I’ll start by saying that I have had five real estate transactions in my life. I used a Realtor every time. However, I have had several clients go the DIY route, both with and against my advice, and lean on me to fill some of the roles the agent would typically have. While I rarely recommend that clients take this route, here are three scenarios where I would lean toward DIY.
1. You have a teardown.
This takes knowing you have a teardown. If you have the smallest house on the block, odds are it won’t be there for long. Having recently helped a client navigate this route, even here there can be land mines. I spent lots of time talking to agent and builder friends to make sure I knew how to price the home and how to negotiate the terms. The financial and tax side, I am very adept at.
If you have those resources at your fingertips, the builders will pay more without an agent, for obvious reasons. Once you know where you want to price it, you can reach out directly to the builders with your price. The bigger they are, the more likely they have an end buyer for your land.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
2. You have a known buyer.
This is definitely a more common scenario for a rental property where the tenant is buying the home. However, I have seen it come up more recently with Baby Boomers selling their homes to their Millennial kids who have been priced out of the market. In this scenario, or any in which you already have a buyer and an agreed-upon price, I would not use an agent.
You will have to hire a real estate attorney to make sure the transaction is handled properly. There are also tax considerations when selling a home below market value. However, the hourly cost to sort out those issues will be much lower than the commission you’d pay an agent.
3. The cost of selling makes a difference in your plan.
I get it. You’d like to sell your home for $1.5 million but will have to dish out a $75,000 commission at closing. There’s a reason I put this situation last. I have seen too many scenarios where folks chose the DIY or, in real estate language, FSBO route and lost much more than the 5% commission. Take the ex-client who listed their home at $1.3 million and very clearly took their own pictures on their very old iPhone. That home sold almost a year later — at $950,000.
Now, there are scenarios where saving on the cost of selling is a good enough reason to sell on your own. Take the situation where the equity is very tight. You need to sell your home for $(fill in the blank) to make the next chapter of your life work financially. If the home doesn’t sell at that net price, you won’t make the move. I don’t think you want to show up at the closing writing a check because a commission put you in the red.
If it’s not already clear, I view the DIY as risky, especially if your equity represents a significant portion of your assets. Additionally, this is not something you want to try and then switch to a Realtor if it doesn’t work out. Seeing a stale listing with multiple price cuts sets off alarms and is likely to turn off a significant portion of your prospective buyers.
My last sale included a negotiated leaseback, documentation to ensure we didn’t have to pay capital gains taxes and an uncomfortable amount of money moving in and out of accounts. Rely on your financial planner (and your financial plan) to quarterback this portion of the process.
See my related article, Six Reasons to Use a Real Estate Agent When You Sell.
Related Content
-
Is Indulging Your Vice Putting Your Retirement at Risk?From alcohol to gambling, adults spend a lot of money pursuing their vices, but are they jeopardizing their retirement nest eggs?
-
Stock Market Today: Investors Respond to the Usual UncertaintyStocks surged late but the major indexes closed mixed as the search for market leadership continues.
-
The Best ROI? Investing in Yourself This YearIf personal growth is something you invest in only after taking care of all other priorities, it's time to turn that mindset on its head. Here's how to start.
-
The Four Worst Mistakes to Make When Selling Your BusinessFrom ignoring potential buyers to failing to consider what you'll do once you've stopped working, here are the key mistakes to avoid when selling a business.
-
Market Volatility Tempting You to Get Out? Read This FirstIf you're retired, or soon will be, riding out a roller-coaster market can be nerve-racking. Try to hold steady and focus on balancing your investments.
-
Five Strategies to Defer Capital Gains in Real Estate InvestingThese powerful strategies, from timing your sales during low-income years to leveraging qualified opportunity zones, can defer capital gains taxes on your real estate investments.
-
Retirement Income Planning for Unfunded Health Care CostsRetirement income plans often don't include late-in-life health or long-term care expenses. Here's how to cover for the unplanned withdrawals to pay for those.
-
Federal Employees Buyout Offer: Five Things to ConsiderFederal workers have a constellation of retirement benefits, and assessing them can get complicated fast. Here are five high-stakes decisions to focus on.
-
Insurance Bad Faith After Natural Disasters: What to KnowUnderstanding the basics of insurance claims after catastrophic losses is important, especially if you encounter insurance bad faith. Here's what to do if that happens.
-
Five Reasons Not to Give Your Child Power of AttorneyWhen drawing up powers of attorney, older parents will most likely name adult children as their representatives. But is that always the smart choice?
