November 08, 2010

The True Costs of FSBO vs Hiring a REALTOR®

The True Costs of FSBO vs Hiring a REALTOR®

Most FSBOs (For Sale By Owners) begin marketing their homes themselves in an attempt to "save the commission."  Unfortunately, very few of them ever really compare the true costs of selling FSBO to the costs of hiring a REALTOR®.

Assuming that you've correctly priced your property for the current market (let's say $200,000 is the 'right' price) what is the true cost of selling one vs. the other.

Century 21 SignIf sold at full price, and the REALTOR® and you agreed to a six percent commission, the cost of selling would be $12,000.

By going FSBO, to be truly equal, you have to be able to market your property comparably to the average agent.  So what does that take?

Data shows that up to 90% of buyers start their searches online, so you have to be on the Internet, and not just a single listing on one or two small websites.  You have to be where the buyers are looking.  Estimates may vary, but to get the online exposure that an average agent has built up over the years, you'd probably have to spend around $2-3000.  BUT, you still wouldn't be at the number one spot on the Internet that buyers look, which is Realtor.com.  To get there and still maintain your FSBO, you'll have to find a flat-fee company to the tune of $500-1000.00.  Want to get your property featured on Realtor.com or some other top real estate website?  That's another $1000 or so.

It's all cool!  You're still at $5k tops, so that means you're still way to the good, right?  But wait! Research also shows that some 80-90% of buyers also use the services of agent For Sale by Owner Signwhen buying a property.  You don't really want to exclude any buyers that are using an agent (and if you're doing a side-by-side comparison, you can't).  Using the commission fee from above, usually a buyer's agent is entitled to half or 3% of that fee.  So that's $6000 that has to be allowed for a buyer's agent.

Hmm,  now we're only at $1000 or so in savings.  Hey, you're still saving, right?  Well, have you figured in your time, yet?  Someone has to field the calls, show the house, handle the paperwork, schedule the inspections and all the other things that an agent would normally do.

Put side-by-side, are you really saving the commission when marketing FSBO?

It gets worse, my friend.  The majority of buyers that specifically look for FSBO properties are looking at them for one reason and one reason only...they want to save the commission! 

That's right, they're looking to save the very same commission that you intended to save on selling.  If you want to sell, can you guess which one of you gets to actually save the commission in order to get a deal?  HINT:  It's most likely the one with the $$$$ and that's the buyer!

So, after all your hard work and effort to get your property sold yourself, it's very likely that you'll actually sell for LESS than what you would have if you had used the services of a REALTOR®.  That's a tough pill to swallow there.

Folks, if you can truly sell your property yourself faster and for more money, then I say, GO FOR IT!  That just makes sense.  However, if you're considering it, be sure that you're actually doing a true comparison of the costs instead of just looking at the number that happens to be the agent's fee.  It may actually save you a lot of time, trouble and dollars in the long run!


for sale by owner photo courtesy of Casey Serin

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