We Paid $4,585 Too Much to Sell Our House. Here's Why
Realtor or No Realtor?
I have always thought a Realtor was a necessity when selling your home. I have a job and a family, and I run a business, so my time is finite. Since our home was in such a depressed area, there wasn't too much between what we could sell the house for and what we needed to pay it off completely.
Before I handed off the process, I researched selling our home on our own. A FSBO (for sale by owner) would leave the research, pricing, listing and paperwork to us. That would take significant time and a learning curve.
A third, often-overlooked option is a flat-fee real estate agency, which provides you with a sign, lists your house on MLS and takes care of the paperwork. In my area, three companies provide this service for close to $1,000. You do the marketing -- and everything else.
We decided to use a Realtor, to save our time and energy.
The Cost Breakdown
After interviewing Realtors who knew our area and have recently sold homes, we realized the sale would come with a 5 percent to 6 percent commission. This would be $8,250 to $9,900, since our home was valued at $165,000. Since we were selling our home and buying another, we were able to talk a few Realtors into reducing their commission.
We picked our Realtor from a large company and agreed on a 4.5 percent commission. Once we signed the paperwork, I figured we would be able to focus on finding another house and leave the sale to our Realtor. I was wrong.
What Happens When You Become the Realtor
To make our home stand out from the crowd, we cleaned and staged it. These are things everyone should do no matter how they sell their home. Great first impressions are vital for turning house hunters into buyers.
I researched comparable homes nearby on sites like Zillow (Z), Realtor.com and Movoto. Within two hours, I knew what we could list our house for. We lived in a cookie-cutter neighborhood; the homes only had three or four floor plans. Many houses were on the market, so I had plenty of data points. At our first meeting, our Realtor suggested what she thought ours would go for, and her number was close to mine.
But we disagreed on the listing price. My initial thought was to list the house at $166,900. My goal was to get $162,000 after negotiations. Our Realtor thought we should begin near $171,000, but I knew that was too high. We hadn't even paid that much for the house, and the post-crash values in our area just didn't support that number. Houses on bigger lots and with more square footage were selling for that price -- but only after being on the market for an average of eight months.
Once we placed the house on the market, we realized it was priced right at $166,900. We had good foot traffic and positive responses. My Realtor's effort consisted of little more than putting the house on MLS: The Internet did the rest. After a week, we were under contract. For our area, we sold the home quickly. The problem was the Realtor didn't really earn the commission. The Internet did most of the work, followed by our elbow grease to get the home ready.
Our buyers needed a lot of hand-holding, and for some reason, that work fell to me. My Realtor would reach out to me with questions and concerns, and I had to babysit the process. Forgotten paperwork, last-minute changes and inspection repair lists -- these were all issues you might have expected my Realtor to have handled. Instead, she was focused on other clients. (If you want to make money, you need many clients.) Her lack of attention continued all the way through closing -- and it ended up on me to make sure the closing went through.
I spent nearly 65 hours over three months pushing this process along. Based on my business hourly rate of $35, I lost $2,275 of income I could have earned from jobs I turned down, while doing what a Realtor is supposed to do for their client.
We Could Have Saved $4,585
Based on our selling price of $163,000, we owed our Realtor a $7,335 commission. Add in the $2,275 worth of business income I lost by passing up jobs, and the total real cost to sell our home was $9,610. In retrospect, it's clear we'd have been better off paying $1,000 to a flat-fee real estate company. I would have had the same $2,275 in lost business income, and we would have saved $6,335. Since buyers agents won't show your home unless you pony up a commission to them, I would've had to throw in the same amount as my Realtor did -- $1,750. That would have brought our total savings to $4,585.
The technology for home buying and selling is much better than it used to be. Today's sellers and buyers only need help when it comes to paperwork and the legal aspects. I'm not advocating that everyone who's selling a home do it on their own. But the wise choice would be to look at all the available options and pick the one that's best for you.
Grayson Bell is the founder of Debt Roundup, a personal finance site with topics ranging from fighting debt to growing wealth. When he isn't busy working, running a business and enjoying time with his family, he writes product and service reviews at Empowered Shopper.