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Should you sell your home on your own?

Whether you live in a sellers' market or not, you may be tempted to sell your home without the help of a listing agent in order to avoid paying their commission. However, many real estate experts warn sellers that selling on your own could lead to financial mistakes that can cost you more than you're trying to save.

If you choose not to work with a realtor, you can market your home entirely on your own or choose a flat-fee service to get your property listed on a For-Sale-by-Owner (FSBO) website.

According to the National Association of Realtors' (NARs')2016 Profile of Home Buyers and Sellers, just 8 percent of all home sales last year were FSBO, the lowest share since the association began its annual report in 1981. Fifty percent of FSBO sellers knew their buyers prior to the transaction in 2016.

"If you're very well educated about the real estate business and experienced, a FSBO sale might be OK, but for the vast majority of homeowners, you lose a lot by not having a professional represent you," says Steve Israel, president of the Buyer's Edge in Bethesda, Md.

NAR reports that the primary reason for those homeowners who didn't know their buyer and chose the FSBO method was to save on the commission payment. While commissions are negotiable, typically sellers pay 6 percent of the sales price, split equally between the buyers' agent and the listing agent. FSBO sellers must still pay a commission to the buyer's agent, typically 3 percent or, for example, $6,000 on a $200,000 sale.

Why sell your own home?

1. Save money. The biggest benefit of a FSBO sale is the ability to keep as much money as possible from the sale, says Debbie Kent, owner of GoToFSBO.com in Vienna, Va., which offers a range of services to FSBO sellers.

Kent says sellers spend just two or three hours on the computer on paperwork and uploading photos to start the FSBO process.

Some homeowners try to sell on their own with just a yard sign and some flyers, but they often give up because they don't have the exposure needed to sell their property, Kent warns.

"We provide exposure to buyers working with realtors and FSBO buyers," explains Kent, whose site includes FSBO listings and Flat Fee MLS listings in realtor MLS systems.

2. Set your own appointments. Another benefit to homeowners of a FSBO is the ability to schedule their own appointments with prospective buyers, says Kent. Sellers can also schedule open houses at their convenience.

3. Streamline communications. FSBO sellers and buyers communicate directly. Kent says another benefit of FSBO is the lack of a middleman. Sellers can negotiate directly with buyers when they, for example, request home repairs or a specific move-in date rather than passing messages back and forth between a listing agent.

Kent says FSBO sales prices and the time it takes to go under contract are similar to sales with a realtor.

Why you may want a realtor

1. FSBOs tend to sell for less. Despite Kent's experience, the NAR says the median FSBO sales price in 2016 was $185,000, while the median price for a home represented by an agent was $245,000.

"One reason for the price discrepancy is that many buyers' agents shy away from FSBOs," says Israel. "Buyers' agents end up with more liability in the transaction since there isn't another agent involved."

2. Avoid legal and financial troubles. Israel says sellers can end up in legal trouble if they "wing it" and opt out of using an agent who understands the local market, the legal and the negotiation process. He says lengthy real estate sales contracts leave a lot of room for mistakes.

"If you don't understand the contract you're signing you could end up with tax issues and extra seller charges," cautions Glenn Bill, a Realtor with Century 21 Scheetz in Indianapolis. "The countless things that could go wrong without professional assistance can cause undue stress on your family as well as financial hardship. For instance, the deal could fall through and you could end up owning two houses."

3. FSBOs require more work on your part. Bill says that another drawback to FSBOs is the time factor.

"For most people, it's difficult to set up showings and to handle all the phone calls, much less find out if the buyer is really qualified," he says. "You also need to think about the security issue of letting strangers into your home without the assistance of a realtor."

Most home-buyers require a mortgage loan to complete their purchase. If your realtor has a good relationship with the buyer's agent, you may gain intelligence on how well-qualified a potential buyer is and/or a sense about how serious the buyer is about a purchase. Review HSH's guide on mortgage preapproval to understand whether or not a buyer is prequalified or preapproved for a mortgage loan before spending too much time with him or her.

While saving 3 percent of your sales price is appealing, make sure you recognize all the risk that you might encounter without professional help.

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