By Owner Frequently Asked Questions
Why do people attempt to sell their own house “by owner”?
- Is it because they enjoy having to be at their home every evening, every weekend, and every holiday until it sells? NO!
- Is it because they enjoy making promotional flyers and running ads in newspapers and home buyer magazines? NO!
- Is it because they enjoy showing their home to a parade of nosey neighbors and people who are not qualified to purchase the home because they don’t want to risk the possibility of losing a sale? NO!
- Is it because they like pretending to be a lawyer, or else hiring a lawyer to draw the “Purchase and Sale Agreement”, the typical (and special) addenda, negotiate on their behalf to ensure they are not taken advantage of? NO!
There is really only one reason why anyone would sell his or her own home — to save the cost of brokerage!
While that is certainly a valid reason, according to the NAR (National Association of Realtors), nationally, over 90% of by owner home sellers eventually list their property with a real estate agent! Why do most by owner home sellers eventually give up and list with a REALTOR? There are only two things that sell a house: price and traffic.
A “by owner” home seller does not have access to the majority of motivated and qualified buyers, because those buyers are typically working with real estate agents! That means that “real” traffic will be low. In the event that a buyer that is working with a real estate agent wants to look at a by owner property, and since agents are paid strictly by commissions, nearly all agents will negotiate a fee with the seller (commonly known as a “co-op” fee) for selling the home, or they will not show the property. Even if the buyer’s agent has an exclusive agency agreement with the buyer to pay their commission, the buyer will attempt to recover their commission costs in the offer to purchase, either as a price reduction, or as seller concessions, such as having the seller pay some of the buyer’s closing costs. In other words, the seller still pays for a significant percentage of the brokerage!
Who pockets the savings?
Some buyers do look at by owner homes without using an agent. Why? They think that they will also save the cost of brokerage. Those buyers assume that since the seller is avoiding brokerage costs, that money is available to them as a discount. If it isn’t, then they have no reason to buy the home. In other words, much of the savings is passed along to the buyer and not realized by the seller.
Home Sale Timing Concerns
In the Denver real estate market, in the current market conditions, the time a home is on the market under normal circumstances using a broker to sell the home is around 45-90 days for a properly priced home in good condition, and 90-160 days and longer for homes in poor condition or at the high end of the price scale. If you add to that the additional time required when the majority of qualified buyers are unaware of the home, or if the home is not properly priced to begin with, the typical “DOM” (days on market) would be much greater. Another concern we often see is when valuable marketing time is forever lost because a contract falls through due to buyers not being properly qualified, and the home returns to the market after being off the market during the interim. In fact, this is often when we have by owner sellers approach us — after the home has already been on the market for a long time and they have been unsuccessful, or after they have had one or two contracts “fall through”.
Buying a New Home
In today’s fast paced real estate market, sellers, including new home builders, have little incentive or tolerance for a contingency that your current home sell and close. In fact, most sellers will, at a minimum, require that your home be listed with a reputable broker. Further, they prefer that it already be under contract with a buyer before they will accept an offer to purchase their home that includes such a contingency. We know of some home builders that will cancel a new home sale contract if such a contingency exists and the home is not at least under contract by the time the framing inspection is due.
So, I have told you why to list your home and not sell it yourself. Even so, why should you allow me to market your home as opposed to “Uncle Joe, the real estate agent”?