Sellers who use a realtor make more money

Before I was a Realtor, I was a "realtor-wannabe." I was always the one volunteering to help friends (and sometimes total strangers) look for a new home. When somebody new moved into town, I was the "chamber of commerce" -- giving them tours, showing them neighborhoods, talking through their housing options. I loved doing that, and it's one of the reasons I hung up my "amateur" standing and became a professional Realtor.

But one time I took it too far. I tried to sell my own home as a "for sale by owner" (FSBO). "Why not?" I thought. "It's a hot market, I don't need help finding a buyer. And I could put all of that extra money in my pocket."

Famous last words.

It WAS a hot market, so it only took a couple of open houses and I had a buyer. Buyer didn't have an agent either. It was just the two of us -- the blind leading the blind. One of us (I don't remember which) found a contract template at an office supply store, we wrote it up, and we were good to go.

Or so we thought.

I got a call from the title company a few weeks later. Any conversation that starts "Gee, I'm glad I'm not you," can't possibly end well.

The house hadn't appraised for the agreed-upon sales price. The buyer was freaking out. I had no idea whether or not I had to let her out of the deal, or if I could force her to buy it anyway. I didn't think my templated contract had given her an "out" for appraisal. I called an attorney, who told me I didn't have a leg to stand on. She walked -- no, ran -- and I called a Realtor.

Looking back on that episode from the perspective of all of the real estate training I've had since, I see that the transaction would have been doomed 19 different ways even if the property had appraised. She wasn't planning on an inspection. I had never had it inspected, so I had no idea what lurked behind the walls. I had no familiarity with the various disclosures required by state law.

It was a lawsuit waiting to happen.

Believe me when I say that I understand the temptation to try to save that 3.2% of the purchase price. It's a lot of money to any homeowner -- it was a lot of money to me then, and it's still a lot of money to me now.

But what I've learned is that the math isn't so straightforward in a home sale. At the end of the day, someone who sells by owner probably doesn't wind up with an extra 3.2% in their pocket. In fact, the best statistics I've seen show that it's the sellers who use an agent who wind up pocketing more money -- a lot more money. According to National Association of Realtors' Profile of Home Buyers and Sellers for 2006, FSBO homes sold for an average of 36% less than homes sold with a real estate agent. That's thirty six percent. Not three point six percent. Thirty six. Over one third.

It makes sense to me. Realtors know how to prepare a home for sale. They know how to market it. They know how to position it to maximize the sales price (without, mind you, pricing it so high that it won't appraise and the buyer runs off like a scared bunny.) And, most important, they know the ins and outs of the sometimes very complex laws and paperwork and disclosures, so that a post-closing lawsuit doesn't sap whatever profit may have come from the sale.

Another factor: when buyers see a FSBO, they immediately start doing math in their heads. "Let's see, if they're not paying an agent, then I'm knocking 3.2% off my offer price." And if they're not coming in with a buyer's agent, you can bet that another 2.8% is going to come off the offer as well.

I can't guarantee that any one home is going to sell for 36% more with an agent than it would as a FSBO. But I'm pretty danged sure that the difference is going to be enough to make it well worth your while to hire a real estate professional.