You may not save as much as you think when you sell a house yourself :
When you try to sell a home yourself, it may appear you can save 5, 6 or even 7 percent of the sales price by not paying a commission (all commissions are negotiable). However most buyers work with real estate agents when they are looking for a house. If you are not going to pay the real estate agent representing the buyer a commission, then you eliminated most of the buyers in your market. Eliminating most buyers will definitely decrease your selling price and cost you money. If you do agree to pay a cooperating broker, you are only saving half of a commission. On top of only saving half of a commission, the buyer is represented by a real estate agent and you are not. Who will have the upper hand in negotiations and the selling process? The buyer’s agent will have the best interest of the buyer in mind, not yours.
Why is it so important to value a home correctly?
If you under price or over price a home it can cost you thousands of dollars. When a home first comes on the market it is the best opportunity to sell a house, especially in a seller’s market like we have now. There are buyers waiting for the perfect home to come up for sale and it is vital that a home is priced right from the beginning.
Why will over pricing a home cost a seller money?
If a home comes up for sale that is over priced, a buyer may not even look at the home. An overpriced home will then sit on the market for weeks or maybe even months until the price is lowered. When buyers see a home has been on the market for an extended period, the buyers start to wonder what is wrong with it. Even if the price is lowered to the right value after a few weeks, the home still may not sell for what it would have sold for if it had been valued correctly to begin with. Houses become stigmatized the longer they are on the market. For an investor or a home owner that no longer lives in the home a stigmatized listing is very bad. Every month a home sits vacant it costs the seller money and if there is a loan on the house it can cost the seller thousands of dollars a month. If a seller would have priced a home correctly to begin with they would have sold the home quickly and saved thousands of dollars.
How will under pricing a home cost a seller money?
Under pricing a home can cost just as much money as over pricing a home. When you under price a home you will most likely sell it very quickly, but there is a great chance you will sell it for less money than it is worth. It is true that under pricing a home can stir up a lot of activity and produce many offers. In a multiple offer situation it is possible to get a contract over asking price. The problem with a low asking price is it attracts buyers who want a great deal like myself. Many times a multiple offer situation will actually scare away some buyers. Some buyers do not want to get into a bidding war and will not offer on a house that has multiple offers.
If you under price a home and get an offer over asking price, the chances are you could have gotten an even higher offer had you priced the home correctly. Most buyers will base their offer off of the list price and not what the home is actually worth. I hear it all the time from buyers; I offered $10,000 over asking price and still did not get the home! They are basing their offer on the list price assuming the seller is asking fair market value; they are not basing their offer on what the home may actually be worth. Another downside to an offer well above asking price is it may give an appraiser a reason to come in at a low value. If an appraisal comes in low, it could cost the seller even more money! By pricing the home right to begin with, you will almost always sell the home for the most money.
Why is valuing a house difficult without a real estate agent?
Valuing a property is the most important aspect of selling a house as I just discussed. It is very difficult to do without a lot of experience and MLS access. Without MLS access it is very hard to get information on recently sold properties. Recently sold properties are the most important piece of information needed to value a home. Only licensed agents have access to MLS, which lists sold homes. Active listings can give an idea of house values, but you have no idea if houses are over priced or what price they will actually sell for. Every house is different, because every house has different features and locations. A real estate agent is an expert at determining value based off of these characteristics. It can take years to understand local markets and local markets can change extremely fast. It is very difficult and takes a lot of time for an agent to determine value correctly, it is much more difficult for someone who is not an agent.
A real estate agent knows how to deal with a low appraisal
If you end up with a buyer who is getting a loan, they will most likely need an appraisal done on the home. The bank will lend the buyer money based on that appraisal and if the appraisal comes in low there is a good chance the buyer will need the price of the home to be lowered. We see appraisals come in low all the time with rising home prices and there is a way to deal with appraisers. A real estate agent knows how to be proactive to help the appraiser and knows how to challenge an appraisal if it comes in low.
A real estate agent knows how to market a home
There is a definite art to marketing a home correctly. You can’t just stick a home in the MLS and wait for offers to come in, unless you under price it. A real estate agent knows how to take the best pictures, do virtual tours, create the best brochures, what websites to use, which magazines and newspapers to advertise in and much more. Real estate agents also know people and a lot of people. Many times an agent will have buyers waiting for a house just like yours.
It is almost always better to use a real estate agent to sell a home instead of selling a house yourself. A real estate agent will make you more money on the sale of your home, even though they charge a commission. I know many investors who have their real estate license and they still use another real estate agent to sell their house for them. Those investors know that another agent has the time needed to sell the house and the market expertise. Before you try to sell a house on your own, consider if it is worth the time it will take to understand the process and if you will actually save any money.