Contain the Commission to 3%

By Joanne Y Cleaver | Updated Aug 17, 2013 10:46 PM

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You saw its potential. You designed, bought, plumbed, wired and painted it. Now that you are thinking of selling your house, why not do it on your own?

Photo: fsbosatellite.com

Selling ‘by owner’ is much loathed by real estate agents, whose livelihood depends on the 6% commission they take from the selling price. With home equity considerably eroded, an agent’s commission can account for a substantial slice of your net equity.

One way to think about the tradeoff is time versus money. If you want a fast, clean transaction, price the house 3% to 5% below its current appraised value and work with a flat-fee service to get the listing on the local multiple listing service, which most house hunters use to find prospective homes.

If your main motivation for selling yourself is to hold on to your hard-won equity, and you price the house at its full appraised value, know that your net take will be eroded by the cost of marketing and owning the house for the several months it will take to sell. And buyers will expect your asking price to already reflect a deduction equal to at least half of the commission, about 3%. Set your initial asking price accordingly.

A newly released survey from HomeGain, a company that provides multiple listing and other services to real estate agents, found that 22% of for-sale-by-owner (FSBO) sellers eventually capitulated and listed with an agent; for 55% of them, that did the trick. Those owners got the worst of both worlds: they spent time and money trying to sell on their own, then ended up paying the full 6% commission anyway.

The same survey found that 73% of sellers who used a HomeGain-affiliated agent sold their homes, compared to 30 percent who sold outside the mainstream of major real estate databases. That underscores the importance of getting your home in the local multiple listing service, which supports the listings you see at Zillow, Trulia, Realtor.com and other popular sites.

You have a shot at containing your selling cost to about 3%. Your choice is to sell ‘by owner’, pricing 3% below market to attract buyers, or to spend about 3% on a discount agent plus out-of-pocket selling costs, taking on many of the selling chores yourself.

For more on buying and selling homes, consider:

Words to Sell By
How To: Sleuth an Open House
Leap Over the Top 3 Market Obstacles