Sell Your House Yourself

Save Thousands of dollars

Why Real Estate Agents Are So Expensive?

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Happy real estate agent about to get paid.
Expensive real estate agent about to get paid

You have to wonder why real estate agents are so expensive. Why it cost you so much money when you hire one to sell your house. Why do people still hire real estate agents to sell a house when there are so many other less expensive ways. The real estate industry says it’s relationships. Many people don’t realize there are options. Some sellers just don’t want to deal with the “hassle”.

Let’s take a look at why real estate agents are so expensive.

Listing Agent

First let’s break down what an agent does on the listing side, that is, when they sell your house for you. A listing agent.

  • A real estate agent helps you determine the right price for your house. The most important factor in selling your house. If a house doesn’t sell it’s overpriced and everything is relative to price including location, condition and features.
  • An agent will most of the time show you what can be done to your home to get it ready for market. Good agents will wait until your home is ready before they list it. Desperate agents want to get a sign in the yard ASAP because they need money. Hire a good agent. Get more money.
  • When a house is ready the listing agent puts it on the market. The agent lists the house in the multiple listing service. This is where other real estate agents can see it. That also means putting the property on the internet where everyone else can see it. Smart agents feature your property on sites like Zillow and Trulia which you can easily do yourself.
  • When you get an offer on your house the agent is there to act as the middleman. They’ll pass information back and forth between you and your buyer or what they call “negotiating”. Having an agent to help you negotiate is handy. Especially if you don’t want to meet your buyer or talk to them directly…for whatever reason.
  • Where agents are most useful is facilitating all of the transnational details such as inspections, appraisals and paperwork.
  • At closing your agent will sometimes give you a cheap gift to show their appreciation for all the money you just gave them.

The advice new agents always get is to concentrate on being a “listing agent”. Being a listing agent involves a lot less actual work than a buyers, or selling, agent. The listing agent has a 1-2 hour meeting with a client then puts the house on the market and waits for an offer.

Selling Agent

The selling agent, often referred to as the buyers agent, helps buyers find a home. Let’s go over what a buyers agent does.

  • The buyers agent helps a buyer find a home. Considering most buyers find their home themselves online buyers agents mostly just open doors. Sometimes that can be a lot of doors. The average buyer looks at 10 homes according to realtor.com. Sometimes it’s less and sometimes it’s considerably more.
  • When a buyer finds a home the agent helps formulate an offer. By looking at past sales the agent can determine fair value. An offer takes into consideration the condition of the property and any updating that’s been done to the house..
  • The buyers agent submits the offer. The sellers agent then shows the offer to their client.
  • When the offer finally gets accepted the agent then guides the client through the remainder of the process. That includes any inspections the buyer wants to do. There are transactional details and paperwork on the buyers side too.

Where Does All The Money Go?

Expense to sell a house

The money or commission in a real estate transaction all goes to the listing agents broker. The listing broker then pays the listing agent and the selling agents broker who then pays the selling agent. You are actually paying for your buyers agent. It would be like paying for your opponents lawyer in court. It’s done this way because this is the way it’s always been done. A buyer would likely not pay for an agent on their own.

But it’s not just the real estate brokerages and their agents anymore.

With the internet a crop of entrepreneurs have sprung that have figured out a way to put themselves between the broker/agent and the client. They do this by running ads on the internet offering real estate services. When a consumer responds to an ad the company puts them in touch with an agent. That agent then gets charged a referral fee of 25% – 40% of the commission.

So that’s a middle man to the middleman and yet another expense.

It’s not just the middlemen either. Competition in real estate is fierce. For instance in my area of close to 600,000 inhabitants there are about 2500 real estate agents and only 1800 homes for sale. All those agents have to hunt up business. There are a multitude of companies, some reputable but not many, that offer real estate agents easy ways to get business…for a substantial fee.

As I can attest to real estate association fees have risen dramatically over the past several years. Association fees are paid at the local level, the state level and the national level.

Real estate is a huge business with a lot of hands being held out that need to be paid.

That’s one reason why real estate agents are so expensive. While the job of selling real estate may have become easier the money involved is spread around more than ever. Many people and organizations want, and get, a piece of that action.

Selling Real Estate Got Easier

A long time ago, in an age before the internet, if you wanted to sell or buy a house you had to have a real estate agent. The real estate industry owned all the information about the housing markets. They held it close. These days all that valuable information is online, free and available to all.

Marketing a home was not so easy. Homes for sale were put in books the real estate brokerages owned. Consumers had to hire an agent in order to see those books full of listings. If you wanted to see a house you needed an agent to set up a showing for you.

Now an agent sells homes through the internet. A house is listed on sites like Zillow and home shoppers find them. many of the online real estate portals don’t charge anything to advertise a house. List it and forget it until an offer comes in.

There was a time whenever a signature was needed the agent and client had to meet together. get in a car and drive to a meeting place. it was time consuming. Companies like docusign and authentisign have put a stop to all that driving around. Now signatures can be obtained never leaving your desk. Another way agents save a lot of time.

Everything that an agent does has become easier and less time consuming.

So why are real estate agents so expensive? It seems they have less work to do with all the technology available now. Consumers are finding homes themselves online. Information is free. Listing a home is incredibly easy when compared to 30 years ago.

Real estate agents are still able to make so much money because people are willing to pay it. When people think about selling a house the first thing they think of is hiring an agent. it’s just natural. The $18,000 fee to sell a $300,000 house doesn’t, in most cases, even raise an eyebrow.

Sell Your House Yourself

When more home sellers start figuring how easy it really is to sell a house the real estate industry will have to take notice and start making some changes. Fees will have to become more realistic if brokers want to stay in business.

Until that time home sellers will continue to pay agents a good portion of their profits and agents will continue to take it.

Except the savvy home sellers who figure out how to do it on their own.

How To Sell Your House Yourself

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Do you know how to sell your house yourself? Have you ever considered it?

for sale by owner real estate sign and beautiful house.

When you think of selling your home what’s the first thing that comes to mind? For most it’s where to find a realtor. How do I find the right Realtor? Many will go to their friends for referrals. Some will google and end up with a service that promises to find them the “best” Realtor.

The truth of the matter is the first thought should be can I do this myself? If you don’t think so then by all means you should hire a Realtor, but think about that commission. It might be worth learning how to do it yourself.

It’s really not that difficult. With some instruction it’s very possible. I’ve taught many new agents the art of listing and selling a home. Brand new agents with no more experience than you have. So why not pay yourself instead of an agent.

Take the money you save and put it down on your next house to lower the mortgage payments. Maybe you can finally afford that vacation you’ve been dreaming about. Or buy a new car. It’s your money. You should keep it.

The Basics

Here’s basically what you need to know to sell your house yourself and save thousands of dollars:

Price your house right!

Many for sale by owners (FSBO) fail and realtors love to point that fact out. The only reason a house doesn’t sell is because of price and everything is relative to price. Homes in the neighborhood may be selling in a certain price range and you think that’s what your’s should sell for. That may be the case but a few things to consider;

  • Is your home the same size? If the neighbors house is 2400 sq ft and yours is 1900 sq ft the neighbors house will be more.
  • Is your house in similar or better condition? The condition of a house factors into price.
  • Does your house need updating? If a home is stuck in the 80’s it will have an effect on price.

You can use the online real estate portals such as Zillow to find comparables when pricing your house.

Realtors that stalk FSBO’s that have been on the market awhile know that the price is to high and they have a strategy. When meeting with the seller they’ll brag about their record, go over marketing plans and convince you they can sell it knowing full well in a couple weeks they’ll be asking you for a price reduction. And you’ll agree. I’ve seen it happen time and again. Now you’re selling the house for what it should have been to begin with but you’re stuck paying those expensive real estate commissions.

Get Your House In Order.

Yes, clean your house. Upside down and inside out. Clean is a big deal when getting your house ready to sell.

Do an inventory of what needs to be repaired, improved upon or replaced. Consider;

  • Painting inside and out where needed.
  • Clean windows inside and out.
  • Insure the roof is in good condition.
  • Test all electrical, plumbing and appliances. repair or replace as needed.
  • Declutter by renting a POD or storage unit.
  • Powerwash the front porch area. Entire house if it needs it.
  • Mow often and maintain landscaping.
  • Clean or replace carpeting if needed.

It has been my experience that home buyers are always on the lookout for what’s wrong with a house, looking for negotiating points. If the carpet needs cleaning to a buyer that’s $5000 for new carpet. In reality it may cost $300 to have it cleaned. A dripping faucet means the plumbing needs to be replaced when the faucet just needs a new washer. You get the picture.

Remember, buyers want to move in and start living. They’ll look for a house that will let them do that.

Marketing Your Home

In this day of the internet, marketing your home is really quite simple. That’s the big difference between pre internet real estate and real estate now. Before the internet, and sites like Zillow, the real estate industry held all the information. You needed a real estate agent to market your home. A real estate agent was also needed to research and visit homes.

Not anymore. Now consumers have all that information at their fingertips.

To effectively market your FSBO;

  1. Put a for sale sign in your yard. You want all your neighbors to know there is a house for sale in the area.

2. Advertise your house online everywhere you can. This can mostly be done for free. Sites like Zillow posts FSBO’s. Craigslist is another popular place that home buyers search.

3. Host an open house. It’s best to hold your house open on the weekend. Find out when realtors do it your area. Start advertising in the online real estate portals where you listed at least a full week before the event.

Sell It

So now that you have priced your home right and prepared it for market your ready to start showing. Potential buyers will call you and ask to see it. If you’ve done everything right someone, or several someones, will make an offer.

A full price cash offer with no concessions is the best. If you don’t get that perfect offer right away but a lesser one you can counter offer. This will go on until you come to an agreement and then you put it in writing.

Ask your potential buyer for a pre approval letter from his/her lender. You’ll want to make sure it is a reputable bank or mortgage company. If you have any doubts research the firm and it’s OK to call.

Every state has a different contract and different rules and disclosures. There are also federal disclosures. You can find paperwork for your real estate transaction online. Search for it. Many title companies have contracts you can use. Make sure you do your research and have all the paperwork in order. Make sure everything is included in the contract. Any concessions or contingencies, such as inspections or paid closing costs, must be included.

It may be that you get get a low offer. What we call a lowball. If that happens do not get emotional. Keep your cool and either say no thank you or give a counter. Some buyers will test the water by making a low offer. They may very well be willing to pay what you want but you’ll never know if you you don’t give them a chance.

Closing

Arrange who will be handling the closing ahead of time be it an attorney or a tile company. This can also be a valuable source of information throughout the process. Keep the closing agent in the loop while you’re in contract.

Once you have a contract most of the hard work is done. The buyers lender and the title agent do most of the work from here on. Just be ready to answer any questions or provide any requested documents.

That’s It

It’s not always easy and sometimes there are complications but that happens with or without a real estate agent. The money you’ll save is well worth the effort.

High Fees and Costs Are Hurting The Housing Market

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The housing market is very low on inventory all across the country. While there are still plenty of buyers looking for homes the housing market itself is slowing. More people, especially millennial’s, are forgoing home ownership for now. Part of that is because of high fees and costs that are hurting the housing market. Some of that decline is simply because of the inventory. There are not enough homes to go around. Some of that decline is due to the high cost of buying a home.

According to Investopedia Millennial’s aren’t buying homes at the rate of previous generations. Millennial’s compose the largest segment of the U.S. population, nearly one forth, and if they’re not buying homes that could create a problem for the housing market.

Affordability is a big issue. There has been a considerable rise in housing prices the last few years. That increase has put home ownership out of reach for many when you include the high cost of buying and selling a house.

Transaction Fees When Selling A House

The Cost of Selling a House with a real Estate agent can be expensive. If a brokerage charges 6% of the contract price when listing a home that is a substantial cut into profits for the home seller. For example for a $250,000 price tag the home seller loses a full $15000.

Think of what you could do with $15000.

Some potential home sellers simply can’t afford to sell their house. People are staying put for longer periods of time which means less people selling and moving. Many homeowners would like to move up, or downsize or move to a different area. High transaction fees often prevent that from happening.

Closing Costs When Buying A House

High Fees and Costs Are Hurting The Housing Market through the buyer too. Closing costs and prepaid are expensive and the responsibility of the buyer to pay. These costs cannot be rolled into the financing and have to be paid out of pocket.

After saving for a down-payment a buyer also needs to have thousands more on top of that to cover closing costs and prepaids.

What are closing costs? Closing costs are all of the banks and government fees and taxes. Closing costs can include, but not limited to:

  • Loan origination fee
  • credit report
  • Appraisal fee
  • Title insurance
  • Closing fee paid to closer company. Could be a title company or a bank.
  • Recording fees
  • Underwriting fee
  • Food certification

Prepaids are taxes and insurance. A mortgage payment consist of principle & interest (the money you borrow and what you pay the bank to do so) taxes and insurance. When a real estate transaction closes there is a certain amount of money that needs to be escrowed for those taxes and insurance. That comes out of the buyers pocket.

All Together

All together the radical increase in housing prices the last few years, the shortage of inventory and the high fees and costs are hurting the housing market. The American Dream of home-ownership seems to be slipping from the grasp of a lot of Americans.

You as a home seller have the power to help fix that. One solution to this national problem is for home sellers to forego the huge transaction costs, real estate commissions, and sell their homes themselves.

Why You Should Sell Your House Yourself

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It’s pretty obvious why you should sell your house yourself. To save lots of money! A really lot! And who doesn’t want to do that?

The real question is why don’t more people do it? It used to be, before the internet, remember waaaayyyy back then, you really did need a real estate agent to help you. Mostly because there was no way to market your house other than the classifieds in the newspaper. Again, remember those? Newspapers?

It required a real estate agent to post your “listing” in the real estate books that only other real estate agents had access to. So you would you need to list your home with an agent so they could show it to other agents who would show to their client. Did you follow that?

The only way to get your house shown was to hire an agent to show it to other agents. The real estate industry held all the information so they held all of the control.

Why You Can Sell Your Home Yourself

And then came Zillow. There were other sites before but Zillow was the 800 pound gorilla that changed everything. Zillow and other modern websites post online all the information that used to be held close by the real estate industry. Today all that information is available for free to the public.

That’s where the buyers are. Their online looking at homes for sale. They can see what the home sold for in the past. They can see what the real value is. They can see pictures and descriptions. They can contact the homes owner directly when a for sale by owner.

Many of these buyers have their own agents but the point is your house can be found. You really don’t need to pay someone to list it for you.

So do it yourself and save thousands of dollars.

That’s why you should sell your house yourself.

Why a Pre-Inspection is a Good Idea

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When I list homes for people they often ask me about the inspection process. I always tell them why pre-inspection is a good idea.

Picture of home inspector standing in front of house inspecting.
Home inspector in front of a house

Most real estate contracts include a clause making the contract contingent on home inspections. Contingent is defined as “occurring or existing only if (certain circumstances) are the case; dependent on”. The buyer has the right to have the home inspected. When major problems are uncovered during inspections there’s a good possibility a contract can fall apart. Every state has different contracts.

For instance in Kansas, as well as most other states, after the inspection the buyer can ask the seller to do repairs. Most contracts are specific as to serious defects. This prevents buyers asking for frivolous or cosmetic repairs. If the buyer and seller can’t come to an agreement on those requested repairs the buyer can terminate the contract and have his earnest money returned.

That’s why having a pre-inspection is a good idea. Having an inspection before you put your house up for sale can head off any potential problems.

When a buyer asks for repairs often they ask for their own contractors or for licensed contractors to do simple jobs. Simple jobs you could easily do yourself. Repairing defects before the home goes up for sale can save money.

Sometimes selling your house “as is” in a strong sellers market is a good idea. That way no surprises and no stress over inspections. If you have already had a pre-inspection you’ll know what to expect. If you have completed repairs before putting the house on the market you’ll have a smother transaction.

The inspection process is where I notice the most stress from sellers. It can get very emotional when repair requests are submitted. personally i dislike the process. I’ve seen deals fall apart over pure pride.

Getting Something

Sometimes buyers, or their agents, will use the inspection process to get something. I’ve had them give a list of repairs and then actually demand money in lieu of or in place of doing the repairs. The repairs are often minor defects sometimes not even real defects at all.

The deal could be held hostage by a buyer, or their agent, threatening to back out if their demands are not met. Yes, it sounds like a crappy thing to do, but it happens.

Buyers could have the mentality that they “want” something in return for the money they spent on the inspector. Even if the house is in perfect condition they may want something done to make themselves feel better.

This is what you avoid by doing a pre-inspection. Know the condition of your house. Take care of any problems before you put it up for sale.

Make it a smooth transaction.

Joel