money. If you are comfortable in the world of real estate or finance, and know you have an in-demand home, this could be the method for you.
- No commission: If you are confident in your ability to pull it off and you have the time to do it right, selling you home on your own will allow you to save as much money as possible.
- Control: If you are in a situation where you prioritize a quick sale over maximizing value, you may be better off selling the home yourself. A real estate agent may be incentivized by a higher commission to hold out if he or she thinks a higher prices is possible. Selling the home yourself can also be useful if you already have a buyer lined up, like a friend or coworker
- Time and responsibility: It’s all on you. If you’re trying to maximize value, selling a home on your own can feel like a second job. And if you’re new at it, it can feel a bit intimidating to work with brokers, a buyer’s agent, and real estate attorneys.
- Risk of lower prices: If you plan to sell your home entirely on your own, you are not eligible to list your home on the Multiple Listing Service, which is available only to recognized real estate agents.7 Because this remains the dominant way people settle on a home to buy, you may be foregoing a host of potential buyers and sacrificing a higher price.
Flat-fee brokers offer some, but not all, of the services associated with a traditional real estate agent. As a result, they do have a commission, but it is much lower than the 5 to 6 percent a real estate agent will seek, usually in the neighborhood of 1 to 1.5 percent. The same websites where you can research home prices may offer free or low-cost listing options; others, like RedFin, offer listing and a pared-down home sales package for a rate of 1 percent. It is also possible to “buy” a listing on the MLS while otherwise going it alone by going it alone buy registering with another entity, which will cost $400.8 This is known as “flat-fee MLS.”
- Balance between exposure of MLS and lower commission: Flat-fee brokers are a kind of middle ground, and may be a good choice for the person who is confident that they have a great home, but need help letting buyers know.
- Choice. If you want some of the services that a real estate agent provides, but don’t want to pay for all of them, some flat-fee brokers offer a “menu” of choices that you can select among, with gradually higher fees for more help.9
- Attention and relationship: If you are seeking out a flat-fee brokerage in the hopes of finding a more affordable version of the kind of holistic assistance a real estate agent can provide, you may be disappointed. Flat-fee brokerages are more affordable because they offer less hand-holding.
- Time: You’ll be on the MLS, but so are tens of thousands of other homes. Without the marketing and connections of a real estate agent, your home may struggle to stand out, and could languish in places that attract more browsers than buyers.
A quick, no-frills option that involves even less work than going through a real estate agent. Real estate buyers, often known as “iBuyer” — there is a company called iBuyer.com, but there are numerous websites that offer similar services — are firms use data about your home to offer you money right away and will buy the home without even seeing it in person. In return, you must pay a “service fee” that is usually slightly higher than the commission a real estate would ask for, typically between 6 and 7 percent.10 Keep in mind that some firms iBuyer put limits on where in the country they will buy a home, or the maximum value home they will purchase.11
- Ease: With an iBuyer, it is literally possible to sell your home at the click of a button, Some firms will even offer cash up front before the sale closes.12 The extra steps associated with selling the home, like those described above, are handled by the buyer after you’ve parted with the home, and are factored in to the service fee. Necessary repairs are also handled by the iBuyer, and are deducted from your final payment.
- One home at a time: If you need to move right away and don’t want to be bothered with the work of selling of a home, or don’t want to pay two mortgages at once, an iBuyer can make that happen. One thing to consider is that, although the service fee charged by an iBuyer may be higher than the commission charged by a real estate agent, you may actually save money if you have already closed on your new home, because you won’t have to pay taxes, maintenance, utilities and other expenses on your former home while you wait for it to sell.
- Lack of control: When you surrender your home to an iBuyer, you lose the ability to guide the sales process. This means the firm can sell even if you think a better offer is forthcoming, or hang on even if you think the market has peaked. You also lose some control about the kind of repairs that need to be done, and could end up paying for things you think weren’t necessary.
- Risk of lower earnings: iBuyers use computer algorithms to gauge the price of your home, so they may miss things that someone who visits in person would. There’s a chance they could overpay, of course, and iBuyers are too new to have reliable data, but one study suggested that homes sold in one metro area to an iBuyer tended to have a lower sales price than those sold through traditional means.13