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Consider Risks of Selling on Your Own

by Matt Difanis

April 6, 2000

As much as I enjoy getting paid to list properties for sale, I did not choose to write on this subject to frighten unsuspecting homeowners into padding my wallet. :-) Rather, I have witnessed firsthand many of the mistakes--including violations of numerous local, state, and federal laws--that homeowners make when attempting to sell on their own. If you are contemplating selling on your own, this month's real estate column will give you a better appreciation of the myriad of challenges that you will face. If you are already a firm believer in using a REALTOR®, then the information in this article will underscore that hiring a good REALTOR® is worth every penny that you will pay for those services.

Pricing Your Home

This is often the first challenge that prospective home sellers face. Unless you pay for a formal appraisal at a cost of $200-$300, you will probably have to rely on very incomplete information. You could spend a day at the county courthouse, where all real estate sales are recorded in the public record; however, if you are not personally familiar with all the homes that have sold in your neighborhood, then the selling prices will be useless, since you will not have any information about the size or features of those homes and how they compare to your house. REALTORS® in the Champaign-Urbana area pay more than $1,000 per year per agent to have all the information in the Multiple Listing Service at their fingertips, so they can quickly help you put your home into an appropriate price context, based upon detailed information about recent comparable home sales in your neighborhood.

Consider the pricing risks you face by pricing your home in the absence of professional assistance: If you over-price, your home will not sell. (Even if an ignorant buyer agreed to your price, the bank would not finance the purchase if the selling price is greater than the value indicated by the lender's appraisal.) On the other hand, if you under-price and find a buyer for your home, you will be plunging into all sorts of challenges without a REALTOR'S® assistance, and you will be cheating yourself out of enough money to have paid for a REALTOR'S® services.

Marketing

Much of the fees that real estate brokerages collect are directed toward marketing. Again, MLS fees are important here, since those fees allow your REALTOR® to make your home available to each of the 425 REALTORS® in this area and all of their buyers. Other common marketing expenses that brokerage fees include are the following:

Newspaper ads
Web sites, including some of the most heavily trafficked sites on the Web, such as Realtor.com
Ads in color real estate magazines
Brochures
The REALTOR’S® time in fielding questions from consumers and other agents
Open houses

Even if you spend literally hundreds of dollars (which a typical classified ad in a real newspaper might cost for a month), you will still not be able to enjoy the benefits of an MLS listing or the exposure in the best media, where most consumers look for homes (i.e., real estate Web sites)

Also, there are incredibly complex fair housing laws that average, non-bigoted consumers could easily find themselves violating. REALTORS® must undergo hours of mandatory fair housing training, and even then they may still make an occasional error.

Disclosures

For many—but not all—homes on the market, there are different disclosure documents mandated by both state and federal law. Failure to accurately complete those documents and to provide them to prospective buyers could result in problems ranging from lawsuits to buyers who can legally bail out of their contract to purchase your home at the absolute last possible moment.

Showings

I am available to my clients and to consumers at almost all hours of the day, night, and weekend; most folks who try to sell on their own are not. In the last couple of years, the National Association of REALTORS® has run a television and radio ad campaign with the slogan, “We’re REALTORS®. Real estate is our life, so you can get on with yours.” For most full-time REALTORS®, real estate really is their life. I have heard numerous agents jokingly refer to the ad as, “We don’t have lives, so you can get on with yours.” Until you have experienced the challenges of trying to field phone calls; schedule showings; hold open houses; provide accurate information that does not compromise your bargaining position—all while working at your own full-time job or keeping house and chasing your kids, it is tough to appreciate the truth in the REALTOR® commercials.

Contracts

A common—and potentially costly—mistake is failing to use a good contract, or failing to use any contract. This stands in the way of holding both parties accountable for holding up their respective ends of the deal, once you have found a buyer who is willing to pay a fair price for your home. The buyer cannot hold up his end of the deal if there is no explicit written agreement that says just what his end of the deal is. You may have heard of cases in which a verbal agreement was enforced by a court in a lawsuit. In Illinois, contracts for the sale of real estate are not enforceable unless they are in writing.

So now you know that it is important to use a contract. But do not run to the local office supply store or scan the Internet for a standard, one-size-fits-all form. It will likely not reflect applicable state and local laws, as well as local custom, which vary considerably from town to town. While REALTORS® cannot practice law without a license, they are permitted to use and to fill in standard contract forms that are in widespread use in their market. The local association of REALTORS®, in conjunction with several members of the local Bar Association, have just such a contract, designed specifically for use in this area. Unless you allow your attorney to bill you hourly to craft one for your transaction, you may find yourself in big trouble.

Managing details in preparation for closing

These include—but are not limited to—the following:

Obtaining a termite inspection
Keeping tabs on the status of the buyers’ financing
Sending notices per the terms of your contract pursuant to home inspections or other issues
Dealing with a home inspection and knowing what can reasonably be expected of you versus what is unreasonable
Ordering title insurance
Scheduling your closing
Preparing the deed

Your lawyer will do some of these items, and some may be done by the buyer or the lender. If you do not have a REALTOR® on your side, do you want to be guessing about who does what at which times?

Conclusion

Despite the information in this article, not every transaction is a nightmare. On the other hand, I rarely encounter transactions that are completely worry-free. All of the potential risks of selling on your own are significantly mitigated by hiring a competent REALTOR®. Note the word, “competent,” in the previous sentence. An incompetent REALTOR® may cost you a small fortune while increasing your risks. Be careful to use an agent whom you can trust and who knows the law and all applicable standards of practice. In the midst of a complex transaction, a REALTOR® may prove to be the best investment you ever made!