Do FSBO's Leave Money On The Table?

In a recent article, “One City’s Home Sellers Do Better on Their Own” by Jeff Baily and published in the New York Times asks the question if “paying a real estate agent’s commission, typically 5 to 6 percent of the sale price, is worth it.”

I think so and the number one reason is your MONEY.

In early 2004, my wife received her dream job offer and we decided to relocate from Austin to Dallas. It was time to sell our charming home in Tarrytown, a home that we had completely gutted and remodeled. We loved Tarrytown. We also enjoyed the remodeling process and we were always on the hunt to find another gem that we could transform. Many Sundays over a three year period were spent going through open houses and, as a result, we were experts in our micro-market and we knew how our home stacked up against the competition.

I happen to be a licensed California broker and even though I cannot practice real estate in Texas, it was natural for us to sell our home without the help of an agent, FSBO if you will. We were 100% confident that the value of our home at the top end was $325,000.

Just before we listed our home in the MLS, a friend mentioned that her sister Megan had recently sold her home, similar in size and quality of updates but in a less desirable neighborhood, for just under $400,000. We were stunned! Comparable homes in Tarrytown had not yet hit this elevated price range. Megan’s agent was tuned-in to the market and knew her house would command a premium because interest rates had dropped to 40-year lows and buyers could afford to pay more for a home. Armed with this new information, we decided to list our home for $390,000. Within 5 weeks, we had a sales contract for $381,000! A “gold star” agent with knowledge of the mortgage market indirectly helped us save $56,000! The real estate market in Austin was beginning to heat up at the time and now I wonder how many For-Sale-By-Owners (FSBO) in Tarrytown left money on the table.

Ok, so my example is not relevant because it happened a few years back. Interest rates jumped 0.6% last week to 6.86% for a 30-year fixed mortgage. This seemingly small increase in rates decreases a home buyer’s buying power by 6.4% . A “gold star” agent will stay on top of current trends and will know how to maximize the selling price of your home in a frothy market.

We live in Dallas now and I’d like to think I know the value of the homes in my neighborhood but after this spring I’m not so sure. Neighbors on each side of us recently put their homes on the market. The neighbor to our right sold their home in one day at $700,000 or $300 per square foot and the neighbor to our left has had their home on the market for 6 months priced at $650,000 or $270 / SF. Both homes are listed by the same agent and on paper are almost identical in square footage and lot size. The cheaper home even has a better curb appeal. Why would an agent list two homes on the same street with similar stats at such different price points? Micro-market expertise. The price difference is due to the difference in finish-out and updates. Incidentally, the listing agent told me that $650,000 home is overpriced but the seller won’t budge. The sellers have moved into a new home and their old house is sitting empty and costing them money. A do-it-yourself home seller looking at data could easily miss these pricing nuances. Price it too low and leave money on the table, too high and it will sit there and you can make the monthly mortgage and tax payments.

The moral to the story is a “top performing” agent can help you maximize the sale value of your home… the hard part is finding a “top performer”.