Why You Don’t Need a Realtor

by | BiggerPockets.com

I recently came across an article that put something so well and so clearly that I really don’t think I could improve upon it. Everyone interested in real estate investing would do well to check it out.

In “Why Do You Still Need an Agent to Sell Your Home?” author Douglas Gantenbein makes an excellent case for the thing I am most passionate about: homeowners getting the power back in their real estate transactions (i.e., selling their own homes).

Written all the way back in 2004, this article cited the then-statistic that “Americans will spend about $1.14 trillion buying 6 million homes this year-both [setting]records.” And of that $1.14 trillion, Gantenbein writes, an enormous chunk would go to realtors. Is this fair?

Here are some highlights from the article:

  1. Realtor work doesn’t equate with realtor commission.

    “And what do Americans receive in exchange for that commission, which can total up to $24,000 on a $400,000 home? In many cases, not much. A realtor’s license can be had after as little as 50 or 60 hours of training (the person who cuts your hair probably has 1,000 hours or more).”

  2. Realtors seldom work in your best interest.
  3. I was flipping through Freakonomics recently and remembered this little anecdote from one of the authors’ real experience:

    “K. wanted to buy a house that was listed at $469,000. He was prepared to offer $450,000 but he first called the seller’s agent and asked her to name the lowest price that she thought the homeowner might accept. The agent promptly scolded K. ‘You ought to be ashamed of yourself,’ she said. ‘That is clearly a violation of real-estate ethics.’

    K. apologized. The conversation turned to other, more mundane things. After ten minutes, as the conversation was ending, the agent told K., ‘Let me say one last thing. My client is willing to sell the house for a lot less than you think.’

    Based on this conversation, K. then offered $425,000 for the house instead of the $450,000 he had planned to offer. In the end, the seller accepted $430,000. Thanks to his own agent’s intervention, the seller lost at least $20,000. The agent, meanwhile, only lost $300-a small price to pay to ensure that she would quickly and easily lock up the sale, which netted her a commission of $6,450.

    So a big part of the real-estate agent’s job, it would seem, is to persuade the homeowner to sell for less than he would like while at the same time letting the homeowner know that a house can be bought for less than its listing price.”

  4. The NAR is an exclusive group that doesn’t want to give up dominance.
  5. “Overall, the NAR has ensured that nearly all residential real-estate transactions still are conducted between two agents in cahoots. And they’re largely responsible for keeping commissions close to that 6 percent level when any normal law of competition would suggest they’d be lower.”

  6. Therefore, FSBO has a lot to offer, in my opinion.

Using a quality FSBO company like Buy Owner puts the power back in the hands of the investor. It’s definitely a smart decision for savvy investors.

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  1. Make sure you let them know that you may also represent yourself in court in the event your FSBO deal goes badly, and the buyers is suing you. So you also won’t need one of those overpriced real estate attorneys out there.

    Then, you can use all of that money you’ve saved to pay to the buyer (since most all FSBO lawsuits go in the favor of the buyer) and you won’t have that lazy old Brokers insurance policy to fall back on.

  2. Oh, how things have not changed. Despite the power of the internet, and some home owners trying to be more independent, FSBO’s are still not easy to sell.

    Part of it, is there is just not any real way to get out in front of the public online for the FSBO. Sure they can list their home on one of the FSBO websites, but I read someplace that on one of them, I think it was FSBO.com as much as 75% of the traffic to the site was REALTORs and Mortgage brokers, looking for potential clients. Which made me wonder how much of that remaining 25% was other would be FSBO’s checking the site out, and trying to decide if they should spend their $500 to get listed on that site as well.

    I don’t mind at all when people try to FSBO, I think it is great, It just tells me who my potential listings are 4 to 6 months down the road.

  3. I agree Jim. If I left the business tomorrow, I assure you, I would still list my home with a brokerage when it came time to sell. Even if one is naïve enough to believe that agents don’t know or do anything for their money (which is foolish beyond belief), one should still bear in mind the liability they take on.

    I certainly wouldn’t ever even consider buying a home directly from the owner. What happens if in two years the foundation crumbles because of a problem that wasn’t disclosed during the sell, or discovered during inspection? Perhaps the previous owner is out of State, what do you do? If you sell your own home, and two years later get served a summons and learn you’re being sued because the buyers house burned down because of that fancy ceiling fan you installed yourself, what do you do? You get a lawyer, dig a hole, and throw money in it every day until you have no more, that’s what you do.

    I buy my cars at dealerships (even thought the salesman will make thousands for writing it up), because I know if I buy from an owner, and it’s a lemon, I’m screwed. I pay people to do my taxes, because if there is an error, and the IRS comes knocking, I’m covered.

    In a litigious society, any opportunity one has to put a licensed professional in between themselves, and the liability, they would be a fool not to. An ounce of prevention is worth a pound of cure.

    Anyone wishing to pick up “Why Do You Still Need an Agent to Sell Your Home?”, may also wish to grab a copy of REPRESENT YOURSELF IN COURT By PAUL BERGMAN – SARA J. BERMAN-BARRETT

  4. Yes, as an active real estate investor who happens to have a license, I do see crazy stuff like that in the industry. How common it is is exaggerated by just how bad it is. We are much more likely to spread that type of story than to spread the professionalism stories that you would expect as the norm and that we typically see on a daily basis.

    Just my two cents.

  5. There are bad lawyers, bad doctors, bad hair stylist (as seen on The People Court), and of course, there are going to be bad real estate agents here and there as well. To simply take such an example as being representative of the profession as a whole is terribly prejudicial and unfair. To recommend people just go it alone because it’s just too easy to pay someone to Market and sell your home properly is reckless (and fees are not set, they are always negotiable).

    I’m curious; if someone follows Jane’s advice, and ends up in litigation as a result, could she herself be liable for their loss?

  6. Jonathan Dalton on

    Timeless advice … fortunately the market hasn’t changed at since 2004. All you need to do is put the “for sale by owner” sign in your front yard and the buyers flock to your door, offers in hand.

    There’s nothing to it.

  7. Las Vegas Real Estate Guy on

    LOL. Good one Jonathan. Then they can turn to a trusted lender for the loan…..

    Chris makes a good point. FSBO will have to let anyone in, regardless. You don’t know who they are, if they are even qualified to buy the place, etc. There are many facets to the service received, some are easy to quantify, others not so much. Somehow I doubt fsbojane could name three.

  8. Agents definitely take a big chunk of the money, which is why most people go into realty to begin with. However, now, especially in California, the real estate market has taken such a dive that agents are looking to other business opportunities to make anything they can.

  9. This is an interesting debate. I have seen both sides of the real estate coin, and can see how both ways can be beneficial to the seller. Each person should weigh all the pros and cons of going without an agent and decide for themselves. It does mostly boil down to how long are they willing to wait, and how much time are they willing to invest.

  10. I really get tired of hearing the argument that Realtors do nothing for their chunk of the sale. People fail to realize that they are paying more for a system that works than for the listing agent to earn an hourly wage that you think is fair. The listing agent may not put a lot of time in for your house directly (they do invest money though), but you are paying for all the MLS technology and for ALL those agents out there traipsing buyers around all day every day – which your listing agent is likely doing too. Its the whole that you are paying for, your listing agent is just a small part of that.

  11. Real Estate Agents play a vital role in the real estate transaction….just make sure you hire a good one. Not to hire someone to look out for your interests is like hiring an unlicensed contractor to remodel your kitchen….you may save a few bucks if all goes well, but you will definitely pay more than a few bucks if anything goes wrong! Also, let’s not overlook the excerpt from “Freakanomics” which actually points to an area of the business that does require further discussion….dual agency! I still find it hard to believe that there are investors out there who are convinced they get a better deal using the Sellers agent to represent them. You may save 1 or 2 points on commission, but then end up paying tens of thousands more on the sales price and/or loss of concessions. “Penny wise and pound foolish” as my grandmother used to say!

  12. Oh, boy, what a discussion we’ve got going here! I can tell I’ve ruffled some feathers, so let me start of with this: nothing personal, folks. I’ve been an agent (a successful one, if I do say so myself), and I worked hard. I’m not saying agents don’t.

    I feel like there’s a lot of material to discuss, so I’ll try to make this organized:

    1) Please note I was citing info from another article. I’m not pulling these ideas out of thin air. Heck, these ideas aren’t even original to me. A lot of other people are seeing the benefits of FSBOing their way through home ownership.

    2) Real estate agent DOES NOT = real estate lawyer. Come on! Look at the difference in training, the difference in responsibility. I am so tired of hearing that analogy. The comparison isn’t even a comparison.

    3) AS FOR PROBLEMS: If you knew anything about FSBO companies, you might know about the valuable help they provide. Places like BuyOwner.com walk you through the process and will be there for any questions you have.

    4) AS FOR PEOPLE SHOWING UP AT YOUR DOOR: Again, with a FSBO company, you don’t have to list your address. No one will show up unless you want them to. You can ask them to get prequalified, you can tell them you’re not ready, you can do whatever you want. That’s the whole point: you’re in control.

    5) AS FOR AGENT’s BENEFITS: A couple commenters referenced what agents do–“the benefit can be huge” and “Even if one is naïve enough to believe that agents don’t know or do anything for their money”–but they did so very generically. I’d like someone to give me some real data, some actual specifics of what an agent provides. Better yet, tell me what an agent provides that a buyer can’t do alone and that is worth 6% of the selling price.

    And one more thing, just since no one ever answers it:

    Seriously, think about it: why should the selling price of a home dictate the agent’s fee? Why should the price matter?

    Is the nicer house getting better representation than the less expensive one? Then play around with that in your mind for a while. Which home would you be more eager to sell, as an agent?

    • fsbojane and writer of this blog: As “licensed or as you say you are, which I doubt” agents you duty is to provide valuable information to people to help them make the buying and selling process easy. NOT tell them a bunch of BS of how easy selling yourself is, because it is not. I flip fsbo’s overr to reality everyday and most of them sell within a month of me listing them. Why lie and say that the fsbo websites work, 90% of the houses on those sites are A. listed with a realtor, B> sold by a realtor. Type in fsbo.com’s owner sells house in google, imagine that the owner of the company sells with a REALTOR! Why? because it only makes sense. Im not saying there are not shady realtors because ie dealt with some of them and they should have lost there license long ago, but why tell owners that they can do it themselves when they have either never sold a home, or have any idea how. yes, you can google it, yes you can list it, but fsbo sites and google cant save the home owner from lawsuits, the buyers agent wiping the floor with them with negotitation and not having a disclosure is very risky. Plus why waste the money? if a home doesnt sell with a Realtor, you owe nothing they make nothing, if you advertise yourself and it doesnt sell, guess what you just blew 2-4k on advertising the way REALTORS do, yeah commisions are high, but ask yourself this. If someone gave you a job and said im not going to pay you by the hr but by how much you do, how much would your time be worth? if a agent doesnt sell a house in 3 months, his/her family doesnt eat, not to mention good agents will hunt for buyers for your home.Heres another FACT for you, count how many fsbo listing there are vs broker listings, count how many fsbo listings sold last quater vs broker listings, if its sooo easy why arent all the broker listings selling fsbo? Why? because it makes NO sense!

  13. Are you saying there is no difference in cost and effort marketing a $2,000,000 luxury home and a $70,000 fixer upper?

    Actually, in some markets it might take 2 years to sell a 2ml homes, and even then your beat down on commission, at extraordiary cost. I could sell 80 $70,000 homes in two years at equal cost and make more off of them.

  14. October ’09 will mark my 40th year as a licensee.

    This humorous discussion comes up cyclically and with the same long term results — nothing changes. Why?

    It’s due to millions of individual decisions made by property owners who’ve looked at all their options and opted out of FSBO status.

    For every FSBO in existence today there were 30 when I was a rookie, so long ago. Either the industry has matured and increased the quality of service and results, or FSBO’s (at least according to the piece quoted) have demonstrated two consecutive generations of severely decreasing IQs.

    My money’s on the later. 🙂

  15. Well, Jane, I agree with you. Not everyone needs the service of a real estate professional. Some people may be better off without using a real estate professional. They may actually save money. Six months ago I stopped at FSBO and looked at their house. They said they wanted $220,000 for the home. I agreed that it was a good asking price and if they had listed with me I would list around the same price and no higher than $229,000. I had some buyers looking in that price range and the home owner assured me they would pay me half of my commission rate if I brought them the buyer. I didn’t show the house and I didn’t bother trying to get them to list. I sold my buyer a home they liked in the MLS – actually it was in my company inventory of homes.
    Anyway, the FSBO home owner sold his house around the same time to someone for $190,000 and a similar home just sold last week using an real estate company for $180,000. Jane, I’m sure you know the market has been in a decline over the last year. So, the difference in price is right in line with the amount the FSBO and the house listed by the real estate company sold the properties for – In my opinion. Of course the house I sold my buyers went for $220,000 and had an attached 1 car garage but, not in as good of condition as the FSBO home.
    So, you are correct – sometimes you don’t need a real estate professional and you can do it on your own. However, that’s not the real story here. People have been selling their own stuff for years – cars, houses, clothes, you name it and people have sold it by themselves without using the services of a professional.
    I sometimes wonder if all the costs to be a real estate professional is worth the end results – dollar wise. I mean I pay for annual license and membership dues, continued education, association fees, and advertising expenses that are like the cost of gasoline, out of control. The time I spend doing this job is closer to 50 and maybe 60 hours a week. I am getting tired. I do have other income and health benefits so I am ahead of most of my peers.
    Now having said all that, Jane. Let’s get down to the real problem of the business. I looked at your web site and I am not sure it is even remotely helpful to the home owner who is wanting to sell a house without the use of a local real estate company. I looked at your profile and kind of feel that that is where the bitterness comes from – your own experience. I am sorry that you could not make it as an agent. It is a tough business. It is tough because, for the most part, it is too easy to get a license. So someone like yourself gets into the business and has no respect for what is required to make a living selling real estate. You beginning buying and selling properties for your own investments. I would guess you purchased listing that came your way while “working” a local company. You saw the value and because you had some knowledge and money were able to “flip” the homes for a profit. Good for you!
    Did that make the owner of the local real estate company upset that you would take the good listings and buy them yourself just to re-sell them without paying the office any commission dollars? That takes a lot of nerve. The owner of a business wanting to make a profit on your investments. I don’t blame you for being upset, Jane. You go girl.

  16. Gregory Bain:

    Let me get this straight: You saw a quality property out there, listed for sale by owner, in your client’s price range and even in better condition (!!) than the other options.

    But instead of giving your buyer the choice of which property to buy, you made the decision for them and didn’t allow them to see the better home, simply because it was a FSBO home.

    Your direct quote states: “I didn’t show the house and I didn’t bother trying to get them to list. I sold my buyer a home they liked in the MLS – actually it was in my company inventory of homes.”

    That, Mr. Bain, is completely unethical, and you should be ashamed of yourself. You weren’t even willing to work with these homeowners, simply because of your own chip on your shoulder. Disgusting.

    I don’t even want to respond to your other baseless accusations now. I think it’s pretty clear who is working in the interest of the homeowner and who isn’t.


  17. Actually NOT a realtor on

    WOW… I’m with Jane. Gregory Bain’s response pretty much sums it up. He wouldn’t show his buyers the better property, and even admits it? Again, wow. That, Gregory, is what gives realtors a bad rep.

  18. I live in one of the most booming real-estate markets in North America; Calgary Alberta Canada. The cause of this boom is a direct result of a thriving Oil & Gas market.
    Property values have gone through the roof and everybody is trying to catch a ride on the gravy train.
    During this boom, I purchased a home and promptly sold it in 8 months for almost $100,000 more than what I paid. I had a realtor “sell” it for me. I guess that depends on your definition of “sell”. I took all the photos, had a professional interior decorator come by and offer suggestions on how to stage my home, I had it cleaned by a professional; I even hung the signage myself. All my realtor had to do was post it on MLS. The result?…my home sold in 1 day. That’s right; less than 24 hours of being on the market.
    My hypothesis is this, if you have a nice home and make it attractive to the masses (decore, furnishings, cleanliness etc.), your home will sell itself.
    As for having a so-called “professional” do it for you, well I must say that of the dozens of agents I know, very few of them are educated. In fact many of them worked in the bars or sold drugs and turned to the lucrative real-estate industry to build a career.
    No offense to the realtors out there, but I personally don’t feel the need to pay somebody thousands of dollars to sell my home when all you really have behind you is a couple of hours of practicum and some crappy tests that an 8 year old can pass.

  19. @ Mike

    I think the major perk of a realtor for a lot of people is the time. In some cities it is extremely hard to find a place to live, so much that it’s like a fulltime job. When my parents moved to Philadelphia they had almost no choice but to get help finding adequate real estate. While in places like Utah or Calgary it’s often easy to sell on your own, in more densely populated areas it takes a LOT of work.

  20. I would never buy a house without a Realtor. Sellers are out there to make a buck and take advantage of a buyer. Most of them hide all the problems they know the house possesses. Using a Realtor costs a buyer nothing. At least if the home is listed for sale, the seller is obligated to sign disclosure forms and can’t sell a home without disclosing.

  21. I think the one issue that is not being addresses directly (and is the crux of the issue as far as I’m concerned) is that how realtors are paid is ripe with opportunity for conflict of interest. I completely agree that industry professionals are needed and most real estate agents provide these valuable services. But when agents are paid on commission, it doesn’t provide the right incentives to work completely on behalf of the seller or buyer. It’s not an issue of a few bad apples providing the fodder for these articles. The system itself doesn’t allow realtors to be completely unbiased. I think the system has stayed the same way for so long because each house sale is, for the most part, an independent transaction with independent people. When confronted with the option of using an agent for this costly transaction or trying some kind of “experimental” approach, most people will go with the tried and true. There should be a better system but because of the history that the system has, a new system cannot get traction. That and most any other way of selling (or buying) means cutting the industry professionals out of the deal which is replete with issues. We need the professionals, but it can be akin to getting in bed with the wolves.

    Someone made a comment about how when using a realtor you are paying for more than just that agent; you are paying for the entire system. I can understand how that would make sense if you are buying and selling homes your entire life where the costs (and values) can average out. But if I buy (or sell) just one home in my lifetime, there is a good chance that I will end up somewhere off of center.


  22. John O'Connor on

    Listing a home with FSBO is a BIG MISTAKE! I’ve known people who put their homes for sale just by simply putting a sign and believe me they were no happy. The potential buyers and the sellers were not capable of properly negotiating or executing the transaction smoothly as language, inexperience and other factors were to blame. Remember, you get what you pay for. A real estate professional can hekp you negotiate deals, take docs back and forth to you,buyers,lawyers, setup for moving day, and so much more. A realtor can also find the buyer for you just by simply talking to other agents in the office. This FSBO business is just that, a business. A bunch of people putting others down to make some money, shame. FSBO jane, try other ways to persuade people to give you business. Becoming a real estate salesperson is not easy, relocating individuals and making sure that they are happy where they live after they have moved is also what a salesperson does, or most do anyway, do you provide this service, No! All you do is put a sign on the lawn and put it on the internet. Im sorry, my grandmother can do that. Do you do open houses? No! But I guess the sign on the lawn will make up for that 😉

  23. There are many flaws with this opinion.
    1. Realtor work doesnt equate to the work. Tell that to my clients whose home sells while other FSBO and Realtor homes sit on the market and expire. Fact is that only about 10-15% of FSBOs sell and many of those are below market value. All agents arent the same and we sell our homes on average at 3-4% higher than the average agent in our area.
    2. Realtors seldom work in your best interest. Again there are good an bad agents,. I always work in my clients best interests even if that means talking them out of making bad decisions. Fact is that FSBOs do stuff all the time that isnt in their best interest in negotiations, marketing, pricing, and staging. Compared to a professional most FSBOs are not helping themselves sell their homes.
    3. Agents are in cahoots – No I represent my clients and the other agent represents theirs if I negotiate, I am working on getting my client the most, a FSBO has no expert negitiating for them so they usually take a loss or are so rigid they lose sales.

    4. Little tidbits, the author suggested a FSBO site to advertise. Most people going to a FSBO site are looking for a deal, if they google a FSBO site they plan on finding a deal or putting a lower offer because the seller doesnt have a professional, or because most FSBOs are overpriced this only encourages lower offers. It is a recipe for a loss and statistically FSBOs tend to sell about 9% lower than homes with agents. I know because I have built my business on FSBOs that dont sell and end up listing with me. For 8 years I have been getting business from the 9 out of 10 that dont sell. Most people who do FSBO do it because they are simply undereducated or they would make a smarter choice.

  24. A conversation I had with my father as a youngster that has stuck with me thru the years and I think it applies here.

    One day I asked my father why we he take his car to a shop for an oil change while my friends dad changed his own oil? Is it because you don’t know how?

    He responded with…….
    “I know how to change the oil in my car but I choose not to. That is not what I do best or how I choose to spend my free time. The best person for that job is someone who has all the right tools and practices changing oil regularly. You will learn that if you focus on what you do well you will be paid well and make enough money to pay others for what they do well. That way you have time to spend with loved one enjoying life and keep the economy strong.”

    “And by the way I know how to make ice cream also! Now ask yourself would you like to put my amateur skills to the test or would you rather go to Ted Drew’s for that famous frozen custard while we wait for the oil to be changed?” Lesson learned!

    I am lucky enough to have an opportunity to focus on my passion for Real Estate and get paid to do what I love. As an Agent I work hard for my clients so they can keep to their schedules and experience a seamless transaction. I invest a great deal of my time, efforts, and money to protect their interests and help them get the best deal possible. In turn I can pay others to do what they are best at so I have time to spend with my loved ones and enjoy life. Full Circle!

    Time is a precious gift and life is too short! A minute save is a minute earned.

    Beyond the liabilities and tricksters……I worry about the safety of the FSBO’s. They don’t take the same precautions we take when letting people in their homes and knowing their schedules.

    I no longer actively seek FSBO’s because in my market they are often looking to overcharge for their homes instead of coming to grips the short sale situation they are in. Whenever I see a sign I will drop off a safe tips booklet.
    On more than one occasion i have been called by a FSBO seeking help from a professional only after they have experienced the bad…. Identity theft-robbery-threatening offers.
    I would encourage other Agents to watch out for those stubborn FSBO’s – they are easily excited over showings and don’t always realize the dangers in our world.

  25. The current transaction models for the buying and selling of real estate are flawed. For the investor the wholesaler-buyer transaction model pits the best interest of the wholesaler; profit, versus the best interest of the investor-buyer; buying property at the lowest price possible.
    A real estate agent’s financial best are often best served by either selling for the highest price possible or taking a lower offer to make a quick sale. By working as an intermediary between seller and buyer a real estate agent may refuse to give a seller an offer that doesn’t work in the real estate agent’s best interest. The situation is just filled with opportunities for conflict of interest.

    I see new transaction models emerging that will allow for more transparency between buyer and seller and lower cost.

  26. Jessica Todd on

    I think having a Realtor is giving the buyer and seller MORE power! We have to do what you tell us to do, within the law…We can’t stop say a minority from looking at a house, but we are on YOUR side. The lady who told the buyer that he clients will accept less is in major violation, and can and I do encourage the buys to take her to court for triple damages, along with reporting her to the board, because she should NOT be an agent, and those people are the ones that give us a bad name.

    Having a realtor means you can trust that everything is being done the way it should be. How are you suppose to understand everything going on at a closing with out one? Some people might, but others won’t. So, do you NEED an agent, no….but I think it is a better move to have one.

  27. In the industry I do see, as an active real estate investor who happens to have a license, these kind of things. The problem lies that we are much more likely to spread that type of story rather than to spread the professionalism stories that you would expect to see and that we typically see on a daily basis.

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