7 Hidden Risks of Selling Your Home Without a Real Estate Agent

It’s a hot market for homeowners in Nashville. It seems like a no-brainer to consider the “For Sale By Owner” option. Homes seem to sell themselves in Middle Tennessee right now. Why pay the astronomical realtor commissions? But, homeowners are still turning towards licensed real estate agents.

Part of the beauty of a real estate transaction is that it is an agreement between a buyer and seller at the end of the day. While most of the contracts in a real estate transaction are standardized, an experienced agent will know how to incorporate language into these contracts to protect their client and get the upper hand in the negotiation.

At Felix Homes, we don’t think you should sacrifice saving money on commissions for working with an experienced realtor. Luckily, you do not have to choose between saving money and using a professional agent.

If you are still set on the FSBO route, here are some common risks to keep in mind.

Risk 1: Choosing A List Price That Is Too High Or Too Low

Selling your house FSBO can mean earning less money. We’ll walk you through how people selling their home choose to list too high or too low, and how both scenarios can mean that you walk away with less money for your house.

Did you know FSBO houses are often priced too low? It may seem online tools, like Zillow's Zestimate or the online valuation we offer, can take a lot of guesswork out pricing your home. These online home valuation tools give you an estimate of the price of your home but can an online valuation really be trusted? You may think that the online estimate should be used as the list price for your home. But in reality, the algorithm used to compute this value is going off historical data. The market is constantly changing, and often historical data just cannot keep up with the current market conditions. Additionally, technology takes away a lot of the nuances of pricing your home like upgrades you may have made over the years. You could be undervaluing your home, and this can cost you tens of thousands of dollars. In fact, we recently listed a home for $50,000 above the Zillow Zestimate and the home was under contract within 3 days of being on the market.

Alternatively, some FSBO homes are priced way too high. This can lead to inaction on the listing, which can scare away interested buyers. When homes sit on the market, buyers assume that the home has bigger issues. This might lead you to accept any offer–even a low one.

At this point, technology cannot replace a skilled real estate agent to look at things like the neighborhood, year built, upgrades, and house size. Getting an experienced local agent to complete a comparative market analysis (CMA) is the best way to ensure you are not leaving money on the table. Not only will they hand-select the most relevant comps, but they have their finger on the pulse of the market and can incorporate that knowledge into their suggested list price.

PRO TIP: See how the Nashville Real Estate market is doing with our monthly updates

Risk 2: Not Understanding The Contingencies In An Offer

Even in a competitive market, most offers will include contingencies. A contingency is a provision for unforeseen circumstances. Contingencies are incorporated into an offer to protect the buyer. We’ll walk you through some of the typical contingency scenarios found in most offers.

Inspection contingency

The inspection contingency essentially says that if something significant comes up on the inspection report, the buyer has the right to void the contract and get their earnest money back. An experienced real estate agent may negotiate to remove this contingency from the contract or stipulate that they forfeit their earnest money if the buyer decides to trigger the contingency. Knowing when to counter an offer and what terminology to use is really when an experienced agent can prove their worth.

Appraisal contingency

The appraisal contingency is commonly used when the buyer is financing the home’s purchase with a loan. A lender requires a buyer to have an appraisal to ensure the home’s value is higher than the sales price. Banks have these rules to protect themselves. They don’t want home buyers to owe more than the home is currently worth. In typical market conditions, buyers will re-negotiate the sales price if the appraisal comes out too low. This is a common reason for why some homes come back on the market after being under contract.

Nashville is not your typical market. Nearly 100 people are moving to Nashville everyday causing home prices to rise as demand exceeds supply. Often houses are appraised lower than the sales price people are willing to pay for them. This is because appraisers cannot keep up with the rate that home prices are increasing in the Nashville area. Appraisals often come back low in Middle Tennessee. Without a skilled realtor, the potential buyer can back out of their contract and get their earnest money back.

When receiving an offer, an experienced agent may counter the initial offer and include language in the contract that stipulates the buyer's responsibility to make up the full difference if the appraisal comes in lower than the sales price. If the buyer is unwilling to agree to make up the full difference, they will perhaps agree to pay a guaranteed amount above the appraised value.

Financing contingency

Pre-approval does not mean the buyer is guaranteed to get a loan. A lot can happen during the loan underwriting process. The buyer's lender may have missed something during the pre-approval process, or the buyer’s financial health may have changed since being pre-approved. If a buyer's loan is denied during the underwriting process, they have the right to void the contract and get their earnest money back.

An experienced agent may have the buyer agree to forfeit their earnest money if the financing contingency is triggered. They will also vet the buyer's lender to carefully review the buyer's financial status during the pre-approval process. Don’t risk your home sale falling through the cracks.

PRO TIP: Compare the process of selling FSBO vs using a low-commission agent

Risk 3: Not Getting The Distribution Of Listing On The MLS

Realtors have access to the multiple listing service (MLS). It’s the most comprehensive database for home listings. The MLS also pushes out your listing to popular real estate websites. If an agent uploads a new listing to the MLS within 24 hours, that listing will be on Zillow, Realtor.com, Redfin, Trulia, Felix Homes, and over 70+ other real estate websites. You want as many qualified buyers as possible to show up as soon as your home is listed. The distribution of real estate listings provided by the MLS network will produce a quick sale with many competitive offers.

FSBO sellers who rely on Zillow, Craigslist, and Facebook for distribution may get offers, but they are likely leaving money on the table.

PRO TIP: Learn our steps for marketing a home to get maximum distribution

Risk 4: Taking Poor Listing Photos

Don’t run the risk of buyers being turned off by poor photos shot on an iPhone. Real estate agents know the value of a good picture and often hire a professional photographer with years of experience. When the images of your house don’t look good, often the most qualified buyers will skip over your home. You want the best buyers to be persuaded to show up for a showing. Do this with quality photography.

Risk 5: Not Knowing What Repairs To Make Before Listing

Many homeowners make the mistake of doing a poor job at getting their home "market ready," or worse, they take the opposite approach and pour money into expensive repairs and renovations that they will never see a return on.

An experienced agent will advise clients what repairs or DIY projects are worth their time and money.

At Felix Homes, we typically advise fixing anything that costs under $100. In many cases, homeowners do not even need to repaint their house or replace the carpets to maximize the sales price of their home. We do recommend getting your carpets steam cleaned and paying for a deep cleaning service prior to putting it on the market.

PRO TIP: See the top things you should do to get your home ready for the market

Risk 6: Not Knowing What To Offer A Buyer’s Agent

FSBO homes have a reputation with realtors for not paying commission. It is, after all, the biggest motivation for going the FSBO route. Realtors might pass up on showing your house to their clients, and the result is fewer offers for you. You will have a more challenging time selling your home and could even be persuaded into accepting a lower offer.

So, even if you choose the FSBO option, you will likely still pay realtor fees. While the norm here in Nashville is to offer a buyer's agent 3% of the sales price, some sellers may choose to offer less. We’ve recommended offering a buyer's agent between 2% - 2.5% depending on market conditions.

Risk 7: Not Being Legally Protected If Something Goes Wrong

A professional real estate agent comes with experience and knowledge. They know things like who pays transfer tax and who pays title insurance in Tennessee. They also help you to be legally protected when something goes wrong. All realtors are required to have insurance for errors and omissions. Insurance and experience come in handy for legal issues such as listing inaccuracies, differences in square footage, and not disclosing certain things about your home. Don’t put yourself through costly legal headaches by not having this protection.

Pay The Lowest Commission While Selling Your House For The Highest Price

At Felix Homes, we're all for saving on realtor commissions. After all, we are Nashville's low commission brokerage. But, at the same time, we believe in financial responsibility. Being financially responsible doesn't just mean saving money but instead maximizing your net proceeds.

At Felix, we know that the advice and guidance we provide our clients' allow them to get the highest price possible for their homes while also paying the lowest commission. You could say it's like having your cake and eating it too!

Sign up to get more Real Estate related Goodness right to your inbox.