Three Reasons Not to Use a Real Estate Agent When You Sell
While this financial adviser doesn’t recommend taking that route, he does see scenarios where it could make sense for you.
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
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
After graduating from the University of Delaware and Georgetown University, I pursued a career in financial planning. At age 26, I earned my CERTIFIED FINANCIAL PLANNER™ certification. I also hold the IRS Enrolled Agent license, which allows for a unique approach to planning that can be beneficial to retirees and those selling their businesses, who are eager to minimize lifetime taxes and maximize income.
-
How to Help Your Kids Without Ruining Your Retirement
Here are some general considerations to ensure the gift of assets to your kids will not negatively affect your financial future.
By Mario Hernandez Published
-
AI to Power the Next Generation of Robots
The Kiplinger Letter There's increasing buzz that the tech behind ChatGPT will make future industrial and humanoid robots far more capable.
By John Miley Published
-
How Annuities Can Help You Retire Early and Delay Social Security
Waiting until 70 to claim Social Security benefits can pay off, so how do you bridge the gap between giving up your paycheck and filing for benefits?
By Ken Nuss Published
-
How to Get Your Kids to Step Off the Gravy Train
A surprising number of young adults live with their parents. Setting some financial ground rules could get the kids out on their own faster.
By Neale Godfrey, Financial Literacy Expert Published
-
Spring Is a Good Time to Clean Up Your Finances, Too
While you’re decluttering your home for spring, consider also taking a crack at cleaning up your finances and old paperwork.
By Tony Drake, CFP®, Investment Advisor Representative Published
-
Is Your Retirement Solution Hiding in Plain Sight?
Here’s how to use your home equity in combination with an annuity contract to produce late-in-life income.
By Jerry Golden, Investment Adviser Representative Published
-
How to Choose Your Trustee or Executor of Your Will
Above all, you should choose someone you trust, keeping in mind that acting as a trustee or executor can be a complex, thankless and sometimes long-term job.
By John M. Goralka Published
-
Three Steps for Women to Take Control of Their Finances
These strategies are especially for women who are new to managing their money because of divorce or the death of a spouse.
By Emily Glassman Published
-
How AI Can Help Take the Emotion Out of Investor Decisions
AI-driven recommendations can complement human judgment, leading to more rational choices that aren’t as influenced by biases and blind spots.
By Francis Geeseok Oh Published
-
Can You 1031 Exchange into a REIT?
No, you can't, but two other REIT-like alternatives let you defer capital gains taxes while giving you exposure to institutional-quality real estate assets.
By Daniel Goodwin Published