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
- Why Luxury Home Sales Are Surging Right Now
- If You Want to Buy or Sell a Home, the Market Is Improving in 'Fits and Starts' So Far In 2024
- Best Time of Year to Buy a House
- Four Reasons to Buy When You Downsize for Retirement
- Four Reasons to Rent When You Downsize for Retirement
-
I'm a Financial Pro: Why You Shouldn't Put All Your Eggs in the Company Stock BasketLimit exposure to your employer's stock, sell it periodically and maintain portfolio diversification to protect your wealth from unexpected events.
-
How Will the One Big Beautiful Bill Shape Your Legacy?The One Big Beautiful Bill Act removes uncertainty over tax brackets and estate tax. Families should take time to review estate plans to take full advantage.
-
Should You Claim Social Security Early or Late? A Financial Adviser Weighs InThere isn't a wrong age to start claiming Social Security, but there are factors that everyone should consider to avoid leaving money on the table.
-
Three Things Financially Confident People Do, From a Pro Who KnowsIf you have any worries about your retirement future, take back control with these three tips.
-
How Much Do I Need to Retire? A Financial Professional Breaks Down Your OptionsWhat it all boils down to is will you be comfortable in retirement? Some people may rely on formulas, while others just aim for $1 million nest egg.
-
Despite Our Grumbles, America Still Delivers on the Dream: Perspective From a Financial Pro Who's Seen StuffSome of us might complain about the state of our nation (and those concerns are legit), but America still offers unparalleled opportunities and mobility that many people around the world only dream about.
-
When You Need Capital Quickly, Think 'Ready, Set, Fund': A Financial Adviser's StrategyInvestors must be able to free up cash to meet short-term needs from time to time. This strategy will help you access capital without derailing your long-term goals.
-
I'm an Estate Planner: Moving Family Assets to a Safe Haven Abroad Could Be a Huge Headache for Your HeirsIn troubled times like these, wealthy clients may seek financial refuge outside of the U.S. But that could cause more tax and estate problems than it solves.
