As I’ve recently posted there can be good reasons for going the for sale by owner route but there can also be plenty of legitimate reasons for not doing it (as opposed to the many bogus reasons often given by real estate agents). However, you’re not limited to just two alternatives at opposite ends of the spectrum. In fact, there are a wide variety of choices available to you on a complete spectrum.
Mininum For Sale By Owner Requirements
At one end of the spectrum you can certainly just throw your home up on some obscure Web site but I strongly discourage you from trying that. You just won’t be exposed to enough buyers. The vast majority of buyers are working with a realtor and looking through MLS listings for their home. In fact, according to the 2013 NAR survey of home buyers and sellers only 5% of all buyers bought their home directly from the previous owner and about half of those people actually knew the seller.
So at a minimum I recommend that you get someone to put your home on the MLS. It will probably cost you around $500 but it will be well worth it. Of course if you are going to market your home to buyers’ agents you will then need to offer them a co-op commission, which is typically around 2.5% in Chicago but can certainly be more or less than that. The only thing is that I can tell you from experience that some buyers’ agents start acting weird when that number dips below 2.5% so you don’t know what impact that will have on your ability to sell your home through those agents.
I also recommend that you use professional photos on your listing because buyers are making decisions on what properties to see based upon those photos. So you really want killer photos.
You Can Also Get A Full Service Broker With A Discount Commission
At the other end of the spectrum you can actually use a full service broker and just negotiate a lower commission or find one that routinely discounts their commission. The higher the price of your home the lower the commission percentage you should be able to get. For instance, a $1 MM home is definitely more work to sell than a $500,000 home but it’s certainly not twice the work so it’s absurd that you should pay the same commission percentage for both properties.
However, be sure that you understand which side of the transaction the discount is coming from because you really don’t want to be discounting the co-op commission. It doesn’t do you much good to pay 4.5% with the buy side only getting 2%.
Or You Could Hire A Realtor To Sell Your Home On A Fee For Service Basis
Another alternative offered by just a few realtors is a fee for service model. These realtors offer a smorgasbord of services to help you sell your home that you can buy from them at different prices and you just pay for what you get. For someone looking to save money but also looking for professional help where it makes the most sense this might actually be the best option.
But keep in mind that under this model you pay for the services whether or not your home sells. So you would only do this if you were confident that you could sell your home in a reasonable time frame at a price that makes sense for you.
Why Not Just Pay A Realtor By The Hour?
A simple variation of the fee for service model is paying your realtor by the hour (plus expenses) to sell your home. But why would a realtor want to do this and, more importantly, could this really save you money?
Some realtors who normally work on a commission basis are willing to do this because quite often they take on a listing, spend a lot of money marketing that listing, and then never sell the property. Their commissions have to be high enough so that they make enough money on the homes that do sell to compensate them for all the time and money wasted on the homes that don’t sell. If they are rational (and not many are rational) all they should really care about is how much they make per hour. Pay them enough per hour and they should be happy.
Paying a realtor by the hour to sell a home actually freaks out a lot of potential sellers because it’s possible that it could end up costing them more than it would if they paid the realtor a commission. However, if the seller is confident that their home will sell at an acceptable price this should be a cheaper alternative for them because they will not be subsidizing all the sellers that are not committed to selling their home. And, believe it or not, the seller might actually have a better idea than the real estate agent how easy it will be to sell their home since they are the ultimate decision maker in the transaction. Only they know how willing they will be to reduce the price if that’s what it takes and to negotiate with potential buyers.
We’ve sold a few homes this way and in all those cases the sellers ended up paying significantly less than they would have with our normal discounted commission. That is exactly what you would expect because the sellers who choose to pay their realtor by the hour usually know that they are going to be easy to deal with.
The Bottom Line
Once you start comparing selling a home on your own, with all it’s inherent risks, to some of the other low cost alternatives out there for sale by owner may not look so attractive any more.