In a declining real estate market, anyone selling a home is desperately trying to squeeze home equity dollars out of a sale. More sellers are deciding to be their own brokers-a bold move that has equal amounts of risks and rewards.

As the housing market continues to tank, homeowners are considering alternative ways to generate as much home equity as possible from their sale. The first thing on the chopping block is often a real estate broker's commission.

In the past, when housing values were sky high, homeowners were willing to let a real estate broker claim a 5 to 7 percent commission. But the new declining market has changed everything, and many homeowners are trying to sell their homes without a broker.

For Sale By Owner (FSBO)-the benefits

Thanks to the Internet and a realization that FSBOs will sell on the market, the do-it-yourself approach to home sales has steadily increased over the years. And why not? The marketing methodology that most realtors use isn't too sophisticated-it's as simple as "For Sale" signs, open houses, and posting on websites. Many homeowners believe that they can create their own materials and do just as well as, if not better than, a realtor.

The Internet has provided homeowners with a reason to be confident. FSBO websites are everywhere. Because only a licensed real estate broker can include your home in the Multiple Listing Services, FSBOs are a viable alternative, and many buyers scour all property websites to find the best deal.

If FSBO proves successful, you stand to save quite a bit of money on a broker's commission. The standard payout for a broker tends to be 5 to 7 percent, although today's market has forced many realtors to slash their compensation. Nevertheless, any percentage you retain can be a healthy chunk of change, especially if your home has a high selling price.

FSBO-the drawbacks

There are always two sides to every story, and the FSBO tale is no different. When you pay for a realtor, you gain access to the MLS, a listing that has no equal on the market. Immediately, you'll have terrific exposure to countless realtors. By going FSBO, you lose this advantage.

Second, selling a home is hard work, and can take hours and hours of time. You'll spend time posting pictures on the Internet, and holding open houses and individual showings. Even then, if your home is in an undesirable neighborhood, you may not be able to muster the resources to get the sale done.

In a real estate environment in which home values are declining, many sellers are considering becoming their own brokers. Before you choose this option, however, carefully weigh the risks and the rewards. You may save big money by not having to pay a realtor's commission; you could also lose big if you don't have the resources to sell the property. It's a tough call-make sure that you think it through before deciding to "do it yourself."

Published on July 7, 2008