When it comes to a real estate transaction, both buyers and sellers ultimately have the same goal – a sale. However, buyers and sellers are on opposite sides of the table when it comes to the negotiation and sale.
For example, buyers want a bargain, while sellers want the best possible sale price. Both sides will benefit from hiring a real estate agent to represent their individual interests.
Why You Need a Real Estate Agent in a Seller’s Market
The following are 10 key reasons why you need a real estate agent in a seller’s market:
#1 Maximize Your Return on Investment as a Seller
Real estate agents work on a commission basis and make a percentage of the sale price of the home. While fees are negotiable, typically, as a seller, you pay 6% of the sale price, where 2.4% goes to the buyer’s real estate agent (i.e., buyer’s agent) and 3.6% goes to the seller’s real estate agent (i.e., listing agent).
If you think of the commission percentage as a cost, you may be inclined to consider the For Sale by Owner (FSBO) approach as a cost saving strategy. Instead of paying a realtor, you can save that cost and simply dedicate your time and effort for facilitating the sale. In the end, you have more money in your pocket, right? Historical data illustrates why this is a common fallacy and is usually not the case.
According to a Realtor® 2020 study in a seller’s market, historical market data shows:
FSBOs typically sell for less than the selling price of their home.
The median FSBO sale price is 11.2% lower than the median agent-assisted sale price.
Considering the median home price, is it better to dedicate your time and effort to selling your home for less or to hire an expert who will save you time, energy, and stress and ultimately sell your home for more?
Even if you do not hire a listing agent, you likely cannot avoid the buyer agent’s commission.
If a higher sales price is not convincing enough, consider the additional cost you will incur as a FSBO and subtract that from the likely lower sale price. As FSBO, you will need to pay for property photos, the MLS listing, and the marketing of your property. Furthermore, you may also need to hire an attorney to assist with the paperwork and closing. Instead of paying all these additional costs, these costs would be covered by your listing agent/broker and deducted from their commission instead of your selling price.
#2 Invest in Legal Protection
A real estate transaction is a legal transaction that involves a lot of paperwork. A real estate agent is used to all the paperwork involved in a real estate transaction. They have experience with the multiple documents, know what to look out for, can identify unusual items or loopholes, and make sure the deal is sound. Most importantly, a listing agent knows how to do the paperwork right. Certain omissions or mistakes can incur costs that are more than that commission you were trying to avoid in the first place.
The paperwork needs to be completed accurately. For example, a seller has the legal duty to disclose anything that materially affects the value of the property. Inaccurate seller disclosures can open the seller up to various liabilities including fraud, breach of contract, and/or negligence.
If you, as the seller, fail to disclose a hazard or material defect and the buyer comes back to you after moving in and noticing the problem, the buyer could sue you. As a FSBO, you open yourself up to various liabilities and the possibility of being sued by the buyer. A listing agent has professional errors and omissions insurance to protect themselves and give the buyer recourse to avoid the seller being sued for damages.
Real estate agents have a “fiduciary” responsibility to their clients and are legally obligated to put their clients’ best interests first. Your real estate agent has your back and will protect your interests. Real estate agents must also adhere to a high standard of confidentiality and know what information is reasonable to disclose. A FSBO does not have to adhere to the same level of confidentiality.
#3 Maximize Your Reach to Qualified Buyers
Listing agents often have access to more listing outlets then FSBOs. To maximize your reach to potential buyers, a listing agent can get your property listing in all the right places. Furthermore, the listing agent may know buyers who are eagerly awaiting a property like yours! The more you expand your reach, the greater the demand which in turn makes it more likely you will sell your home quickly and at more desirable price.
From the buyer’s agent perspective, the buyer’s agent is likely to coach their clients on the dangers of FSBO and to proceed with caution without another professional on the other side of the table.
Lastly, a real estate agent will not only protect your time, but also their own. They will qualify buyers who are interested in your house and weed out the curious neighbors/dreamers. Your listing agent will encourage the showings that are most likely to result in an offer on your home.
#4 Protect Your Time & Minimize Stress
A market analysis, setting a sale price, crafting the listing, staging your home, hiring a photographer for photos, setting up the MLS listing, marketing your property, hosting showings and/or open houses, answering buyer questions, getting under contract, facilitating the inspections and tests, and ultimately getting to closing takes a lot of time, effort, and stress. Is it worth taking this on? Could you spend your time better in another way? It is important to evaluate the “opportunity” cost of your time.
Furthermore, everything that goes into marketing and selling your property can be stressful. Understanding legal jargon and the paperwork can be stressful. Accommodating potential buyers phone calls, showings, and requests can be demanding and stressful as well.
#5 Hire an Expert to Avoid Costly Mistakes & Benefit from their Expertise
Real estate agents have a wealth of knowledge and experience to benefit sellers. They know how to best price your home, have access to valuable market data and analysis, monitor real estate trends, know the process and are mindful of read flags, and can make recommendations to enhance the value of your home.
Without a real estate agent’s assistance, FSBO face the challenge of accurately and reasonably determining an asking price, figuring out how to list their home, navigating the real estate paperwork and transaction process, negotiating, and going through the closing process. As a legal transaction, it is often better to be safe than sorry.
When comes to doing things yourself, you always must be cautious because at the end of the day “you don’t know what you don’t know!” What if you have an amazing offer but you didn’t realize the offer was contingent on a specific test? If that test is not done, then the offer will not go through and you may have missed an even better offer. After all, you are not a realtor, how where you suppose to know better?
In another scenario, what if you could increase the value of your home by $10,000 by investing in $2,000 of home improvement projects? Would this be worthwhile? Yes! A ROI of 5x is well worth it! Realtors® know market trends, what buyers want, and are experienced at home valuations. A realtor may be able to recommend specific home improvements to maximize your ROI. Without a Realtor®, you could invest in the wrong projects and/or miss the opportunity to increase the value of your home all together.
#6 Bring a Skilled Negotiator onto Your Team & Ease the Selling Process
Negotiation is one of the most valuable skills a real estate agent can offer you. Real estate agents know how to vet potential buyers to identify qualified offers. They can skillfully work with the buyer’s agent to get an offer that meets your needs. Furthermore, listing agents can provide invaluable advice when negotiating counteroffers. With their experience, they have a toolbox of tried-and-true techniques for negotiation.
Not only will your listing agent handle all the transactional paperwork and read all the fine print, but he/she will also look out for loopholes or unusual requests. If you have multiple offers for consideration, your listing agent can also help you sort through the offers, weigh the pros and cons, and help simplify the decision-making process. Lastly, they will recommend when you should counteroffer versus accept.
#7 Avoid Emotional Mistakes & Take off the Blinders.
We have all made poor decisions when we are emotional. Selling your home is an emotional process. There are many easy mistakes that can be made such as overpricing your home, refusing to counter because you are offended, eagerly taking a low offer to speed up the process, etc. Without an emotional stake in the outcome, a real estate agent can make sound, logical recommendations, and decisions on your behalf.
As the homeowner, you likely have blinders on and do not have a true perception of your home’s flaws. You may love your décor, but others may perceive it as clutter. You may love your kitchen, but others may perceive it as dated. A real estate listing agent knows what makes homes sell and will give you honest, realistic recommendations to showcase your home as its best.
#8 Avoid Rejection & Benefit from Constructive Criticism
If you are the FSBO, you have to face the rejection every time a buyer’s agent tells you that their client is no longer interested. It can be hard to hear some of the feedback. A listing agent can help you avoid the rejection and associated negative feelings. Additionally, a listing agent will have help you discover “constructive feedback.”
#9 Make Potential Buyers Comfortable
When touring a home, the seller should not be present. The current owner’s presence tends to make potential buyers uncomfortable and/or hesitant when asking the necessary but hard questions. If you are a FSBO, who else is going to show your house? If you are a FSBO, you may realize buyers are rushing through the house.
#10 Avoid the Hassles
Real estate is a 24/7 business. Are you prepared to answer your phone every time it rings? Rush home for a showing every time there is an interested buyer? Can you qualify the buyer? Are you prepared to add-on all the marketing and transactional duties to your daily routine? If you do not answer yes to all of these questions, you want to hire a real estate agent to shield you from these hassles and take care of them for you.
When it comes to deciding between FSBO versus hiring a listing agent, the benefits of hiring a real estate agent far outweigh the minor commission fee.
When you hire a real estate agent, you are ultimately choosing to:
Maximizing your ROI as seller.
Invest in legal protection.
Maximize your reach to qualified buyers.
Protect your time and minimize stress.
Hire an expert to avoid costly mistakes and benefit from real estate expertise
Bring a skilled negotiator onto your team & ease the selling process.
Avoid emotional mistakes & take off the blinders.
Avoid rejection & benefit from constructive criticism.
Make potential buyers comfortable.
Avoid the hassles.