Realtor vs. Discount Brokerage vs. FSBO

Selling your home is a big deal. Thinking of selling on your own?

Do you hire a Realtor, a discount brokerage, or do it yourself to receive top dollars? Before we continue, let’s get one thing straight, in any profession there is a dividing line between a true professional and the average Joe, and real estate is no exception. With the understanding that I’m speaking of the former, here are my thoughts.

Hiring a discount brokerage or doing it yourself is almost one in the same thing in my mind. For $500-$1000 you can have your listing posted on MLS through a discount brokerage and then you’re left to sea, just like doing it yourself minus the whole MLS thing. Here’s some food for thought:

Additional Legal Fees

You pay more than normal to your lawyer to review the contract and finalize your transaction as a lot of FSBO’s (For Sale By Owner) end up in legal disputes or litigation, which ends up costing the seller more in the long run. This is primarily caused by misrepresentation on the seller’s part about the property as there is no proper disclosure given and no obligation to give it. Whereas working with a Realtor, its part of their Code of Ethics and their licenses are on the line. This keeps the seller out of the courts and saves money.

They charge upfront (in most cases thousands). Agents don’t.

When it comes down to it, listing with an agent shouldn’t cost you a cent. I know you probably read that a few times. Agents don’t charge upfront, we only charge when results are provided. This gives you an advantage in more than one way. On the other hand I have heard of individuals paying upwards of $2,000 upfront just for a sign and a spot on a website, only to end up having their house listed and sold by an agent.

Just because you’re a real estate professional does not mean you’re rich or overpaid.

This has been the fuel for many slanderous ad campaigns released by popular for sale by owner websites over the years. The truth of the matter is, if it was that easy and they got paid a “small fortune” to sell a house, everyone would get into the business. Selling homes is hard work. Agents often find themselves working for free and hoping to receive a commission. Consider this situation: A buyer has his agent show him 30 houses over the course a month. The agent spends hours of his time to assist the buyer. The buyer decides not to buy. The agent has worked for free and lost money on expenses. This is a common situation.

List Too Low or Too High

Either listing too low or high is a potential nightmare. A seller can be unknowledgable about the real estate market and property value in their neighbourhood leading to a too low price being placed on the property, or the seller lists too high (which is the more common scenario). We all think we live in castles, but we don’t. Taking the highest selling comparable on your street or neighbourhood without doing a proper analysis of a FEW comparables can be detrimental to the listing. A seller can forget to compare upgrades, lot size, type of home, parking, etc. when comparing the highest sold listing to theirs and listing at the same price or higher. That’s where the knowledge, experience and expertise of a neighbourhood Realtor come into play. We all know what happens to overpriced listings…..they don’t sell! And if they take longer to sell, you must now factor in the additional carrying costs associated with the time frame. Will it equal saving on a Realtor commission?

$1 Commission vs. 2.5%

A lot of times when a seller lists their property through a discount brokerage, the brokerage will offer a $1 commission on the MLS posting. Newsflash  for Mr. and Mrs. Seller, no agent in their right mind will show that listing. Realtors work hard for their money and should be compensated accordingly. Without proper exposure, the seller will NOT receive the best terms, price and conditions. On the flip side, some sellers will even offer the Buyer agent their full 2.5% commission which blows my mind.  Why a seller would not be willing to hire a Realtor with the sale of their biggest investment, but will properly compensate an agent that is working against them and in the best interest of the buyer is beyond me. A buyer agent is there to negotiate the seller down on price and ensure favourable conditions for the buyer. Why should a seller be willing to pay full price for this without someone having their back? I’m seriously confused!

They actually petition agents to sell their houses.

After years of bashing the profession, certain for sale by owner websites are now calling on agents to come to their rescue, so they can take credit for selling homes. Tell me another business model where you ask your competition to do the work for you. This is really an admission of one thing – serious buyers go to an agent. Why? Because it will cost you nothing to buy through an agent.

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Agents don’t hate for sale by owners.

These companies would have you believe that agents think FSBOs are ignorant. This isn’t the case. We get why you would want to go this route. It can be done, but just because you can do something doesn’t mean you should. Like many DIY projects you are putting yourself at risk. In this case you are taking a risk with the biggest investment of your life. It will not be an easy process.

Security

The dangers of selling your home For Sale By Owner go far beyond losing equity, they place homeowners at risk of unaccompanied strangers, thieves, and potentially worse. You are giving access to your home, to just anyone. Often times Real Estate transactions end up in legal battles, costing you attorney fees that you wouldn’t have paid had you worked with a licensed professional. It’s not because the 11 percent of FSBOs who actually make it to the closing table aren’t intelligent people... they just haven’t been through all the experiences a professional Realtor® has. Realtors® can foresee issues before they occur which in return prevents any legal troubles, home inspection problems, negotiating table concerns, as well as strategies that will ultimately give you the best chance of closing for a higher net.

The Know How

You don’t just hire a Realtor to put a sign on your front lawn and show up to the negotiation table when an offer comes in – there’s so much more than that. A Realtor will help you get your home ‘show-worthy’ by advising you how to stage and what is worth fixing and updating to yield the best return on your investment. They will market your property through various outlets such as virtual tours, professional photos, social media (blogging, Facebook, Twitter, etc.), databases of potential clients, farming areas where potential buyers might come from, connections in the real estate industry, and the list is endless! A good Realtor knows how to read people and their body language to weed out the serious from the non-serious buyers.

They don’t have a real estate license.

This is something a lot of people do not realize. These so called “private sale” websites are just that. They are not licensed to trade in real estate or to give you real estate advice. They can’t even advise you on how to price your property because doing this would fall under an agency relationship and would be considered trading in real estate. That requires a license. These parameters are set in place to protect you, the consumer.

Privates sales carry a stigma and uncertainties that make buyers uncomfortable.

Ever gone to view a private sale as a buyer? Then you know it can be extremely uncomfortable and limiting to view someone’s house with them in it. It can be even more uncomfortable to negotiate with them. On top of all this, private sales beg the question, why didn’t they use an agent? Is there something wrong with the house? If they are trying to cut costs now, did they cut costs/corners with repairs?

The Right Mindset in a Real Estate Transaction

Selling your home is about having the right mindset. After all it's your home, you are emotionally attached to the property, you have memories there, you need to be able to switch this off and be detached from your connection to the house. It’s about being confident in your numbers, your marketing, your follow-up, and confident that you have dotted every i and crossed every t before you reach the closing table. A Real Estate transaction is not rocket science, it’s a roller coaster ride, with tons of moving parts as well as uphill and downhill battles. If you aren’t careful, the roller coaster will take you for a ride you didn’t sign up for

Bottom line, the decision is yours to make and you should choose accordingly. This is one of, if not the biggest investment of your life and you should consider all the facts and be fully informed before taking the leap! Keep in mind, if you`re willing to spend the extra dough on those high quality jeans that are super comfy , then why not on something you've poured your life savings into. I think it`s worth it, don`t you?

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