Selling Without a Real Estate Agent? New Incentives, New Challenges

You might have heard that selling your home yourself could save you thousands of dollars in agent commissions. It’s a fact. Putting your home up For Sale By Owner (FSBO) is one way to get around agent commissions — which do still exist!

Yet there are hurdles as well as potential rewards for the FSBO seller. Risks and savings are different now, because the real estate world has changed so much this year.

Let’s do a walk-through.

Agent Commissions Still Exist

Last year, a Missouri jury determined that brokerages and agent groups were colluding to protect their long-held commission structure. The lawsuit highlighted a not-so-secret practice: agents could steer their buyers clear of homes that weren’t listed for an agreed-upon 5 or 6% commission.

The time was ripe for pushback. Technological factors added to the pressure against the agent groups. Today’s buyers are familiar with real estate sites and apps. The internet is full of helpful information sources for buyers and sellers alike. Already, there are low-commission apps that match up people and homes.  

In the lawsuit, sellers’ groups had argued that the industry was keeping fees high through its grip on the Multiple Listing Service. Sellers had tired of the longstanding MLS tradition that pressed them to agree to cover 5% or 6% agent commissions up front. The sellers essentially forced the real estate industry groups into a settlement. This sent shockwaves through the industry.

It’s a whole new world for home selling. Read all about the National Association of REALTORS® settlement here.

But new rules were hashed out, and the selling continues. It’s just that sellers no longer agree to cover both agents’ fees up front in order to publish a listing through the Multiple Listing Service.

All that said, commissions based on a percentage of a home’s selling price do still exist. They’re still the norm. But now, the public knows fees are negotiable. The old 6% (to be split between buyer and seller agents) is no longer written into home listings.

And with this major shift in selling norms, à la carte (per-service) pricing is on the rise. Sellers can do a lot more for themselves, with the option of just paying flat fees for specific services.

Do the New Real Estate Rules Help FSBO Sellers?

Some homeowners would like to sell, but don’t relish the thought of hiring a full-service seller’s agent. These deed holders are in a stronger position now. People have more ways to handle their own conveyances, and get help with the paperwork only when they need it. Sellers now have a clearer option to pay individually for selected services, as some agents are setting per-service rates.

Sellers might decide to do a lot of the work themselves. Here’s a checklist of what they must know to pull off their deals:

• Where to list a home, and for how much. Selling for too little could offset your savings. Slightly more than half of FSBO sellers think they’d have made more money with an agent.

• How to market and show the home. Will you need to do staging, virtual tours, post cards, etc.? Maybe not, if you already have a buyer lined up.

• Understand the  negotiation process, including necessary legal disclosures, and which of your buyer’s needs or contingencies shouldn’t be argued over.

• Obtain an accurate valuation of the home.

• Address the needs of buyers who have lenders in the transaction.

• Know how law and marketing interact. A large portion of FSBO sellers reach their buyers “through the grapevine.” What should they know about fair housing laws?

• Understand fraud and how to prevent it. “Most scams involve a request to wire funds,” Zillow® observes. “Do not wire funds to anyone you haven’t met personally.”

For all the above reasons, it’s a good idea to recruit a coach, at least, if your selling experience is limited. Your state provides boilerplate, fill-in purchase agreements. But for tailored paperwork needs, FSBO sellers can pay per service.

Sellers and buyers can create their own deeds. They can still have related paperwork drafted or reviewed by professionals.

Where Can a Seller Find the Right Services, When Needed?

First, know that it’s legally acceptable to create the deed yourself. But you can still have professionals review it, and other documents used in your transaction.

If your buyer is financing the deal, the bank’s lawyer might also handle paperwork needs.

In some states, lawyers handle all real estate transactions, by law. But if you are choosing to work with an attorney, here’s what one can do for most real estate transactions:

• Draft and review sales contracts, or modify a boilerplate contract to suit your actual situation.

• Assist you with disclosure forms and settlement documents.  

• Find and clear old liens and claims from your title.

• Help you negotiate a fair deal with your seller.

• Guide and represent you at the closing table.

• Explain fair housing law and real estate regs at all levels: local, state, and federal.

• Explain taxation — on everything from deed transfers to capital gains.

Make a checklist of what you’ll need to sell your home. Your basic needs as a seller include a contract to sell your home for a specific price. Your agreement with the buyer should identify and offer basic details about the home, and of both parties involved in your deed transfer. Experienced lawyers draft contracts that meet the home state’s requirements, and the goals of the parties.

You can opt to ask the title company to meet at least some of your needs. Title firms have lawyers. They know where to find mortgage consultants, surveyors, and appraisers. They record new deeds as part of their everyday work. Of course, they also run title searches, so buyers know they’re getting free and clear titles.  

At the End of the Day…

Sellers have alternatives to the old standards of the real estate world. Now, more so than ever. And they don’t need to go it alone. There are legal pitfalls involved in selling a home; professional representation lessens your exposure to them.

It’s not a good idea to ask the other party’s representatives for strategy tips. That can quickly lead to a conflict between the parties’ interests. Working with an attorney of your choice ensures that you have professional guidance. Yet it can be done for less than the cost of a full-service real estate agent.

Important note: We offer this article as general information — not as financial, legal, or taxation advice. Each transaction is unique, with its own mix of potential pitfalls and rewards. Legal and financial advisers can offer case-specific guidance to help a deed holder make informed moves.