Do You Really Need a Real Estate Agent to Buy or Sell?

Do You Really Need a Real Estate Agent to Buy or Sell?

Realtor handing house keys to a couple

The Internet has challenged many long-established assumptions about buying and selling a home. Transactions that were once difficult to perform without the assistance of a third party — setting up travel plans, say, or reshaping an investment portfolio — are now far easier to perform on your own.

So when it comes to buying or selling a home, one of the biggest and most complicated financial transactions in most people's lives, it's worth asking whether doing it alone makes sense.

While it's certainly possible to buy or sell a house without using a real estate agent — there are even a number of advantages — don't discount the value of a professional just because you think it will save money. Sometimes it will; sometimes, it won't.

Below are some pros and cons to help you make the decision:

PRO: Agents have more information and expertise

While anyone can access a number of websites that provide information about listings, real estate agents have access to an exclusive database, the Multiple Listing Service (MLS), which provides detailed price history information — in other words, the MLS lets agents tell you how the price of properties has changed over time. Agents also have training, familiarity, and experience with what can be confusing paperwork and a hard-to-navigate process.

CON: The fees, of course

The math is simple, and so is the point. Selling agents will typically charge you around 6 percent for their services — thousands of dollars that you would otherwise be counting as profit. Buying agents, however, do not directly charge the buyer a fee.

PRO: Agents can make you more overall money

Even though the cost of an agent might make you consider selling your home yourself, think about what an agent can do for you as a negotiator. Experience, access to the MLS, and knowledge of the marketplace can all lead to a higher negotiated price — in many cases, easily high enough to justify an agent's fees.

CON: An agent's interests are not necessarily the same as yours

When you're buying a home, there's a basic, underlying economic tension between you and your agent: You're rewarded differently for different outcomes. Whereas you're looking to buy a home at the lowest possible price, and therefore save as much money as you can, your agent's compensation actually decreases as you find a better deal.

The following hypothetical situation demonstrates a possible problem when you're working with an agent to sell a home. Say your house has been on the market for three weeks when you get an offer for $250,000. Based on your research, the offer is lower than you'd hoped, but it's a firm offer. Your agent, who will most likely be splitting the commission with the buying agent, stands to make $7,500 on the deal.

You hold out and decide not to sell, against your agent's advice. Two weeks later, you get another offer: $275,000. While your decision has proven extremely valuable — you've made an extra $25,000 — the difference in profit for your agent is far less significant. His overall commission has only gone up by $750. The difference between your additional profit and his additional profit is enormous.

Despite being your representative, getting the best deal for you may not have been in his best interest but fortunately your decision has worked out better for you.

Disclosures

The information in this article was obtained from various sources not associated with State Farm®. While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. These suggestions are not a complete list of every loss control measure. The information is not intended to replace manuals or instructions provided by the manufacturer or the advice of a qualified professional. Nor is it intended to effect coverage under our policy. State Farm makes no guarantees of results from use of this information.