A man posts a 'for sale by owner' sign in the front yard of a house.

Real estate agents exist for a reason. (Getty Images)

A typical real estate agent's commission is 6 percent of a sale, according to industry experts. That 6 percent isn't always a windfall for the agent, who splits the money with perhaps a brokerage firm or another agent (since often there are two agents involved, the seller's and the buyer's). But it is a substantial chunk of change for a home seller. At 6 percent, if you sell a house for, say, $300,000, the seller will potentially end up handing over $18,000 to the real estate agents involved in both sides of the sale.

So naturally some home sellers opt to remove the agent from the equation. They sell the home on their own, a practice often referred to as an FSBO (for sale by owner), and some people even purchase homes without a real estate agent.

[Read: How Does Your Real Estate Agent Get Paid?]

If you're thinking of buying or selling a house on your own, keep in mind that real estate agents exist for a reason. Plenty can go wrong when you skip the real estate agent. Such as ...

Paperwork may be filed incorrectly. Evan Harris, co-founder of SD Equity Partners, a San Diego-based real estate company, says that his firm works with a lot of house flippers who don't use agents to sell their properties. And if there's going to be a problem, he says, it's often with the paperwork.

"In every real estate transaction, there is a lot of legal jargon and important paperwork that has to be 100 percent correct," Harris says. "Agents and their legal counterparts have what is called errors and omissions insurance to protect themselves from any mistakes. An FSBO does not usually know enough about the industry to obtain this type of insurance – and sometimes isn't even able to as an individual entity."

And if you don't have the insurance, and you do make an error, like not disclosing important repairs that you were legally required to report to the buyer, what could happen?

"The impacted party, which is usually the new homeowner, will wage a civil lawsuit against the FSBO," Harris says.

Whether or not you can buy errors and omissions insurance, Harris suggests hiring a real estate attorney to fill out the paperwork for you.

"Not only will you be covered for any mistakes, you will also have a legal representative's opinion on the deal to make sure that you are not being taken advantage of by the other party involved in the transaction," Harris says.

You may have fewer buyers. Thomas Miller, a Realtor and listing specialist with Keller Williams Capital Properties in the District of Columbia, makes that point.

"Many buyers and agents are reluctant to engage with sellers that do not have professional representation. Often, for-sale-by-owner transactions take much longer and are more stressful than those where both sides have professional representation."

So if you sell a house on your own, you'll be fighting the bias among real estate agents that your house is going to be a headache to purchase.

[See: 10 Tips to Sell Your Home Fast.]

You may price your house incorrectly. If you study the market, maybe you'll come out just fine, but if you believe the data, you'll think about hiring an agent.

Every year, the National Association of Realtors puts out its annual profile of home buyers and sellers, based on numbers crunched the year before. According to the 2016 profile, FSBOs accounted for 8 percent of home sales in 2015; the average FSBO home sold that year for $185,000 compared to $240,000 for agent-assisted home sales.

Miller says he recently had buyers purchase a home directly from the sellers, and he feels that his buyers got a great deal, and the sellers, not so much.

"Since the purchase ... more than five similar homes, either on the same street or less than a block away, have sold for between $75,000 to $100,000 more than my clients paid for their home. The sellers accomplished their goal of saving money on a commission but clearly left a great deal of money on the table," Miller says.

If Miller is right, and the sellers could have sold their house for $100,000 more, in order to keep that $6,000, the sellers gave up an additional $94,000 (minus taxes).

Another way to potentially lose money? Buying a home without a real estate agent. Many times, the seller's agent has it worked into the client's contract that if the buyer doesn't have an agent, the commission that would normally go to the buyer's agent will go to the seller's. So if you're working like a madman, and your seller's agent isn't breaking a sweat and later gets the commission that would have gone to the agent you didn't hire, you might feel like you lost.

[See: 10 Unorthodox Ways Your Real Estate Agent May Market Your Home.]

You may lose more time than you bargained for. People work full-time selling homes. Granted, a typical agent is trying to sell a lot of homes every week, and you're only trying to sell one. Still, Jason Saft, a New York City-based real estate agent with Compass.com, a technology-driven real estate platform, says that a lot of people simply don't have the time and energy it takes to sell a house.

Saft says: "Ask yourself: Can you take on a new full-time job?" He adds: "When you boil it down, there is a striking similarity between real estate sales and dating. You must remain consistently available and constantly on your 'A-Game'. Do you have time to handle every inquiry in a timely manner? Are you ready to have people come in and out of your home on their schedule and not yours? Can you keep the space looking clean and fresh for all prospective suitors? While this may seem intuitive, it's important to understand the implications of these factors on your day-to-day life."

Of course, even if you have an agent, you have to be ready for people to come in and out of your home, but you can generally live your life and go shopping or off to your day job while your agent shows your home. But that's not to say you shouldn't sell or buy a home on your own. If you're detail-oriented, have a type-A personality or are perhaps retired and could use a time-intensive hobby, selling or buying a home on your own may be just the type of pastime you've been looking for.


Weird Home Features That May Confuse Homebuyers


Slideshow

What your home says about you might not help it sell.

Older couple talking with woman in living space

(Getty Images)

Giving a home a personal look and feel is important to many homeowners, as it not only makes you more comfortable but also provides a sense of ownership. But that all goes out the window when it comes time to sell your home. Suddenly, those custom design touches can be a liability in attracting interested buyers or getting the sale price you’re hoping for. Real estate agents weigh in on home upgrades that might make potential buyers scratch their heads, and how sellers can work around them.

Urinals

Urinals

(Getty Images)

This ultimate finishing touch to a man cave bathroom might get a few stares during home tours. But having a urinal shouldn’t keep people from buying the house, says Greg Cooper, manager and broker at Berkshire Hathaway Home Services in Indianapolis. “You’re catering to 49 percent of your audience here, so people just kind of stand there like, ‘Wow, don’t see many of those,’” Cooper says. “I don’t know if they’re put off by it – they just kind of think it’s maybe unuseful.”

Nods to history

Nods to history

(Getty Images)

Especially if you have an old home, you might be inspired to return the interior to its 19th-century glory days, complete with a wood-burning stove and a soaking tub in the kitchen. Doing so could leave you with a limited buyer pool, but marketing the home as historically authentic could make the sale a success. “As long as people know what to expect when they’re walking in, they know it might be a house for them. It’s not so much a turnoff as a preference,” says Joanna Williams, managing broker for Better Homes and Gardens Real Estate Kansas City Homes in Liberty, Missouri.

Secret rooms

Secret rooms

(Getty Images)

A hidden passageway might sound like a fun idea – or a safe one if you’re adding a panic room – but be sure it doesn’t come off as creepy when you put your house on the market. Make any hidden rooms or security spaces fit with the floor plan, recommends Jeff Knox, owner of Knox & Associates Real Estate Brokerage and author of a blog focused on the Dallas real estate market. “If someone converted a closet into a panic room and tried to hide it, it looks way out of place, and that would turn somebody off,” he adds.

Sports rooms

Sports rooms

(Getty Images)

Watching the game wouldn’t be complete without the memorabilia of your favorite team adorning the TV room as you cheer them on, right? Before putting your home on the market, you might want to neutralize a sports-themed room to avoid distracting buyers, especially die-hard fans of a rival team. “You don’t want to sell an Alabama room to an Auburn fan, or a Michigan room to an Ohio State fan,” Cooper says. Downplay as much as you can, especially if the furniture and walls sport the team logo as well. “We always recommend they take the stuff down, and at least if they insist on leaving it up, just a couple items as opposed to the entire space,” Williams says.

Custom installations inspired by loved ones

Custom installations inspired by loved ones

(Getty Images)

You love your family and friends a lot, but a permanent installation reminding you of them, such as a spouse's likeness on the wall or each family member's handprints adorning the front walkway, will be a difficult sell for anyone else. Cooper recalls touring a home that had a custom marble tub modeled after the seller’s first wife’s backside. “I can’t imagine getting in that tub if you’re anybody but her,” he says. The chances a buyer will be OK with keeping such a personal element in the home are slim. It also serves as a distraction, so replacing it before the home goes on the market might be best.

Garage conversions

Garage conversions

Custom garage door on a residential home.

(Getty Images)

Whether it’s for more space or to create the custom theme room of your dreams, converting your garage is going to take a toll on the value of your home. Knox says most buyers want a garage, and they certainly don’t want one that’s been altered lackadaisically. “A lot of times they’ll halfway convert the garage so it looks clumsy. They will drywall it in, but leave the garage door, or they’ll drywall the inside of the garage door, but on the outside it’s still a garage door,” Knox says.

Rooms inspired by Pinterest

Rooms inspired by Pinterest

Woman driving a nail into a wall with a hammer

(iStockPhoto)

Increasingly, Williams says she and her colleagues have to talk to sellers about the room they overhauled entirely with Pinterest tutorials. While an attempt to save on redecorating is more frugal than paying a professional, if you don’t know what you’re doing the results can be disastrous. “There’s some tasteful things that can be done, but there can be also far too much Pinterest being done in there,” Williams says. Especially for floor and wall treatments, consult a professional first to avoid it affecting your sale price.

Cabinets for your kooky collection

Cabinets for your kooky collection

(Getty Images)

A spare room is the perfect place to beautifully display the collection of action figures, stamps or artifacts you’ve been accumulating for years. But be careful when it comes to selecting custom cabinetry to house your prized possessions. Cooper says as long as cabinets don't affect primary rooms for buyers – master bedroom, master bath, kitchen, living room and dining room – they shouldn’t lower the value. But if the displays don’t match the architectural style of the house, Knox says it can throw off buyers since they know they’ll have to remove or replace them. “Very contemporary cabinets in a traditional home will kill it,” he says.

Built-in fish tanks

Built-in fish tanks

(Getty Images)

If your aquarium is custom made for the area it takes up, it could pose a bigger challenge to the sale of your home. A fish tank will only be appealing to those that have or want fish, but anyone else will view it as something to be taken out and a space that needs decorating. “If you find a fish lover, that’s all well and good, but if not you’re probably going to want to take it out, and that involves removing it in some way and finishing the area that tank took up,” Cooper says. “Not a crisis, but there’s effort involved – and money.”

Stripper poles

Stripper poles

(Getty Images)

We all knew something like this was coming. Whether it’s for exercise or weekend parties, a stripper pole in your home will be a major distraction for potential homebuyers. Williams explains a stripper pole keeps a potential homebuyer focused on who the seller may be, rather than what the home itself offers: “You want to be as vanilla as you can whenever somebody is looking at your house because they want to picture themselves into it. And [a stripper pole] absolutely is making a statement about your lifestyle.”

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Tags: real estate, housing market, National Association of Realtors, home prices, existing home sales, pending home sales


Geoff Williams has been a contributor to U.S. News and World Report since 2013, writing about a variety of personal finance topics, from insurance and spending strategies to small business and tax-filing tips.

Williams got his start working in entertainment reporting in 1993, as an associate editor at "BOP," a teen entertainment magazine, and freelancing for publications, including Entertainment Weekly. He later moved to Ohio and worked for several years as a part-time features reporter at The Cincinnati Post and continued freelancing. His articles have been featured in outlets such as Life magazine, Ladies’ Home Journal, Cincinnati Magazine and Ohio Magazine.

For the past 15 years, Williams has specialized in personal finance and small business issues. His articles on personal finance and business have appeared in CNNMoney.com, The Washington Post, Entrepreneur Magazine, Forbes.com and American Express OPEN Forum. Williams is also the author of several books, including "Washed Away: How the Great Flood of 1913, America's Most Widespread Natural Disaster, Terrorized a Nation and Changed It Forever" and "C.C. Pyle's Amazing Foot Race: The True Story of the 1928 Coast-to-Coast Run Across America"

Born in Columbus, Ohio, Williams lives in Loveland, Ohio, with his two teenage daughters and is a graduate of Indiana University. To learn more about Geoff Williams, you can connect with him on LinkedIn or follow his Twitter page.

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