Why Sell Your Home Yourself?
Generally, the only reason people choose to sell their own home as opposed to working through an agent is the perception that they will get a higher net. Unfortunately, that is rarely the case and I will explain why. First, here is the situation as most people who have attempted to sell their own home in any but the strongest seller's market can attest to. And, Las Vegas is not in a buyer's market!
| Perception |
Reality |
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Higher net by not paying a commission to an agent
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- Security – people coming into to your home are not screened; you have no idea what their motivations are.
- FSBO buyers expect a large discount since they know you are not paying broker fees. They typically offer 8% to 10% below market; not below asking price. In a national study, "The median home price for sellers who use an agent is 16% percent higher than a home sold directly by an owner; $230,000 vs. $198,200".
- Requires a more knowledgeable buyer who is willing to trade off business risk and time for a much lower price (bargain hunters).
- Limited access to the most qualified, most motivated and least price-sensitive buyers.
- Takes longer to sell since you are drawing from a much smaller pool of buyers (See charts below) and your home is not available during key out-of-town buyer times (weekdays).
- Conformance to laws, regulations and legal protection.
- Sustained, significant marketing effort and cost.
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Beyond perception issue are the realities of marketing reach. When you sell your own home, you are competing with every other home on the market. And, it becomes largely a marketing event, with agents having far more resources. Please take a moment to look at my home marketing process and see the worst case of what you will have to compete with.
Another challenge for FSBO's is the fact that most buyer's prefer to work with agents because they do the leg work, reduce risk and smooth the entire process. Why shouldn't they; agents are free to buyers. The only buyers who prefer not to use agents are bargain-hunters who are not willing to pay anywhere near market price for a home anyway.
Buyer Sources
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The diagram at left is from a national study. Since it is national it does not apply as well to any specific area. However, I believe that for Las Vegas, the numbers for the agent sources are low and for newspaper sources too high. I feel the reason for both is that a large percentage of Las Vegas home buyers are from out of town - principally LA. I feel that out of town buyer's are much more likely to use a agent than in-town buyers. Also, since buyer's do not pay for the services of an agent, I feel that bargain-hunters are the primary buyers for FSBOs. |
Financial Comparison
The following model compares selling through an agent vs. selling your home yourself. The two key assumptions that result in a higher net when you sell through an agent are:
- Agents have access to more buyers and buyers that are less price sensitive. The primary source of buyers or FSBO are bargain-hunters. Bargain-hunters never pay full price. In the model below I am assuming that the FSBO home sold for 8% below market value. In most national studies, the average FSBO sale is 16% below an agent represented sale.
- Since FSBO's have no built in marketing infrastructure and have access to a smaller pool of buyers, it will take longer to sell. I used 3 months for the agent represented seller and six months for the FSBO. In today's market, I feel that these numbers are very conservative.
| Sold through Agent |
|
|
| Assumptions |
|
|
| |
Home Market Price (1) |
$400,000 |
|
| |
Commission |
6% |
|
| |
Monthly Payment (2) |
$2,628 |
|
| |
Time to sell (Months) |
3 |
|
| |
Tax Rate |
35% |
|
| |
|
|
|
| Calculations |
|
|
| |
Home Market Price (1) |
|
$400,000 |
| |
Expenses incurred while on market |
|
|
| |
3 months payments |
$7,883 |
|
| |
Tax Savings on Interest |
-$2,483 |
|
| |
Total expense |
|
$5,400 |
| |
Commission paid |
|
$24,000 |
| |
Gross Net |
|
$370,600 |
| |
| Sold By Owner |
|
|
| Assumptions |
|
|
| |
Home Market Price (1) |
$400,000 |
|
| |
Below market price |
8% |
|
| |
Monthly Payment (2) |
$2,628 |
|
| |
Time to sell (Months) |
6 |
|
| |
Tax Rate |
35% |
|
| |
|
|
|
| Calculations |
|
|
| |
Home Market Price (1) |
|
$368,000 |
| |
Expenses incurred while on market |
|
|
| |
3 months payments |
$15,766 |
|
| |
Tax Savings on Interest |
-$4,966 |
|
| |
Total expense |
|
$10,800 |
| |
Gross Net |
|
$357,200 |
| |
Notes:
1. Priced correctly based on comps and similar information
2. 10% down, 6.875% interest rate, 30 year fixed + taxes and insurance |
So, on top of a lower net you will have spent all the time, effort, risk and hassles of selling it yourself. Want to sell your home for more money in less time? Call me.
Eric Fernwood
Eric@ISellLVHomes.com
702-358-8884
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