Should You Sell Your Home Yourself ? : YES : Just Do Your Homework, Hire a Lawyer to Help and, Above All, Be Patient
You don’t need a broker to sell your home. However, you must spend some time to educate yourself.
The sale of a house is a legal transaction, and in every sale, both buyers and sellers should routinely have their lawyers review the purchase contract. In “by owner” sales it is mandatory that a lawyer review the transaction.
Brokers claim that you need them to price your property. This is fiction. The price for your property is what a willing buyer will pay in the open market. Does that mean you can set any price you want? Of course not. It should be priced within the range for your neighborhood.
Brokers have information that helps them determine the price, but even they are not infallible. There are many stories about houses that have been listed at such a low price that they are sold to someone in the listing office, before they got into the multiple listing book. You have to remember the broker wants to price the property so that it sells quickly, and this is inconsistent with getting the highest price.
The prospective seller will want to test his price to see how realistic it is. You can do this by attending open houses in the area, reading the ads in the paper and, most importantly, obtaining a property profile showing comparable sales in your neighborhood for the last six months. Lists of comparable sales are available through a local escrow or title company. Finally, to get an even closer approximation on your property’s value, hire an appraiser. Remember, you can always lower your price.
It is a seller’s market now, and you can be effective with a modest advertising budget and well-placed ads. It is not necessary these days to have the broad exposure that the broker provides. Some houses are sold with a single add, but that is the exception. Selling your home is a waiting game, and you must be patient.
Brokers charge the same commission whether the house is hard or easy to sell, and that commission is a big bite of your equity. A 6% commission on a $200,000 house equals $12,000. Using the $200,000 example, say you have a $150,000 mortgage, then your equity is $50,000. The same 6% commission when taken out of your $50,000 equity equals a walloping 24% of your equity.
Today, with real estate prices so high, a 6% commission doesn’t make sense. A 6% commission on a $500,000 house is $30,000. Yet five years ago that same house may have sold for $250,000, with a commission of $15,000. The 6% commission on today’s prices results in a 100% increase in the broker’s fee without any increase services.
The 6% commission is even less valid when you consider California properties in the $500,000 range and up. A house selling for $1 million has a commission of $60,000 and one selling for $10 million has a commission of $600,000. It is very hard to argue that there is significantly more work involved for the sale of the $10 million house so as to justify a fee 10 times as great.
Selling your own home is not for everyone. It is a waiting game, and you must be patient. It also involves a significant commitment in time to price the property, show it, negotiate the terms, qualify the buyer and close escrow. Unless you are willing to learn how to do it right, and use the services of a real estate lawyer, my advice would be “Hire a broker. Don’t even try to do it yourself.”
But if the thought of saving the real estate commission is appealing, put up a “for sale by owner” sign and start to work.
