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For Sale By OwnerSometimes when homeowners hear about a seller's market, they get excited about the prospect of making big money by selling their home. After interviewing some real estate agents, some or all of that excitement tends to abate once they learn that the vast majority of sellers pay the total commission, reducing the net proceeds after the completed sale. That usually leads to a little research that reveals you don't legally need to be represented in the sale of your home. When someone sells their home without the assistance of a real estate agent, the property is referred to as For Sale By Owner, or FSBO (pronounced FIZ-bo). Initially, the notion of saving thousands to tens of thousands of dollars seems savvy and practical, but there are some not-so-well-known facts about selling your home DIY:

  • Statistics show that FSBOs are successful at selling about 14 percent of the time. Of that group, 7 percent knew whom they were selling their homes to ahead of time (friend, relative, neighbor, etc.) That means that true FSBOs are only successful about 7 percent of the time.
  • Seventy-one percent of all real estate litigation is a result of one party not being represented in the transaction. This is the classic FSBO, because the buyer has an agent protecting their best interest while the seller does not. In fact FSBOs gets sued more than any other group in real estate.
  • There are not less than 100 to 150 pages of documents and at least two dozen forms involved in the real estate transaction. The FSBO needs to be intimately familiar with each page. If they are not familiar with each form, I would never recommend signing a legal and binding document.
  • You are probably not a marketing expert and good marketing can attract a bidding war. A real estate agent at the top of his or her profession will know exactly how to market your home effectively.
  • According to the National Association of REALTORS®, a real estate professional can get the seller a 10 percent to 13 percent higher price for their home than consumers trying to sell by themselves. Since REALTORS® typically only charge 6 percent, it sounds like the average consumer makes 4 percent to 7 percent or more on their home sale, if they list it with a REALTOR®.
  • Most buyers looking for a home employ the services of a real estate agent because their representation is essentially free to the buyer. As mentioned earlier, the selling party is responsible for paying the entire commission in the vast majority of real estate transactions. Some buyer's agents may discount their commission to help out their client and the homeowner, but the homeowner will still be on the hook for at least a partial commission.

In the long run, working with a real estate agent can actually save you money, especially if litigation were to ensue after the sale if the homeowner wasn't absolutely diligent while working within that state's real estate laws. The real estate profession isn't as specialized as say, a surgeon, but continuing education is mandatory and there is a litany of ever-changing, fine details that could create devastating consequences if overlooked. So, just as I would advise against performing surgery on yourself to save a couple bucks, I would also advise against trying to navigate your way through one of the most significant financial transactions of a lifetime without the guidance of a real estate agent.