With the internet and the emergence of so many real estate companies like Redfin, Zillow, and many more, you might be wondering, Should I sell my home myself? It's certainly a great way to save on commissions.
After all, there's a dearth of supply and the real estate market is quite strong in many parts of the country. If there's a time to try selling your home yourself without a license, now could be the time.
One of my biggest regrets when I sold my San Francisco rental house in 2017 was that I didn’t TRY to at least sell my home myself. My tenants had given me a 30 day notice and I just had a baby so I felt too busy to try.
I Didn't Want To Regret Not Trying To Sell My Home Myself
My plan was to always keep my SF rental house for the rest of my life and continue renting it out. Heck, I've even thought about buying a rental property in Hawaii as an investment too. Anyway, I bought the SF rental house in 2005 for $1,525,000, lived in it until 2014, and had been renting it out since.
But after three years of landlording, I just couldn't take managing irresponsible tenants anymore. The only demographic I could attract was five guys. In other words, my house always turned into a party house where neighbors complained and things were damaged.
I decided to hire an agent for a 4.5% commission to compete with me. She was to find a buyer for over $2,500,000, and I was to get a good tenant for over $8,500 (my tenants were paying $9,000). I’d go ahead and go with whoever succeeded first.
The Race Was On Like Donkey Kong
I had a 20 day head start because I started showing the house before the lease was up. Half my tenants left already, and the house was relatively clean. Then I tried for another 30 days to find tenants and I couldn’t find anybody other than 5 dudes who wanted to pay less.
By best offer after 45 days was for $7,500 from a startup founder divorcee with three kids. Her finances weren’t stable. The other offer for $7,500 was from a family of six with a dog, which would create major wear and tear. I knew the rental market was weak due to the emergence of many new luxury condos downtown that competed with my house. But I didn't realize the rental market had fallen so much.
My realtor was able to find me an offer for $2,600,000 within 10 days after five private showings (I told her no open houses b/c I wanted my privacy and really didn’t want to sell). $2,600,000 was great because it was $100,000 more than my aspirational price, and $1,000,000 more than what I could have got when I listed the house for sale in 2012 when I left my day job. I thank my lucky stars every day I failed to sell my house in 2012!
But still not wanting to sell and pay all those commissions, I countered at $2,800,000, thinking the buyers would just balk. They ended up countering at $2,700,000. Then I countered them at $2,740,000 and they accepted. I agonized over selling because I knew that 20 years from now house will be worth over $4 million. But I had to live for today, and this house and my other rental property were the main sources of controllable stress in my life.
Using An Real Estate Agent Isn't That Bad
On the one hand, it feels good to sell a house I bought for $1,500,000 in 2005 for $2,740,000 in 2017. I walked away with $1,800,000 after putting $315,000 down. On the other hand, paying $123,300 in commissions really leaves a bad taste in my mouth.
The only way I can console myself for using a real estate agent is to tell myself these two things:
1. I would still need to pay the buyer’s agent 2% – 2.5% = $54,800 – $68,500. Some agents won’t show their clients houses if the commission they receive is less than 2%! Therefore, I would have potentially faced lower demand while not saving as much as I thought.
2. I may have been too close to the house and negotiated poorly. In other words, I may have accepted $2,600,000, or countered at only $2,700,000 and accepted $2,650,000 because my aspirational price was $2,500,000. With a lower price, I would have wiped out all my savings by listing myself. With an agent as a barrier, I felt more confident to get more aggressive with pricing. Selling a house is much more emotional than buying a house.
Try To Sell Your Home Yourself First, And Then Go Pro
If I could do it again, I would have tried to list and sell my house myself for 1 week to test the waters. If I didn’t get any nibbles, then I would have hired an agent.
The risk to listing yourself is that your property gets poorly marketed and becomes a stalefish listing. Once your house passes the 14 day window in San Francisco at least, people start wondering what’s wrong and the price goes DOWN.
Although I know I sold the house too soon, I just wanted to simplify life. I invested $550,000 of the proceeds in real estate crowdfunding for a potential 15% annual return. And the rest I invested in CA muni bonds ($400,000), the S&P 500 index ($600,000), and individual tech stocks ($300,000).
Power Of Real Estate Crowdfunding
Theoretically, the total income generated from the $1.8 million in proceeds will be at least 2X what I was earning in rent with NO WORK. I really believe in the power of real estate crowdfunding and arbitraging much cheaper valuations in the heartland of America.
My favorite real estate crowdfunding platform is Fundrise. They were founded in 2012 and have the most selection of deals with the best track record so far. It's free to sign up and explore.
A simple life earning completely passive income is better than owning a rental house in an expensive coastal city. At the age of 41, my time for aggressive risk taking and hustling has faded. Time to enjoy life more!
Related: Is Investing In Student Housing A Good Idea? The Pros And Cons
About the Author: Sam began investing his own money ever since he opened an online brokerage account in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at two of the leading financial service firms in the world.
During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $250,000 a year in passive income. He spends time playing tennis, hanging out with family, consulting for leading fintech companies and writing online to help others achieve financial freedom.
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