For Sale by Owner

Homes for Sale By Owner There are two basic methods available to a homeowner to sell a home: Sell the home by owner; or hire a real estate broker to sell the home. How does a homeowner decide which method to use?

The decision by a homeowner to sell their home by owner instead of through a real estate broker is driven in almost every case by financial considerations. The decision is based on a desire by the homeowner to increase the amount of money that they net at the end of the sale after all expenses are paid. The homeowner that decides to sell their home by owner believes that not paying sales commission to a real estate broker will allow them to net the most money possible from the sale.

Sale by Owner- Best Deal? In my experience of interacting with homeowners since 2005, I have discovered that financial considerations are the single and sole motivation for homeowners in truly 99 out of 100 cases when deciding whether to sell their home by owner or whether to hire a real estate broker. While the logic of not paying sales commission in order to net more money seems sound, it actually turns out that homeowners who sell their homes themselves actually net LESS money than those homeowners that hire a real estate broker. This is clearly counterintuitive, so why is this true?

It is true because real estate brokers garner a higher purchase price from home buyers than homeowners selling by owner do.

Selling Your Home Think of the example of selling a diamond ring. If the owner of the ring has the original packaging and receipt and places the ring very tastefully in its display box, then puts the ring up for sale at a Saturday garage sale, will the owner get top dollar, or even a fair market price for the ring? Of course not!

Why? There are two reasons:
(1) the ring is being sold with no professional salesperson involved; and
(2) buyers always expect to pay less when they buy directly from the owner (think of the Sams Club and Costco models).

Now imagine that same diamond ring being sold at a professional jewelry store by professional sales people in a professional environment among other rings. Just as the jeweler gets a higher price for the ring than the owner does, a real estate broker also gets a higher price for a home sold in a professional environment as opposed to a home owner trying to sell the same home by owner.

It turns out that this higher purchase price more than covers the increased expenses of hiring a real estate broker, resulting in a higher net number for the homeowner.

By way of example, a homeowner that sells their home by owner for $200,000 and has selling expenses of $3,000 nets $197,000. The same home sold through a real estate broker sells for $220,000 with expenses of $15,000, resulting in a net of $205,000. So the homeowner who hires a real estate broker actually nets $8,000 more than the homeowner who sells the home by owner.

If you are considering selling your home by owner in the Idaho Falls area, give me a call at 208.680.5589. I would love to sit down with you and explore the advantages of hiring me to get your home sold by a professional!

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