A Realtor is a powerful tool to use when you are selling (or buying) a home. For a For Sale by Owner, there is a hope there will be no need for a LISTING REALTOR. Saving the commission on one side of the deal by not having a listing realtor can be a significant savings (generally around 3% of the home sales price), but what happens when your home does not sell and sits on the market. When should you get a Realtor involved?
On the MLS, there is a counter called DAYS ON MARKET (DOM). This shows the other Realtors how long a home has been listed. The higher the number of Days of Market, the more likely the offers will not be what you were hoping for. A home sitting on the market is usually priced wrong, the condition of the home is not what buyers are looking for, or location is not where people are looking. Two of the three of these is curable, but which one is it?
As a home sits on the market, there are costs associated with it. These are the holding costs. The costs typically include – utilities, taxes, insurance, maintenance, and mortgage. They add up as time passes reducing your potential profit on the home. Since most mortgage payments go toward interest, you are paying out money, you will not get back. The same is true with all holding costs.
Many For Sale by Owners drop pricing thinking that is the solution. It could be but dropping the price without understanding the market may in fact hurt you. There could be another solution that could get you your price, so randomly dropping the price may not help get a buyer to make an offer. The real estate market is a funny beast. If you understand it, research it, it can be tamed and understood. It just takes the right person or company at times to assist.
We could go on and on about the different aspects of why your home is not selling, but the main question we need to answer is when you should get a Realtor involved. The best answer to this is – when the costs and time outweigh the savings on your home.
Typically you are told that Realtors charge 6% to sell your home (this is not always the fact, but it’s a on-average commission with 3% on each side of the deal – but the seller is always in charge of deciding the commission). The listing Realtor on a deal of $200,000 would be earning $6,000. This $6,000 would have been your savings if you would have sold it on your own. Let’s look at the costs for a home sitting on the market for 3 months:
Holding Costs for 3 months:
- Mortgage: $1400 x 3
- Taxes: $300 x 3
- Insurance: $100 x 3
- Maintenance: $100 x 3
- Utilities: $150 x 3
- TOTAL: $6150
As you can see it would cost just over $6,000 to have your house sit on the market for three months without selling. This is 3% of your home cost already. Now after three months, you decide to get a Realtor involved. You will now be adding 3% of the Realtor cost, plus the holding costs for another 1 to 3 months (depending on when a purchase agreement is signed and closing happens – closings are usually 30 – 45 days after a purchase agreement is signed).
Your costs to sell the home are now 2 ½ to 3 times what it would have cost to have a Realtor involved, along with time you put in showing the house and maintaining the house while you were selling it For Sale by Owner. Time is valuable.
This information is not to scare you into running out and hiring a Realtor from day 1. This information is to let you understand that you may need to get a Realtor involved to help sell your home and reduce the holding costs and time on the market. For many For Sale by Owners, mentally they are so against using a Realtor and pride takes over causing them to accumulate holding costs, make bad pricing decisions or put too much money back into the home they will not get out (updating home).
The main goal with or without a Realtor is to get your home sold either as a For Sale by Owner or with a Realtor. Both information and professionals are powerful tools.
If you have a question about buying or selling your home, please reach out to Mitten Realty Group at 248-294-7850 or via email at email@example.com
Scott Fader and Gary Brincat
Mitten Realty Group, LLC
Mitten Realty Group is a veteran owned company located in Michigan. Scott Fader and Gary Brincat are two of Michigan’s multi-million-dollar top producers. They have been working in real estate as brokers, Realtors, investors, property managers and real estate company owners for over 20 years. Together they would like to share their experiences, knowledge, success and failures to help buyers, sellers, Realtors, brokers and anyone else in the real estate and business, so that together we can grow as a community.