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Real estate agent, iBuyer or FSBO: What’s the best way to buy or sell a home?

What we'll cover

  • Difference between agents, brokers and realtors

  • Benefits and considerations when working with an agent, iBuyer or homes that are for sale by owner

  • How you can do research on your own

The homebuying/selling experience is a deeply personal one. After all, this could be the biggest transaction you ever make. A real estate agent can help simplify confusing paperwork, connect you with the right buyers or sellers, work out deals, and reduce your anxiety about the entire process.

But even though working with an agent is the norm for most, you technically don’t need a real estate agent to buy (or sell) a home. Any homeowner can list their property for sale or sell to an iBuyer. So, is hiring a real estate agent the right move for you? Read on to learn more.

Agents vs. brokers vs. realtors

If you decide to use an agent, it’s essential to work with the right person. Many buyers use someone referred to them by a friend, neighbor or relative or one they have worked with in the past. It’s always a good idea to interview several candidates before picking one that best suits you.

It’s also important to note that all realtors are real estate agents, but not all real estate agents are realtors. So, let’s start with some quick vocabulary:

  • A real estate agent  is someone who has completed training, passed the required state exams, and is licensed to represent a buyer or seller in a real estate transaction.

  • A real estate broker is also an agent but has a higher level of education and has passed additional exams.

  • A realtor is an agent or broker who belongs to the National Association of Realtors (NAR). This person has pledged to uphold a very specific set of ethics — like putting the buyers’ and sellers’ interests first — to become a member of this industry organization.

The best fit is completely up to you. One candidate might have more experience but charge a higher commission. Another might have less experience but truly understands what you’re looking for in a home.

Working with an agent

The benefits:

  • You have an expert by your side to help you navigate the process

  • An agent’s network can connect you with the right homes (or buyers if you are selling)

  • Agents will negotiate on your behalf

The considerations:

  • You’ll have to spend time finding an agent you want to work with

  • Agents add a “middle man” to the home buying/selling process

  • Agents typically receive about 6% of a home’s price in commission from the seller

If you’re a first-time buyer or seller, an agent’s knowledge, experience and professional network could help you better navigate the process .

First-time home buyers make up about 31% of all house shoppers. Millennials, the largest group of first-time buyers, say paperwork and understanding the process are the two most complicated parts of buying a new home. And across all generations, 53% say finding the right home is the toughest part.

Lucky for you, these are all parts of the process that real estate agents are trained to handle.

For buyers, agents search through listings to find the homes that meet your criteria and help you weigh the pros and cons of each residence you consider.

A good agent will also have a large network (which might include professionals in home-related fields like construction, interior design and home financing) and know of homes that haven’t hit the market. The best homes in hot markets tend to go fast, so having a leg up on your competition could make all the difference. With a strong agent by your side and a pre-approval letter from a mortgage lender like Ally Home in hand, you’ll be ready to take on any bidding war .

Speaking of … found a home you love but a competitive market has pushed its price higher than what you’re willing to spend? Agents also help negotiate the price for you. Your agent can work with the seller’s agent (or the sellers themselves) to get you a house for a fair price.

Sellers can use real estate agents, too. Whether you’re upgrading your digs or downsizing to something that’s more manageable, your agent will work to bring serious buyers through your doors, potentially minimizing the amount of time your home is on the market (and the number of days you have to keep your home completely spotless).

A seller’s agent also helps with both open houses and private showings and will negotiate on your behalf with potential buyers.

Real estate agents put in a lot of time and effort so you don’t have to.

For their work, they typically charge sellers about  6% of a home’s sale price . So on the sale of an agent-assisted $265,000 home, they’d receive a commission of about $16,000.

This commission is usually split between the buyer’s and seller’s agents. And while the sellers typically “pay”  both agents , oftentimes that fee is worked into the listing price of the home, meaning the buyer essentially pays the bill.

Taking the iBuyer route

The benefits:

  • You can sell your house far faster than selling through traditional methods (as little as 24 hours)

  • You don’t have to host open houses or work with buyers

  • If buying from one, you may close quicker since you don’t have to worry about the seller’s timeline

The considerations:

  • An iBuyer offer may be less than what you could get from selling on the market

  • iBuyer fees are typically more than an agent’s commission

  • Agents typically receive about 6% of a home’s price in commission from the seller

iBuyers are a relatively new and fast-growing option for buyers and sellers in the real estate market. An iBuyer is a real estate company that uses technology and algorithms to quickly buy homes using cash offers.

As a seller, you might consider selling your home to an iBuyer if you are looking to close ASAP — possibly 24 hours or less. Even in the hottest market with a great agent and plenty of interested buyers, you’re unlikely to experience such a quick turnaround time when selling the traditional way. If you want to sell to an iBuyer, you don’t have to list your home. Just submit some basic info about your property and the iBuyer will give it an estimate and potentially make an offer.

Selling to an iBuyer can save you time and stress, but it isn’t free of fees. Sellers typically pay the costs of getting the home move-in ready, as well as potential agent fees (depending on the iBuyer company). All in all, fees usually add up to about 7.5% — about 1.5% more than a typical agent commission.

As a home shopper, you can work with an agent to purchase a home from an iBuyer, similarly to how they help you if you were shopping from traditional sellers. Or, if you’d prefer, you can go through the process yourself.

For sale by owner

The benefits:

  • FSBO homes tend to sell faster

  • You can avoid agent commission fees

  • It can make transactions smoother between buyers and sellers who know each other

The considerations:

  • FSBO homes usually sell for less money

  • Sellers have to price their own homes and deal with the paperwork

If you’re looking to save on commission fees or sell your home quickly (maybe to someone you know?), then going the for-sale-by-owner (FSBO) route could be a good strategy.

FSBO is less common, but it could help you put that “sold” sign in the yard faster than if you use a realtor.

The home buying/selling process can be unpredictable. It takes buyers about eight weeks and viewing a median of nine homes to find the right abode. But FSBO homes tend to sell faster than agent-assisted homes — largely because sellers know the buyer.

If you don’t already know a potential buyer, you’ll need to be a smart marketer to get the word out about your house to the right people. That means signage, web listings, flyers, open house setups and more. Be prepared to pay out of pocket for most of those expenses, too.

You’ll also need to price your house, a task that FSBO sellers say is the most difficult part of the process (followed by understanding all the paperwork). Our home valuation resource gives FSBO sellers a detailed report of their home’s estimated value based on market trends and comparable homes in their area.

While FSBO homes typically sell faster, they also sell for less. The typical FSBO home sold for a median of $217,900 in 2020, compared to a median of almost $295,000 for agent-assisted ones.

Realtor versus for sale by owner versus iBuyer. The pluses and minuses of these three selling options. When opting to sell with a realtor, the advantages are that a home typically sells for more money than for sale by owner. Less D.I.Y work is required, you have help with paperwork and negotiations and you have access to a larger network and more serious buyers. The disadvantages are that homes sold with realtors on average sell slower than for sale by owners and sellers must pay the agents commission, usually about six percent. When opting to go the for sale by owner route, the advantages are that a home sells faster than working with a realtor, you save money on commission, you can sell to friends or family with ease and there are fewer middlemen. The disadvantages are that for sale by owner homes on average sell for less money than with a realtor and it involves a lot of D.I.Y work, such as pricing and marketing the home, doing paperwork, negotiations, etcetera. When opting to sell to an iBuyer, the advantages are that a home can sell in as little as 24 hours, you avoid the hassles of traditionally listing your home (like staging, showings, inspections, etcetera), you receive an all-cash offer, and you can sell and close on your own timeline. The disadvantages are that homes tend to sell for less than when traditionally listed, iBuyer fees are slightly higher than realtor commissions (around 7.5 percent), and the transactions are impersonal, so there’s no negotiations.

Required: A bit of DIY

Even if you work with a real estate agent, there will be parts of the home-buying process you’ll need to do yourself.

“Is this a safe neighborhood?” might be one of the first questions that pops into your mind when house hunting. However, your agent can’t exactly answer that.

The Fair Housing Act of 1968 aims to prohibit housing discrimination based on race, color, national origin, religion, sex, disability, or family status.

Seemingly innocuous questions like “Is this a good place to raise a family?” or “How good are the schools here?” could be seen as discriminatory, and legally, your agent can’t answer them.

Instead, you’ll need to do some research on your own.

You can find demographic information, school rankings, and crime statistics (by zip code) by conducting a search online.

Closing time

Whether you’re sold on working with an agent or not, your home buying and selling dreams can be a reality. Depending on your needs and how much effort you want to put into the buying or selling process, a real estate agent could provide the assistance you’re looking for. But for others, an agent might not be worth the cost or the time involved.

Just like you know your dream home when you see it, once you understand the work of a real estate agent, you’ll know whether or not you need one by your side.

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