Imagine you have an item up for sale. It’s one of a kind and your biggest investment. You can only sell it once. The more places you advertise it is for sale, the more you will likely increase the amount of money you can sell it for. The more you advertise it the longer it may take to sell and the more your own privacy will be compromised. What do you do?
This is the question that many people face when considering how to market their home for sale. If they put it up for sale on their own, they won’t have to pay a seller’s agent commission although they may still be liable for the commission of the real estate agent. Still, that can be a big saving. However for sale by owner listings (aka FSBOs) often end up selling for less than those listed with a broker partly because of the scope of broker advertising. Increasingly this is changing. There are a growing number of services that owners can list on and even the top site for real estate search, Zillow, allows both FSBO listings and “make me move” offers which let people choose a potential price that could tempt a homeowner to pick up stakes and leave. With a for sale by owner listing finding a buyer is just the beginning, this route often includes a variety of potential pitfalls along the way including having to handle all facets of the negotiation on your own. What a broker offers in addition to experience is also a layer of protection in the transaction.
Another option is the pocket listing. This is when an agent has the listing and handles all facets of the transaction but does not advertise the home on the open market. Instead, the agent works privately, often networking with other agents and brokers to connect a buyer and seller without ever having the home on the multiple listing services(MLS). However, a recent study shows that the average single-family home seller who kept their home off the local MLS missed out on an opportunity to make more than $200,000 more. Admittedly, San Francisco is likely an extreme case at least partly because the quest for housing there is highly competitive and prices are inflated but pocket listings are also popular in other hot markets including New York, Miami, and Los Angeles. In these markets inventory on the open market is still well below historic levels.
Many people end up frustrated with the experience of using a real estate agent. The commission model makes some people ill at ease because they feel the agent should not get such a large share of their home’s value. Much of the work an agent does is often behind the scenes and not always visible to their clients. Other business models are being created, including brokerages that use agents who are paid hourly or agents who charge a flat fee but offer a much smaller range of services. Many of these services are still in their infancy and not widely adopted. The real estate industry remains ripe for disruption.
When selling anything, whether it’s a home, an investment property, a car, or a collectible it’s important to know what you want. Price is not always the only consideration. It’s also key to know how fast you want (or need) to sell, and how much time and effort you are willing to invest in the sale process. Putting a home up for sale is about managing risk and expectation. The good news is that people who are interested in buying and selling now have a wealth of options and the ability to do a great deal of research before deciding how they want to sell.