Realtor or For Sale By Owner? Pros and Cons
Realtor or for sale by owner (FSBO)? Pros and Cons
When it comes to selling your home, you have conflicting values that weigh against each other. Those conflicting values can make it hard to decide if you should go with a realtor or sell your house yourself.
On the one hand, you might think you don’t know how to sell your home — and, if you even attempt it, you’re going to make a mistake that’s going to cost you thousands (or maybe tens of thousands) of dollars. So you should go with a realtor, because their experience makes it way less likely that they make a similar mistake.
At the same time, though, you want to get as much money as you can out of your house. You want to sell it for as much as it will go for, and you don’t want any middlemen taking a huge chunk of the profits. So you might want to list the house yourself.
In this article, we’re going to review those two popular methods of selling your home: going with a realtor and listing it yourself online (a “for sale by owner,” or FSBO). We’re going to use Fargo, ND as our example market, since that’s where Autopilot Properties bases most of its business.
We’ll weigh the pros and cons of each so you can make an informed decision about what you should do with your house.
Selling Your House with a Realtor: Pros
We’ve written about selling your house with a realtor before, and we warned that it can be very costly without producing enough value to offset those costs.
But why does it make sense to go with a realtor? For a few reasons. They have…
- Access to various listing platforms (like the multiple listing service).
- Experience negotiating and showing homes.
- Understanding of the laws surrounding contracts.
Most importantly, though, realtors:
- Do a lot of the work for you.
- Save you time.
That last point is the most important. In the research studies we reviewed in our previous article on the topic (which is admittedly a little biased), one of the most consistent findings was that realtors sell homes faster on the MLS than FSBOs. There are simply a lot of motivated buyers and sellers on the MLS, so properties can sometimes be on and off of it in the blink of an eye.
If you have an extremely well-paying job that takes up a lot of your time, it might not make sense for you to spend an extra 10 hours a week for a month or so just to eke out another $10-15k out of your house. You’re paying for the convenience of having someone else do the work for you.
Selling Your House with a Realtor: Cons
We’re going to risk sounding like a broken record, but from the Stanford Institute of Economic Policy to the American Economic Association, there have been multiple studies in real estate markets across the United States that confirm the same finding: on average, realtors simply charge too much and create too little value for their services.
The average house in Fargo sells for about $240k at the time of this writing. Your realtor takes a 3% cut at closing, for a total of $7,200. That means they have to make your house appear at least $7200 more expensive than it really is.
Sometimes, if the realtor gets lucky, he or she can sell your house in as little as a day, particularly in a hot market. Now their agency takes half of their cut ($3600) and they get the other half.
So, to sum up the cons:
- You lose money. Realtors, on average, charge too much for their marketing services while creating very little change in the sales price. This has been confirmed through multiple studies.
- You have to spend time vetting different realtors to see which one deserves your business.
Selling Your House as a FSBO: Pros
Before the internet, it made perfect sense to sell your house with a realtor. Realtors, after all, had access to a unique network that it would’ve taken months to access. Now, if you’re a homeowner, you can list your house on Zillow, Trulia, Redfin, or any number of FSBO sites. If your house is in poor condition, you can easily contact distressed property buyers who can give you an offer as-is and make the repairs. You simply have more options than ever. It doesn’t always make sense to go with a realtor.
The best part is that you don’t have to pay that 3% commission to the listing agent. However, you might still have to pay a 3% commission to the buying agent. Still, that can save you up to $7k — maybe more.
- You have a lot of options to sell your home.
- You don’t have to pay a 3% commission to your realtor, saving you $7k+ if you live in Fargo.
- Those same studies listed above show that you’re likely to sell your house for just as much as a realtor would sell your house.
Selling Your House as a FSBO: Cons
With all that said, selling your house yourself is no walk in the park. If you’ve ever listed something on eBay, think of it like that — except you’re listing the most expensive asset you own.
The cons of selling your house as a FSBO are pretty much the inverse of the pros of going with a realtor:
- You don’t have access to the multiple listing service (which can help you sell your house faster).
- So, on average, it takes longer for you to sell your house.
- You have to do the work yourself.
- You probably have little experience staging and showing homes.
Conclusion: Realtor or For Sale by Owner (FSBO)? Pros and Cons
So, to wrap things up, if you go with a realtor, you don’t have to do as much work. You sell your house faster with fewer headaches. But, in return, you lose maximum value on your house (probably up to $7k or more in Fargo and most average markets in the US). Depending on your personal financial situation, this might make perfect sense.
If you decide to sell your house yourself as a FSBO, you have access to a lot of different listing platforms, and even distressed property buyers who can give you an offer on properties quickly, and you don’t have to pay that 3% commission to your realtor — because you don’t have one. Studies show you’ll probably sell your house for just as much as the realtor would. So, you save a lot of money but it takes more work.
If you have any questions about your property in Fargo, particularly if it’s in poor condition and you’re looking to sell, please contact us. We’ll give you a fair market offer on it.