Can I Buy or
Sell a Home Without a Real Estate Agent?
Today’s real estate market is one of the fastest-moving in recent memory. With record-low inventory in many market segments, we’re seeing multiple offers—and sometimes even bidding wars—for homes in the most sought-after neighborhoods. This has led some sellers to question the need for an agent. After all, why spend money on a listing agent when it seems that you can stick a For Sale sign in the yard then watch a line form around the block?
Some buyers may also believe they’d be better
off purchasing a property without an agent. For those seeking a competitive
edge, proceeding without a buyer’s agent may seem like a good way to stand out
from the competition—and maybe even score a discount. Since the seller pays the
buyer agent’s commission, wouldn’t a do-it-yourself purchase sweeten the offer?
We all like to save money. However, when it comes to your largest financial asset, forgoing professional representation may not always be in your best interest. Find out whether the benefits outweigh the risks (and considerable time and effort) of selling or buying a home on your own—so you can head to the closing table with confidence.
SELLING YOUR HOME WITHOUT AN AGENT
Most homeowners who choose to sell their home
without any professional assistance opt for a traditional “For Sale By Owner”
or a direct sale to an investor, such as an iBuyer. Here’s what you can expect
from either of these options.
For Sale By Owner (FSBO)
For sale by owner or FSBO (pronounced fizz-bo)
offers sellers the opportunity to price their own home and handle their own
transaction, showing the home and negotiating directly with the buyer or his or
her real estate agent. According to data compiled by the National Association
of Realtors, approximately 8% of homes are sold by their owner.1
In an active, low inventory real estate
market, it may seem like a no-brainer to sell your home yourself. After all,
there are plenty of buyers out there and one of them is bound to be interested
in your home. In addition, you’ll save money on the listing agent’s commission
and have more control over the way the home is priced and marketed.
One of the biggest problems FSBOs run into,
however, is pricing the home appropriately. Without access to information about
the comparable properties in your area, you could end up overpricing your home
(causing it to languish on the market) or underpricing your home (leaving
thousands of dollars on the table).2
Even during last year’s strong seller’s market, the
median sales price for FSBOs was 10% less than the median price of homes sold
with the help of a real estate agent.1 And during a more balanced market, like the one we experienced in
2018, FSBO homes sold for 24% (or $60,000) less than agent-represented
properties.3 This suggests that, while you may think that you’ll
price and market your home more effectively yourself, in fact you may end up
losing far more than the amount you would pay for an agent’s assistance.
Without the services of a real estate
professional, it will be up to you to get people in the door. You’ll need to
gather information for the online listing and put together the kind of
marketing that today’s buyers expect to see. This includes bringing in a
professional photographer, writing the listing description, and designing
marketing collateral like flyers and mailers—or hiring a writer and graphic
designer to do so.
Once someone is interested, you’ll need to
offer virtual showings and develop a COVID safety protocol. You’ll then need to
schedule an in-person showing (or in some cases, two or three) for each
potential buyer. In addition, you’ll be on your own when evaluating offers and
determining their financial viability. You’ll need to thoroughly understand all
legal contracts and contingencies and discuss terms, including those regarding
the home inspection and closing process.
While you’re doing all of this work, it’s
likely that you’ll still need to pay the buyer agent’s commission. So be sure
to weigh your potential savings against the significant risk and effort
involved.
If you choose to work with a listing agent, you’ll save
significant time and effort while minimizing your personal risk and liability. And the increased profits realized through a more effective marketing
and negotiation strategy could more than make up for the cost of your agent’s
commission.
iBuyer
iBuyers have been on the scene since around
2015, providing sellers the option of a direct purchase from a real estate
investment company rather than a traditional direct-to-consumer sales process.4
iBuyer companies tout their convenience and speed, with a reliable, streamlined
process that may be attractive to some sellers.
The idea is that instead of listing the home
on the open market, the homeowner completes an online form with information
about the property’s location and features, then waits for an offer from the
company. The iBuyer is looking for a home in good condition that’s located in a
good neighborhood—one that’s easy to flip and falls within the company’s
algorithm.
For sellers who are more focused on speed and
convenience, an iBuyer may offer an attractive alternative to a traditional
real estate sale. That’s because iBuyers evaluate a property quickly and make
an upfront offer without requesting repairs or other accommodations.
However, sellers will pay for that convenience with,
generally, a far lower sale price than the market will provide as well as fees
that can add up to as much or more than a traditional real estate agent’s
commission. According to a study conducted by
MarketWatch, iBuyers netted, on average, 11% less than a traditional sale when
both the lower price and fees are considered.5 Other studies found
some iBuyers charging as much as 15% in fees and associated costs, far more
than you’ll pay for a real estate agent’s commission.6
In a hot market, this can mean leaving tens of
thousands of dollars on the table since you won’t be able to negotiate and
you’ll lose out on rising home prices caused by low inventory and increased
demand. In addition, iBuyers are demonstrably less reliable during times of
economic uncertainty, as evidenced by the halt of operations for
most iBuyer platforms in early 2020.6 As a seller, the last thing
you want is to start down the road of iBuying only to find out that a corporate
mandate is stopping your transaction in its tracks.
If you choose to work with a real estate agent, you can still explore iBuyers as an option. That way you can take advantage of the added convenience of a fast sale while still enjoying the protection and security of having a professional negotiating on your behalf.
BUYING YOUR HOME WITHOUT AN AGENT
According to the most recent statistics, 88%
of home buyers use a real estate agent when conducting their home search.1
A buyer’s agent is with you every step of the way through the home buying
process. From finding the perfect home to submitting a winning offer to
navigating the inspection and closing processes, most homebuyers find their
expertise and guidance invaluable. And the best part is that, because they are
compensated through a commission paid by the homeowner at closing, most agents
provide these services at no cost to you!
Still, you may be considering negotiating your
home purchase directly with the seller or listing agent, especially if you are
accustomed to deal-making as part of your job. And if you are familiar with the
neighborhood where you are searching, you may feel that there is no reason to
get a buyer’s agent involved.
However, putting together a winning offer package can be
challenging. This is especially true in a multiple-offer situation where you’ll
be competing against buyers whose offers are carefully crafted to maximize
their appeal. And the homebuying process can get
emotional. A trusted agent can help you avoid overpaying for a property or
glossing over “red flags” in your inspection. In addition, buyer agents offer a
streamlined, professional process that listing agents may be more likely to
recommend to their clients.
If you decide to forego an agent, you’ll have
to write, submit, and negotiate a competitive offer all on your own. You’ll
also need to schedule an inspection and negotiate repairs. You’ll be
responsible for reviewing and preparing all necessary documents, and you will
need to be in constant communication with the seller’s agent and your lender,
inspector, appraiser, title company, and other related parties along the way.
Or, you could choose to work with a buyer’s agent whose commission is paid by the seller and costs you nothing out of pocket. In exchange, you’ll obtain fiduciary-level guidance on one of the most important financial transactions of your life. If you decide to go it alone, you’ll be playing fast and loose with what is, for most people, their most important and consequential financial decision.
SO, IS
A REAL ESTATE AGENT RIGHT FOR YOU?
It is important for you to understand your
options and think through your preferences when considering whether or not to
work with a real estate professional. If you are experienced in real estate
transactions and legal contracts, comfortable negotiating under high-stakes
circumstances, and have plenty of extra time on your hands, you may find that
an iBuyer or FSBO sale works for you.
However, if, like most people, you value
expert guidance and would like an experienced professional to manage the
process, you will probably experience far more peace of mind and security in
working with a real estate agent or broker.
A real estate agent’s comprehensive suite of
services and expert negotiation skills can benefit buyers and sellers
financially, as well. On average, sellers who utilize an agent walk away with
more money than those who choose the FSBO or iBuyer route.3,5 And
buyers pay nothing out of pocket for expert representation that can help them
avoid expensive mistakes all along the way from contract to closing.
According to NAR’s profile, the vast majority of buyers (91%) and sellers (89%) are thrilled with their real estate professional’s representation and would recommend them to others.1 That’s why, in terms of time, money, and expertise, most buyers and sellers find the assistance of a real estate agent essential and invaluable.
QUESTIONS
ABOUT BUYING OR SELLING? WE HAVE ANSWERS
The best way to find out whether you need a real estate agent or broker is to speak with one. We’re here to help and to offer the insights you need to make better-informed decisions. Let’s talk about the value-added services we provide when we help you buy or sell in today’s competitive real estate landscape.
Sources:
1. National Association of
REALTORS -
https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-profile-of-home-buyers-and-sellers
2. Washington Post -
https://www.washingtonpost.com/business/2020/12/09/factors-consider-when-determining-whether-use-an-agent-buy-or-sell-home/
3. National Association of
REALTORS -
https://www.nar.realtor/blogs/economists-outlook/selling-your-home-solo-to-save-money-you-ll-actually-make-less-than-you-think
4. Seattle Times -
https://www.seattletimes.com/business/real-estate/redfin-is-first-major-ibuyer-to-sell-in-seattle
5. MarketWatch -
https://www.marketwatch.com/story/selling-your-home-to-an-ibuyer-could-cost-you-thousands-heres-why-2019-06-11
