Why You Should Always Use a Real Estate Agent to Buy and Sell Houses

Why You Should Always Use a Real Estate Agent to Buy and Sell Houses

Hi, it’s Mark Ferguson, with Invest Four
More. I’m back with another video on real estate. In this video I want to talk about
why you should always use a real estate agent when you sell a house. So, I run InvestFourMore.com;
it’s a real estate blog and website with about 200,000 views a month. I’ve been a
licensed realtor since 2001. I’m also an avid real estate investor with 11 rental properties
and I’ve fixed and flipped over 100 homes in my career. When it comes to selling houses, I suggest
a seller always uses a real estate agent. The main reason being, even though it may
appear as though you save money by not paying a commission when you sell a house yourself,
in the long run, many times, it actually costs you more money than you’re saving. So let’s
go over the basics of how it might work when you list a house with a realtor, and when
you list it yourself. First thing I want to say is there are no
standard, typical, set commissions—everything is negotiable. Real estate agents charge different
commissions all the time. To use an example, HUD, which sells government foreclosures,
pays a 3 percent commission to the listing agent and a 3 percent commission to the buyer’s
agent. So we’ll use HUD’s example of a commission. But again, it’s all negotiable. If a seller was to list their home, they would
pay the listing agent and the buyer’s agent. So the listing agent represents the seller.
He helps them, you know, set a price, get their home ready to sell, determine the market
value, advertise the home, market the home, complete contracts, complete the closing process,
help select a title company—there are many things the listing agent does. The biggest
thing the listing agent does, and the most important thing, is they determine value.
That is what’s going to make you the most money as home seller. If you list a home for
too much money, you’re probably going to end up losing money on the transaction, over-listing
it for the right amount. The reason is, when you list a home for too
much—let’s say the house is worth 200,000 dollars. You decide you want to get more money
out of it and see what happens, so you list it for 225,000 dollars. Well, the home sits
for six weeks, you get no offers, very few showings. You decide, “Okay, well, we’ll
lower the price. We’ll lower it down to 210.” You still get very few showings, no
offers. Another six weeks goes by. Finally, you drop the price to 200. It’s like, “Okay.
You know, we’re down to 200,000. This is where it should have been priced to start
with. We’ll get our offer and we’ll get it sold.” Well it doesn’t sell at 200,000.
Not because the market has changed very much, but because that home now has a stigmatization
against it. Many realtors, many buyers may see the house is for sale for three months,
four months, and say, “What’s wrong with this house? Why hasn’t it sold at this price?
It seems like an decent price. But I don’t think—you know, someone else must have seen
something wrong with it, or else it would be sold already.” Now that seems like a
silly thing for people to think these thoughts, or for that to affect their house-buying process,
but it does. Selling a house, buying a house is a very
emotional process. It’s the biggest purchase most people make in their lives. And many
times, decisions are not reached based solely on facts but many times emotions. And if you
see a house for sale for an extended period of time, you automatically think, “There’s
something wrong with it. There must be something I missed. So let’s move on to another house.”
I see this many times. I’ve done it myself on my own houses, where I tried to squeeze
out a little too much money. The best bet is to price it right the first
time, because that’s when you’ll get the highest price possible. And if you list the
property for too low—I’ve seen this strategy as well, where people try and get multiple
offers, create a bidding war. Maybe they’ll get more than the house is worth by, you know,
creating a sense of scarcity. The problem with this strategy is, I also think it leaves
money on the table. We’ll use our example of the 200,000-dollar
home. The seller decides to sell it for 180,000 dollars, or list it for 180,000 dollars—create
a sense of scarcity, multiple offers, maybe people people create a bidding war and bid
up to 210,000. What happens is, those low prices attract the people who are looking
for great deals. Maybe investors, maybe owner-occupant buyers who’ve been waiting for just the
perfect deal to come up—they don’t want to pay market value. And you do create a bidding
war, and you do create multiple offers. But if those people are looking for this great
deal, why in the world would they pay more than they know the home is worth? You’re
probably going to get five or six offers that are below asking price. You’re probably
going to get a couple offers real close to asking price, and maybe one or two that are
higher. You might get an offer for 190, maybe even 195 if you’re lucky. But you have to
think about that. That buyer’s still paying 15,000 dollars more than you’re asking.
And yes, it’s still a good deal, based on what the home is worth at 200,000 dollars,
but there’s still that emotional part of the buyer’s brain saying, “Why am I paying
so much more than the list price? Do I have to pay that much more than the list price?”
You know, it turns into a guessing game of whether you’re bidding on what the home
is actually worth, or what you think other people will be bidding, so you can still get
a good deal. I list many bank-owned properties, many HUD
homes, where they’re priced low because of an appraisal, or some other reason—the
bank just wants to get rid of it. And in almost every case, the home would have sold for more
money if it was priced at the correct price, what the home was worth, instead of low and
trying to create a bidding war. So if you price the home right—say you price it 204,900
or 207,900, which is very close to what you think it’s worth at 200,000—then you’ll
attract that buyer who is looking for that home price of—you know, they want a decent
deal, they want to pay what the home is worth. They’re fine with that, they want a nice
house, they’re not looking to get an awesome deal. They know the home is within the range
of what values are. They say, “Hey, look at this house, 207,900, 204,900, we can offer
them 200,000, maybe 195, do some negotiating.” Many times, you’ll get that offer in the
first three weeks for the price you know it’s worth, and you’ll walk away with the most
money. That’s why a real estate agent is so important, because if you use an experienced
real estate agent, they’ve spent years and years and years learning how to price homes,
learning what the market trends look like and figuring out the best place to price your
house. Trying to do that yourself will take hours and hours and hours of time. And you
still won’t have one hundredth of the experience of a good realtor who’s been doing it for
an entire career. So using that example of what HUD pays on
a commission, 3 percent of 200,000 is 6,000 dollars. That would be for the listing agent.
Again, that’s negotiable—it could be more, it could be less. But you also have to pay
the buyer’s agent, in most case, which might be another 3 percent. So that would be 12,000
dollars total. So people assume, “Oh, well I can save, you know, 12,000 dollars on commissions
by not using a real estate agent. And even if I price it too low or too high, I’m probably
not going to overshoot the mark by that much.” But people don’t consider how these costs
break down. For one thing, if you sell your house for sale by owner and try and save that
full commission, many times buyers are represented by their own real estate agent or realtor.
The reason is, typically the seller pays the buyer’s agent and the buyer does not have
to pay them, so why in the world would they not use a buyer’s agent? The buyers will
want to be represented by an agent in most cases because it’s the biggest purchase
of their life, they want to make sure everything’s done correctly, they don’t miss anything,
and nothing goes wrong during the deal. So most people who try and sell their home for
sale by owner will end up paying a buyer’s agent if they do complete a successful for
sale by owner sale. So you’re not really saving 12,000 dollars—you’re only saving
6,000 dollars when you consider you will most likely have to pay a buyer’s agent. Then we have the problem of marketing your
property. Now, you may have done a lot of research, you may know how to market your
property. You create flyers, you put a for sale by owner sign up, put it in the paper,
put it in Craigslist, but how long is that going to take you to figure out? How long
is that going to take you to do? And is everybody still seeing that house? And the answer is
no. The best way houses sell is by being listed in the Multiple Listing Service, which is
only available to real estate agents. So if you have your house for sale by owner, the
for sale sign in the yard, and maybe you advertise on Craigslist, I would estimate 10 percent
of the people looking for houses in that area may actually see it. Maybe a little more,
maybe a little less. But most of them are depending on their real estate agent to find
houses for sale in the MLS for them, and send them those houses. And they’re going to
miss your house, they won’t ever see it. So an option: You could use a limited service
real estate firm to put the house in MLS for you. Solution solved. Your house is in MLS,
great marketing, it will sell. Here’s the problem with the limited service companies:
For one thing, they only put it in MLS for you, they don’t do any of the paperwork,
handle any showings. So buyer’s agents, realtors, will be calling you all day long
to show your house, to set up showings. They will still charge you a fee; it might be a
couple hundred dollars—usually I think it’s 4 or 500 dollars. So now you’re not really
saving that 6,000 dollars anymore, you’re saving maybe 5,000 dollars, maybe a little
more. And you’re attracting buyers who are represented
by a real estate agent while you are not. So if you do sell your house to a buyer who
has a real estate agent, who do you think has the advantage in that transaction? You,
who does not have much experience selling houses, does not know about real estate contracts,
does not know what the typical costs are as far as selling a house—or the buyer, who
has a realtor representing them who can write the contracts, knows what’s typical for
the seller to pay, what not to pay and all the ins and outs of real estate. That buyer’s
agent is working for the buyer; they’re not working for you. And they’re going to
do what’s in the buyer’s best interest, not what is in your best interest. So let’s think about if you’ve actually
saved any money. You may have reduced the commission you’re paying by 5,000 dollars.
But you don’t have any help pricing the home, so you could easily overprice it or
underprice it, which could cost you at least 10,000 dollars very easily, if you do either
one of those. So, you’ve just completely wiped out your savings and cost you money.
You most likely are going to sell to a buyer who’s represented by a real estate agent.
That real estate agent knows what the customary costs are, is representing the buyer and not
you. There are at least 5,000 dollars in things the buyer’s agents could do to help their
buyer out as far as inspections, as far as closing costs, negotiating for the appraisal,
negotiating for inspections. In general, that just wiped out any commission savings you
just had as well. Now, we haven’t even talked about the time
it’s going to take you to learn how to do all these things: to review the contract,
to market the home, to take great pictures, to hire the limited service MLS company, and
you’re losing money. So before you list your home yourself, and think you’re saving
a ton of money by not using a realtor or a real estate agent, think about if it’s worth
the time, the hassle, the trouble. And in the end, you’re most likely not going to
save any money. It’s going to cost you money. I’m not trying to scare people. I am a realtor,
I’m obviously biased. But the facts are, I know many investors who even have their
real estate license and they still use another realtor to list the house for them, because
they don’t have the time to figure, you know, the correct prices. Or, the time to
market the property correctly. And it’s worth it to them to pay an agent because in
the end, they know they’ll make more money by using a professional who knows the market,
knows what they’re doing, and will look out for their best interests. Thanks a lot for watching. I have a lot more
information on InvestFourMore.com. If you check out the description of this video, I’ll
send a link to the article I wrote about this subject. Talk to you soon.

5 thoughts on “Why You Should Always Use a Real Estate Agent to Buy and Sell Houses

  1. Thank You, very informative!

  2. Great case made!

  3. Cruise control at 100mph? What methods do you use to calculate all these numbers? I don't know about you but I would have to have all this written down in some way.


  5. Real estate Agents are blood sucking pricks and 100% unecessary. About as useless as tits on a boar hog.

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