The age of the Internet has dramatically shifted the way all of us do business. Every now and again, you’ll hear about so-called “paradigm shifters”, new companies that will totally revolutionize the way that everyone does business - sometimes for the better, other times...not so much. The real estate business is no stranger to these companies; we’ve seen our business change a lot, from online listings to full-scale social media campaigns to get your home sold. There are two “disruptors” in the real estate game we want to talk about in this post: selling your home without help (known as For Sale By Owner, FSBO, or “fizzbo”), and selling your home through a flat fee company (in Canada, it used to be through ComFree; they were bought by Purplebricks, a UK company).

The advantages of either of these methods is, ostensibly, that you’ll save money, because you’ll have to pay your real estate agent a percentage of the home’s sale price as their commission. We’ll show you why not choosing a real estate agent can mean leaving money on the table, and worse!

Real Estate Agent vs. FSBO

There are so many problems with FSBO that I honestly don’t know where to start. Let’s go with the most obvious one: selling a home is a lot of work. Do you have time to inspect your home, determine its value, do any necessary cosmetic fixes, recommend a reputable cleaning company, run a social media campaign, stage everything, print signs, show it, stay in touch with lawyers and contractors, and engage in prolonged, intense negotiation? Between your 9-5 and taking care of your family? Probably not! Real estate agents handle all of this for you. We do a number of other things, too; check out this article by Realtor® on what real estate agents do to earn their keep. A good real estate agent will help you find defects in your house from infestations to faulty furnaces and plumbing problems. They’ll also help you find the best deal on repairing problems that would lower your home’s value.

Imagine a world where you’re doing all of that work. You’re bound to get stressed; if your home takes a long time to sell, you’re likely to get completely fed up, and you might take offers that are well below the value of your house. In fact, the National Association of Realtors statistics page shows that the average FSBO home in the United States sold for $200 000, whereas the average home sold by real estate agents sold for $265 500. There’s no way the commission you’re paying will total $65 500 on a home sold for $265 500, so real estate agents are actually making you money. It’s worth mentioning that the statistics are a bit skewed, because most people who list FSBO are selling lower value properties, but the difference is still staggering.

Expertise is another big factor when it comes to hiring a real estate agent. You wouldn’t represent yourself in court, and you wouldn’t diagnose your own illnesses; you’re not a doctor, nor a lawyer (unless you are, in which case, pick a different, relevant example). Why would you sell your own home? Real estate agents are master negotiators; we can get you the best price on your home.

One of the worst feelings is finding a prospective buyer, getting a down payment, thinking your home is sold, then finding out their credit is too poor to secure financing. Real estate agents help you avoid this problem by properly vetting potential buyers, asking pertinent questions about their financial situation, and ensuring that if they put in a down payment, they’ll be able to get a mortgage.

There’s the legal elements of home sale to consider, too. There’s a lot of information you have to disclose about your home; smart buyers will also ask for a property disclosure statement, and providing one that’s inaccurate could leave you on the hook down the line. An experienced real estate agent will find flaws and defects in the home that might cause problems down the line, and help you find good people to fix them, so you can sell your home faster, without ending up liable for problems. Part of the legalities of owning a new home with a mortgage is to ensure you get good  home insurance . For help with that a local lawyer is a fantastic addition to your real estate team.

Real Estate Vs. Purplebricks (Fixed Commission)

The second “disruptor” we want to look at: sites that offer you Realtors® on a fixed commission. The most notable of these is Purplebricks, which recently purchased Canada’s former fixed commission structure company. Purplebricks has a lot of advantages of FSBO, because you get actual real estate agents helping you to sell your property. That said, all isn’t as nice as it seems.

Were Purplebricks strictly advantageous, everyone would use them; percentage commission real estate agents continue to be the norm. Part of the reason for this is that you get what you pay for. Real estate agents want to earn their commission; as such, you’ll probably get harder working folks when you pay percentage.

When it comes to Purplebricks, the incentive structure is simple: sell as many homes as possible, as quickly as possible. That means it’s not to their advantage to sell at the highest price; rather, they want to sell at whatever price point will get the house sold. When it comes to a traditional commission structure, you can negotiate this problem away. Let’s say you have a house that you want to sell at $250 000, but are willing to accept $220 000 for. You might say that on the $220 000, the real estate agent gets 5%, totalling $11100. You might offer 15% on everything above that; that’s an extra $4500 for the realtor and an extra $25 500 for you. That extra is well in excess of what you would “save” on commission selling your home for $220 000.

All in all, going with a percentage commissioned real estate agent is still the best way of selling your home, for the right price, without having to put in a ton of legwork yourself, and with reduced legal liability. The advantages outweigh the hypothetical savings by a lot; as we’ve seen, you’ll probably make more money with a real estate agent, too!