Getting ready to put your house on the market? Before you do, you’ll have to decide whether you want to hire a full-service broker, work with a discount broker or sell the place on your own. It’s not an easy decision — there are advantages and disadvantages to each method.
A traditional broker, for example, will present you with a complete marketing plan and expose your home to as many buyers as possible. You could, however, save yourself thousands of dollars by selling your property on your own. But some would argue that the headache isn’t worth it.
Here are some pros and cons to consider before you take the plunge.
Brokers work. Despite the advent of the Internet, traditional agents continue to dominate the real-estate market. Indeed, 87% of all home sales were sold with the assistance of a realtor, according to a 2002 survey by the National Association of Realtors.
Want exposure? Hire a broker. Traditional realtors share their property listings in a database called the Multiple Listing Service. This database contains more than 90% of all properties that are for sale and is used by more than 900,000 agents nationwide. It’s a snap for an agent to find all of the homes in a client’s price range — and buyers can even do it themselves by visiting Realtor.com. And since the listing broker is willing to split the 6% commission with any realtor who finds a buyer, there’s plenty of incentive to show a competitor’s inventory.
A good agent will do all the work for you. He or she will take control of the transaction and do everything from setting an accurate asking price and prescreening prospective buyers to showing your home and negotiating the final price. All you’ll need to do is keep the place tidy. This should free you to spend your weekends looking for your new abode.
The wrong agent may not always have your best interests in mind. Take, for example, the so-called open house, where buyers are invited to view a home en masse. Only 3% of homes are sold this way, according to the National Association of Realtors. Why are they so popular? Many sellers feel that, like newspaper ads, this is a good way to market their home. Also, they’re often used as a means for generating buyer leads (for the agent), says Colby Sambrotto, chief operating officer of the Web site ForSaleByOwner.com.
A broker is in control of your transaction. Even with showing services, be prepared for strangers to view your house at practically any time of day…which means having to always keep it clean. More important, your broker will be negotiating on your behalf, and you’ll have to trust that he or she is providing you with all of the information you need to make a final decision. If you choose the wrong agent, you may find your agent encouraging you to reduce your price just to make a quick sale so he can move on to another property.
Discount brokers are slightly cheaper than traditional brokers (however, statistics show that your home will most likely sell for less that if you use a Full Service Broker). Companies such as Foxtons, eRealty.com and zipRealty.com charge sellers between 2% and 4.5% for their services. (Typically, the higher the fee, the more service that’s provided.) So the commission for that same four-bedroom colonial could cost you just $15,750, slightly less than the $21,000 a traditional broker would charge you.
You’ll reach more potential buyers with a discounter than if you sell your home on your own.
Some discounters will prescreen for qualified buyers and weed out the riff raff. This is especially important at a time when everyone is worried about security. “If you just put an ad in the paper, God forbid, someone (comes over) just to case the place,” says William Notte, Foxtons’ vice president of customer service.
You get what you pay for. Some discounters merely list your property on their Web site. Or they’ll field calls from prospective buyers, but you’ll have to give the official home tour and deliver the hard sell.
You’ll have to pay up to get your home in the Multiple Listing Service database. While discounters can offer you this service, you won’t get it for 2%. Many discounters will charge you a higher fee, say 4% to 4.5%, for the listing.
Don’t expect agents to bang down your door. Even if your home is listed in the Multiple Listing Service database, some agents may refuse to show your property. Why? The discounted commission. Rather than the traditional 3% buyer’s commission, many discounters will offer agents just 2% or 2.5%. While that may seem like splitting hairs to you, the difference can really add up. If an agent that is not working in their buyer’s interest can make $10,500 selling one $350,000 home vs. $7,000 on another comparable property, which one do you think he’ll show first? “The reality is that not as many agents will show your house” if you offer them a less competitive commission, says Alex Perriello, chief executive and president of Coldwell Banker.
For Sale by Owner
More money in your pocket. That’s right, you get to keep whatever your home sells for. You can put the money you saved towards the down payment on a larger home or toward more important expenses, such as your child’s education.
No one knows your home better than you do, unless you inform your agent of all of the reasons that guided you to purchase it.
If you want something done right, do it yourself. Selling your own home gives you complete control over the transaction. You set the price, you set up convenient times to show the home and you get to negotiate with a buyer. This way, you’ll know when it’s time to cave and lower your price or stay firm because your house is attracting a lot of interest.
Less exposure. If you try to sell your home without the assistance of a broker, you’ll dramatically limit the number of potential buyers who’ll view your property, says Coldwell Banker’s Perriello. First, your house won’t be included in the Multiple Listing Service. Second, Perriello argues, buyers feel more comfortable using a broker, since they want to see all of the available homes in a given neighborhood and have a professional on hand to help analyze the properties.
Expect your home to sell for less. According to the National Association of Realtors, homes that sold with a broker went for a higher median price than those sold by an owner. Many buyers believe they can negotiate more vigorously if they’re buying directly from an owner who’s avoiding a hefty broker’s fee.
Selling your own home can be a hassle. You have to set a price, place ads in the paper, field calls from prospective buyers and then put on your best smile and sell that house like a pro. And don’t forget about the negotiations. Some industry insiders even argue that buyers feel more comfortable talking money with a third party. Now try juggling all that’s involved while holding down a full-time job and looking for a new home for your family to move into. Some argue that the headache is well worth the 6% commission.
Sources for this story include: Coldwellbanker.com, FoxNews.com, and TheMattesonGroup.com