Use a High Quality Real Estate Agent

Jack from Twitter asks what Dave's opinion is on the sale of real estate: with a real estate agent or for sale by owner?

QUESTION: Jack from Twitter asks what Dave’s opinion is on the sale of real estate: with an agent or for sale by owner? Dave recommends always using a real estate agent.

ANSWER: I would always use an agent, but only a high-quality, high-octane, high-protein real estate agent. I wouldn’t fool with about 80% of the people in the real estate business. I would want to deal with someone in the top 20% of the business, who sells a lot of property and has what’s known as a clue.

When you put the house up for sale by owner, you put a sign in the front yard, and let’s say you’re in an area where the typical real estate commission is 6%. If I knock on your door as a buyer, then what do we get? Why do you think I’m there? I’m there because I like your house, but one of the other reasons I’m there is because I figure I’m going to get a better deal because you’re not paying a real estate commission. I’m trying to save some money because you’re saving on the commission. You’re trying to save some money because you’re saving on the commission. You’re going to negotiate away some of the commission because there’s only one commission there. Both of us—the buyer and the seller—can’t save the commission. It doesn’t work that way.

Many times, a real estate agent will knock on the door and bring you a buyer. Then you would typically pay that person at least the buyer’s half or a 3% commission. Then you’re going to negotiate away part of the other half. In addition to that, it’s tougher to negotiate these deals on your own by half, and you may make a mistake. One tiny mistake in a real estate transaction causes you to lose tons and tons of money—a lot more than a commission.

An agent will put your property in the MLS system. They advertise it. They have a Rolodex full of clients that they’re working. They’re able to expose your property to more people to buy it.

Lots and lots of studies have been done. After all of the adjustments I’ve just covered, you don’t save money by selling the house yourself unless you already have the buyer lined up. If you already have the buyer lined up, you can go down to the title company, draw up a contract, and close the sale. But if you go through a normal marketing cycle and normal processes to find a buyer, you may lose money on an FSBO.

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