Agent or No Agent?

In the pursuit of listing your property for sale, the thought crosses your mind... "Should I use a Realtor or maybe I can just sell it myself and save some money." The best way to consider this decision is to run through some considerations to help weigh in on the decision.

Average Cost to Sell a Home

As of this writing, the median home price in California is $571,875. When listing your home the average commission to the Listing Agent is 3% and the average commission to the Buyer's Agent is 3% totaling 6%. This means the average cost to sell the median home in California is $34,312 or $17,156 to each agent.

Most Realtors work for a broker and work on a commission split so the brokerage can pay for office equipment, employees, building leases and make a profit. The average commission split between an agent and the broker is 60/40. The Agent would keep 40% of the total commissions. In this example, the agent would keep 60% of $17,156 leaving each Agent with $10,293.

Average Days on Market

The typical US home spends between 65 and 93 days on the market, from listing to closing. That means that a home with a typical 30 to 45-day close was on the market for between one and two months before accepting an offer. Keep in mind that the time a home spends on the market varies greatly depending on local market conditions, demand and seasonality.

One interesting point to note is that over the past nine years, as the housing market has recovered from the recession, there has been a dramatic drop in the length of time houses are on the market — the average number of days on the market was 140 days in 2010.

And the 65-93 day figure above doesn’t include the time spent thinking about moving before taking action. Sellers spend roughly six months contemplating the decision to list, and that doesn’t include any time spent completing repairs or preparing for listing.

Factors Eroding Your DIY Savings

  • DAYS ON MARKET - A home listed For Sale By Owner (FSBO) spends an additional 19 - 30 days on the market longer than if they listed with a Realtor. Not only do FSBO's empirically take longer to sell, 20% end up hiring a Realtor to re-list on the MLS which converts to an average 68 days more on the market than if they listed with the Realtor from the start.
  • MORTGAGE PAYMENT, TAXES, INSURANCE - Don't forget you have a monthly mortgage payment, property taxes, and homeowners insurance, and even monthly HOA dues eating away your FSBO savings. If your P.I.T.I. mortgage payment was $3,493 per month and it took you 2 months longer to sell it yourself, that's a loss of $6,986 to your FSBO savings.
  • BUYERS WITHOUT REPRESENTATION - When holding an open house, a majority of the traffic are people who live in the neighborhood looking for decorating, upgrade, landscaping, flooring, or other ideas. They are not in the market to buy and have no interest in your home. When you are selling by owner, these same folks now call you to make an appointment to see your home and leave and waste a few hours a week showing your home to people who have no interest in your home. You are desperate to sell your home, you've never done this before so you let everyone in who calls you. Unfortunately, some may even be looking to case your home for robbery. You can even receive an offer and find yourself 3 weeks in and find out the potential buyer didn't qualify... You told other buyers "sorry I have an offer" and now they are gone. Back on the market, you go. This leads to a loss of invested time, days on market, marketing expenses, safety concerns, and no discernment on who is a real buyer and who is not.
  • NO NEGOTIATION POWER - A buyer knows you aren't using a Realtor to sell you home. Just as you didn't want to spend 6% to list with a Realtor, your buyer doesn't want to pay full price for your home because you aren't using a Realtor. The first thing your potential buyer is going to say is "we want a price reduction of 6% if you aren't using a Realtor." Maybe you are a decent negotiator and come to an agreement to reduce the price by 4%.
  • DEFICIENT LENDER APPRAISAL - Lenders use their own appraisers and most come from hundreds of miles away for the job. This means you have an appraiser who is not familiar with your local area. This can lead to your appraised value coming in anywhere between $10,000 to $30,000 or lower than you projected. You are forced to bow to the pressure and lower your sales price down to the appraised value. If you had hired a Realtor you would have had a better chance of arbitrating the appraised value and getting the appraisal adjusted to match your listing price.
  • LAWSUITS - One of the biggest risks you take as a FSBO is non-disclosure. There are tons of general disclosures, local disclosures, and specific disclosures. Most real estate related lawsuits are very expensive. The buyer will be suing you in almost every case. That means if you lose not only are you responsible for the damages and anguish amount, you are also paying their court expenses and attorney fees on top of paying your own attorney fees to defend yourself. If you are lucky you'll end up in Small Claims court which has a maximum suit amount of $10,000 plus recovery of court expenses.

This list isn't an all-encompassing factor list however if you experienced each of these while selling your home. Let's say you conservatively got hit with each of these points listed above:

  1. You had a buyer that wasn't qualified up-front and it took an extra 2 months to sell. You spent an extra 2 months on mortgage P.I.T.I. totaling $6,986.
  2. Your buyers tell you they will go buy this other house listed by a Realtor or they will buy yours instead if they can get a deal since there is no Realtor commissions getting paid. You reduce your price by 4% and keep 2% because the 6% Realtor commission was going to cost you $34,312. You lost $22,875 in the 4% price reduction but kept $11,437 (2%) in your pocket. Not bad
  3. You close the sale and 6 months later you receive a summons to small claims court for $10,000. You find out you forgot to disclose to your buyer your home was built in an era that used lead-based paint. The buyers received an estimate for a company to remove the hazardous lead-based paint material from the home and repaint. The estimate was for $12,500 but they can only sue in small claims court without hiring an attorney for $10,000. You go to court and lose the case. You now have to cut a check for $10,000 and you also have a judgment on your credit report for the next 7 years.

Where did you end up?

  • Saved $34,312 by not listing with a Realtor
  • Lost $6,986 by having to pay 2 extra mortgage payments
  • Lost $22,875 (4%) to discount negotiation with the buyer.
  • Lost $10,000 because the lender appraisal came in low.
  • Lost $10,000 because you weren't aware of the required disclosure and lost a lawsuit.
  • Total Savings: (-$15,549)

Putting Commissions Into Perspective

This means if your home took 90 days to sell, your Realtor had to work for 3 months. This time doesn't include the month or two your Agent worked with you to prepare your home prior to listing. So if you don't count the 1 or 2 months your Realtor helped you prep for listing, take the $10,293 and divide it over 3 months. That is a monthly income to the Realtor of $3,431 or $2,402 after taxes.

The average real estate agent in the United States closes 12 deals a year so based on the averages here, your agent would be making $41,172 a year before taxes.

What's Your Time Worth?

We will assume you qualify to carry the mortgage payment of the median home price. To calculate this we will use the median home price in California of $571,875. With an interest rate of 4% and a 30-year term, your monthly Principal, Interest, Taxes and Insurance payment would be approximately $3,493. You need to be completely debt-free making $8,123 per month with a 43% debt ratio to qualify for the $3,493 monthly mortgage payment. At $8,123 you are making $97,476 per year.

Before we calculate what your time is worth, let's first evaluate what kind of income it takes to buy the median home in California.

At a minimum to qualify for the median California home your monthly debt-to-income ratio must be at or under 43%. This means the mortgage payment plus your loans and credit card monthly payments can't exceed 43% of your monthly income.

The median annual income for California as of this writing is $75,277 or $6,273 per month. The mortgage payment including property taxes and insurance for a $571,875 home with a 4% interest rate would be approximately $3,493 per month. So this is what we have:

  • Median California home price of $571,875
  • Mortgage P.I.T.I. payment based on the median home price at 4% is $3,493 per month
  • Median California income is $6,273 per month.
  • 43% of the median monthly income is $2,697 ($796 shy of qualifying for the median home price)

What we can deduct from these points is the median income of California falls short of qualifying for the median home price by $796 per month. The median home price in California would require a qualifying debt-to-income ratio of 56% as opposed to the actual 43%.

So what's your time worth? Imagine your employer coming to you saying "why am I paying you $8,123 per month?" "I could do your job myself and save $8,123 per month." You would begin reciting the value you bring to the company, how you increased sales by 25% in the last 6 months, production increases, etc. in order to remind your boss why you should be kept on the payroll.

When you ask a Realtor "why am I paying you to sell my house when I can do it myself" it's that same thing. You have the expertise and knowledge of your job position your boss may not possess or may not have the time to do by themself. If your boss is making $20,000 per month then it wouldn't make sense to fire you and put a guy the company is paying $20,000 per month to do a job they were paying you $8,123 per month to do. That decision would cost the company $11,877 per month trying to save $8,123 per month.

Your monthly earnings are $8,123 per month so you are worth about $2,030 per week or approximately $51 per hour. While working your full-time job for 8 hours per day, you are going to sell you home by yourself.


Assuming you are debt-free and only have a mortgage payment


Murphy's Law

If you are not familiar with the term, Murphy's Law states "anything that can go wrong will go wrong." This is a good place to start when considering your options. Let's break down the most serious pitfalls when it comes to selling your home with or without an agent.


  1. Law Suits - Let's get this one out of the way first. Small Claims court has a maximum suit amount of $10,000 plus court expenses.