Should I use a Real Estate Agent to sell my spec home?
As discussed in a previous post, your Goal for your spec home is a 33% markup sell. This is a lofty goal, something to shoot for. You will remember that even at 33%, if you are dividing the profit between more than just yourself, it is not a huge windfall.
The difficult decision is whether or not to use a real estate agent when selling a new home.
There are many factors that I considered when contemplating this decision. In our area, it is common for real estate agent to take up to 6% of the purchase price. If you sell your home for 25% markup and pay a real estate agent, you are down to 19%. Let me show you the math:
Price to build the spec home: $300k
Listed Price of home: $400k (33% markup)
Actual sale price of home: $375k (25% markup) (Potential $75k profit)
Real Estate Agent cost: $22,500 (at 6%) (Profit with a real estate agent 52.5)
There are definite benefits to using a real estate agent (shifted liability, time, MLS listing, etc). The obvious biggest downside is the loss of markup from the real estate agent fee. For me, I made the decision to sell our first spec home using a real estate agent. For future homes, I will weigh the benefits and difficulties of trying to sell it myself.
Some builders/owners want 100% control of every process involved in building and selling a house. If you are one of these people than you may want to try to go at it without an agent. It may become frustrating to you if the agent is doing things exactly as you would.
When to list the spec home for sale?
The easy answer is to list the spec home for sale as soon as it goes under construction. You want to sell the home as soon as possible to get cash in hand and move onto the next project. The difficulty with this idea is that it turns the spec home into a custom home. The new owner of the home will now take over the construction and make custom order changes. This will change your project and future projects.
If possible, list the spec home as soon as it is in a condition where most of the finish work has been completed and you can bring buyers through a home, not just a construction zone. Again, this is the ideal. On my project we listed as soon as possible and dealt with the risk of selling early.
We have learned that there are some people that found the listing early in the construction process and have followed it through the finishes. On our next spec house, I will probably list it early on in the construction process again. Once the finishes are in, you can re-list it on the MLS or drop the price by a nominal amount to have it highlighted in the listing services.
by: Levi Barber