Why consider selling your home for sale by owner (FSBO)-style? When it comes down to your next real estate transaction, that 6 percent commission that might seem so insignificant when you first speak to a realtor about selling your home, but it can make a world of difference when it comes down to saving yourself and your family from financial ruin. It could be the difference between hope and helplessness for many homeowners looking to cash in on their home equity.
The sad truth is that many homeowners are being misled about the significance of that 6 percent commission. It’s a big number when you break it down.
Paying Real Estate Commission 101
For homeowners looking to the future, the sale of their house symbolizes a brighter outlook, the beginning of financial stability, earning cash that can go toward a new home, paying off debt, getting a fresh start. But your budding home sale excitement can take a hard tumble during the process—home values drop, you’re advised by that commissioned real estate agent middleman to drop your sale price in order to be competitive, and next thing you know, your profit has disintegrated. .
Let’s say you have a $200,000 house that isn’t getting much buyer attention, so you drop the listing price by 10 percent. That’s $20,000 right there—gone! Then when the house sells for $180,000, you have to knock off another 6 percent—$10,800 for the agent’s commission, not to mention closing costs.
Typically, most American homeowners don’t have much equity built up at the time they put their home on the market, on average about 7 or 8 years after they purchased it. Home equity rarely tops 20 percent. When you think about it, the equity you were expecting to bank isn’t much more than the agent’s commission. After you drop the listing price, plus pay the realtor and closing fees, you’re lucky to walk away with $8,000.
Add to that any money owed to the mortgage holder if you fall behind even two months on payments. Before you know it, what could have been a manageable financial challenge becomes an uncontrollable financial disaster, because when your payments are two months late, the equity is gone. Zip, zap, zero. That’s when the feeling of hopelessness sets in.
Making Tough Real Estate Decisions
On the other hand, when you don’t have a realtor commission to pay and your house loses 10 percent in value, you still retain your equity. You’ll still walk away with $20,000 profit! There’s a feeling of hope. You’re out from under a financial burden.
ListingDoor recently worked with a man who called us from Corpus Christi. The victim of Texas layoffs, he lost his job and was desperate to sell his home. And as sad as that is, he took smart action rather than let the situation overwhelm and overtake him. He put his home on the market using ListingDoor’s For Sale By Owner (FSBO) resources and it sold immediately.
The difference in his voice between the time he signed up for ListingDoor and the time he called us to say he received a contract on his home was remarkable. His struggles were over. He knew things were going to be okay because he no longer had the burden of house payments with no income. He was able to get his equity out of his investment. He dodged a bullet.
Unfortunately, sometimes things don’t go the way we’ve planned them. Life sometimes requires tough decisions and if we hesitate, life sometimes makes those decisions for us. That’s the time we most need to look clearly and fearlessly at the reality of the situation and take sole responsibility for turning it around.
Your Real Estate Commissions and Your Nest Egg
USA Today recently reported a sobering trend: most Americans today don’t have enough money to retire without tapping into their home equity. Taking away 6 percent of their home’s value to pay a realtor’s commission typically cuts out 40 to 60 percent of their equity. Your comfortable retirement could end up becoming no retirement as your nest egg loses the padding you’d counted on from the sale of your home.
The agency commission has got to go if we ever want to experience a stable housing market again. Washington, D.C. real estate lobbyists have controlled the home sale market for too long, at homeowners’ expense. But a change is just around the corner—in fact, it’s taking place right before our eyes. There’s a new confidence in the way Americans conduct their business and personal lives. We prepare our own taxes, get answers to our own basic legal questions, we fix our own stopped drains and nurse ourselves back to health from minor illnesses.
We know that if push comes to shove, we can rent out rooms for extra money. We can sublet our big homes and collect rent, and live in a smaller, less expensive condo or apartment. We have choices, and a newfound confidence that comes with taking destiny into our own hands. Removing real estate commissions from the equation and learning to sell our own homes, FSBO-style is a big step in this journey. It’s our destiny, and we can take comfort in that destiny because knowledge is power.
