It’s possible that we may have paid too much, but we live in our desired neighborhood, close to parks and city center in a property we love. At 80, we have seen and heard of many incompetent or inept agents who are not good with details.
Our take: When it comes to buying and selling real estate, there are sellers who can — and do — sell their homes on their own, without using an agent or attorney. There are also home buyers who purchase homes on their own without the aid of a real estate agent or attorney. In fact, an entire industry has emerged that buys homes directly from sellers and turns around and sells them to buyers unrepresented by agents. These enterprises are referred to as iBuyer companies.
Homeowners who sell on their own are frequently referred to as FSBO sellers (the acronym stands for “For Sale By Owner”). These sellers advertise the homes themselves, pay whatever fees might be out there to list their homes in the multiple listing services (if they choose to do that), show their homes and handle whatever paperwork they need on their own.
The one thing they don’t do is pay a full commission to sell their home. They may pay a commission to the broker who brings them a buyer or a fee to list their home in a multiple listing service, but if the buyers find the seller on their own, no commissions are paid. The savings are potentially huge, since the cost for a full-service agent is typically 4 percent to 6 percent of the sales price, a cost normally paid by the seller (although not always).
On the buy side, the Internet allows buyers to search online for homes anywhere in the world, but buyers regularly drive by FSBO signs in neighborhoods they’re exploring.
Most real estate closings have one real estate agent representing the seller and one representing the buyer. In some cases, the same agent may represent both sides (which is often referred to as dual agency, transactional agency or non-agency, and we’ve written extensively about what sort of representation a buyer or seller can expect in that situation).
The number of FSBO closings varies from time to time. According to the National Association of Realtors (NAR) 2020 Profile of Home Buyers and Sellers, a report distributed to NAR members and available to the public for purchase, FSBOs accounted for 8 percent of home sales in 2020 (that number was 15 percent in 1981) with a median home price of $217,900. According to the Realtors, FSBO homes sell for less than agent-represented homes.
The Realtors also say that 85 percent of homes are sold with the help of agents, which leaves 7 percent of no-agent sellers unaccounted for, assuming that the 8 percent of sales attributed to FSBOs is correct.
As we have often said, if you can sell by owner, why wouldn’t you? We’ve sold property by owner over the years and enjoyed saving on the commission. Sure, you’ll save the commission, and some sellers feel they know their home better than any agent ever could, so they’ll do a better job of showing the property. You seem to fall into this category and have ventured into the real estate world without working with real estate agents or real estate attorneys. Good for you.
But many buyers and sellers run into problems when trying to buy or sell on their own. Buyers often pay too much for properties because they don’t have access to all of the information that’s available to buyers through their agents (who presumably have worked in the business for a long time and have a good sense of neighborhood valuation).
You mentioned in your letter that you may have paid too much on your home purchase. One mistake some home buyers make is not knowing the real estate market well enough to make an informed decision on the value of a home. Frequently, real estate agents and real estate attorneys are there to help buyers and sellers avoid costly errors in the home-buying and selling process.
Sellers who sell by owner often misprice their home. They price it too high or too low because they don’t understand enough about how their home compares to others that are currently for sale or have recently sold. You can learn only so much from an online listing (or even a 3-D walk-through or video) of a property.
While there are bad real estate agents and bad real estate attorneys out there, we have found that most agents and attorneys work hard to serve their clients. There is no law that requires home buyers or home sellers to use agents or attorneys, but faced with making the single largest purchase that most people will make in their lives, most home buyers and sellers elect to use real estate agents. In those parts of the country where real estate attorneys represent buyers and sellers, most home buyers and sellers choose to work with attorneys.
We’re delighted it worked out for you. But as long as real estate agents and real estate attorneys can bring some value to the transactions, they’ll continue to be a part of most real estate transactions.
Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact them through her website, ThinkGlink.com.
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