Dear Monty column: The 5 different methods to sell your home
Columns share an author's personal perspective.
Reader question: It appears there are different methods to sell your home today. We haven't bought or sold a home for 30 years. Back in the day, we would contact an agent or try on our own. The choices are confusing. What are those choices today, and what are the differences between them?
Monty's answer: Real estate is a legacy business experiencing pressure to change. Technology and shifts in consumer awareness and behavior are the drivers. Today, consumers are more demanding and are getting accustomed to products and services delivered almost instantly. Technology has opened the door to outsiders that see real estate innovation as an opportunity to garner a piece of the recurring $77 billion annual revenue stream generated by real estate brokerage.
Current home selling options
Traditional full-service broker: The broker/agent pays for all advertising and promotional costs, including the multiple listing system. You have a single point of contact. The agent handles the negotiations. The cost is typically between 5 and 7% of the sale price based on success only fees.
Discount brokers: The cost is typically 1 to 3% for the listing broker. Still, it does not include any additional commission for the selling broker, which is 2.5 to 3%. This category also contains brokers that rebate commissions, use flat rate fees, and MLS only fees. There are additional selling agent fees and closing costs. Some of these companies charge upfront for service.
For sale by owner: The seller handles the sale directly and pays all costs associated with a home. They show their home, hold open houses, and take all the little tasks. The cost could include paying a real estate agent when they produce a buyer, advertising and promotion, and all associated closings costs.
Guaranteed sale brokers: The basic strategy is a lower price guarantee at the end of a negotiated period. The home is promoted at a higher price with pre-agreed price adjustments before the expiration of the period. With a guarantee, the home seller is free to purchase another home. The goal is to sell the old house before the broker has to buy it. The fees are generally higher. Here is an article on DearMonty.com (https://bit.ly/3pdzZ0h) that offers more detailed information.
iBuyers: The iBuyer takes a different approach. They buy the home directly from the seller and then handle the home's sale after the fact. The sellers have no involvement with the typical process. The seller must agree that the iBuyer handles any necessary repair using the company and pay for those repairs out of the closing proceeds. The seller must also agree to a service charge that is akin to a commission, but like the guaranteed sale, is at a premium. iBuyers currently only operate in larger, robust, markets.
More change is coming
Innovation today is creating more tools and products almost daily that will power different methods to sell your home. Here is an article from TechCrunch.com (http://tcrn.ch/3nGWLxi) to demonstrate. Innovation has already affected the way homes are bought and sold and will very likely continue.
Richard Montgomery is the author of "House Money - An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home." He advocates industry reform and offers readers unbiased real estate advice. Follow him on Twitter at @dearmonty, or at DearMonty.com.