If you’ve ever sold a home you’ve probably heard the statistic that sellers who hire a full service Realtor net more money for their home than selling the property themselves. We know that the lack of transparency from ibuyer platforms means netting less from companies like OfferPad and OpenDoor – that’s an easy calculation, but one we will reserve for another post on another day. Here we’re talking about FSBO’s (for sale by owner), or limited representation agents (Pay me XX, and I’ll list your home in the MLS and you do all the rest). While an in depth search will result in a lot of confusing and conflicting data about the costs of using a Realtor vs the cost of selling yourself, I can share two recent examples where I was witness to how a seller leaves money on the table when self-representing.
In both cases, I represented the buyer and here’s what I noticed: First, both homes had been on the market for quite a while, unusual in a market with historically low inventory and high buyer demand. Sellers on both properties had reduced the price considerably from their initial over-market price. That cost them both time and money. A longer period of showings and several additional months of mortgage payments often result when pricing does not reflect the current market conditions.
The real cost of self-representation showed up in the negotiations and handling the paperwork required to move the transaction along. On the first one, we wrote up the offer for what we believed to be fair terms and conditions. The seller reviewed the offer himself, and called me for advice on countering. That is something I, as a buyers representative cannot do. Advice can only come from the broker representing the party seeking that advice. The seller ended up accepting our offer. Good for us! When the estimated settlement statement came out, he was enraged (and called to let me know it) that he was netting less than he thought, believing that he was somehow tricked into accepting an offer that didn’t meet his needs. The fact was, that he didn’t know how to run a net sheet, or understand the seller paid closing costs that would reduce his net from the agreed upon purchase price. He wanted the blame to rest with me for not explaining it. It was not my job to help him understand the key variables in assessing the merits of an offer. In fact, I couldn’t have gone down that road with him even if I wanted to. My fiduciary duty is to my client. While I always do everything I can to treat all parties fairly, I can’t fix the inexperience of a seller representing himself when I’m representing the buyer. These are the pitfalls which result in a seller leaving money on the table when self representing.
The other case involved the sellers lack of understanding in how to read the contract and write an effective counter offer. The home was on the market for several months, the price reduced several times. We submitted an offer that was fair based upon the comps in the area. We asked for seller concessions (closing cost assistance the seller provides to the buyer), a home warranty plan paid for by the seller, and the use of our title company. The verbal discussions went back and forth until we received an email from the seller spelling out terms we could agree to. Rather than write a counter offer, the seller asked that I send in a new offer with the new terms. Using the email that HE SENT with the new terms, a new offer was sent that he accepted. Shortly after we went under contract, he called to ask me why he was paying for a home warranty plan and why we were using our title company. He forgot to address those items in the email, so he was stuck with those terms. Another example of how a seller leaves money on the table when self-representing.
I don’t go into negotiations with a win/lose attitude. The best outcome for both buyer and seller is when each party thinks they are being dealt with fairly. However if a seller insists on representing him or herself, as the old saying goes, he (or she) has a fool for a client. If you do choose to represent yourself or hire a limited service agent to just post the property in the MLS, don’t expect the buyers agent to work for both you and the buyer. The buyers agent is bound by its fiduciary duty to their client, unless there is a dual representation agreement.