Do I Need a Real Estate License to Sell My House?

Selling a house on your own (For Sale By Owner or FSBO) can be a complex process. Before you begin, how do you know if you need a real estate license to sell your own home? After all, there’s an entire industry built around transferring ownership of real property, so where does the legal requirement come into play?

Check Your Local Laws

Fortunately for hopeful FSBOs, there are no laws explicitly requiring homeowners to hire listing agents or for the homeowner to hold a valid real estate license. However, real estate laws vary by state, so before you decide to sell your home by yourself, consult with a real estate legal professional who practices in your market. You may also want to look up your state on our State-By-State Guide To Real Estate Forms.

You can start your real estate legal research at FindLaw.com. Simply select your state from the list and search for “real estate.” We also suggest you read How to Find a Real Estate Attorney.

Some states require a real estate agent or an attorney to handle paperwork specific to certain steps in the transaction. In addition, buyer’s agents may be less inclined to work with an FSBO seller as these sellers may not be as knowledgeable on how to handle offers, contingencies, and facilitating the closing process.

How to Sell My House

Although selling your house does not require a listing agent, there are multiple ways to do it. While many FSBOs handle the entire home selling process themselves, other do engage the services of real estate agents or other professional for specific tasks.

FSBO has several key advantages over the traditional brokerage path. For one, you don’t have to pay the commission that would otherwise go to the agent. With the listing agent out of the equation, you can save a considerable amount regardless of the market.

In addition, you’ll also save on “a la carte” options such as home stagers, professional photographers, and marketing costs which could otherwise be used to pad the listing agent’s commission split.

How Much Do Real Estate Agents Make?

The sales commission on a house is usually 5-7% (with 6% being the most common). The buyer’s agent and the listing agent will negotiate how to split this commission (taken out of the final sale price). Before “going under contract” with your listing agent, you should discuss your expectations for what value your agent can bring to the transaction.

Are There Drawbacks to the FSBO Option?

The FSBO option is not without a few drawbacks. In addition to any legal constraints, you will be responsible for preparing all the required documents (e.g., title, utilities, permits) as well as handling all the logistics (e.g. marketing, managing and paying inspectors and contractors).

Using a listing agent can save you time (as well as money). Real estate agents handle the home selling process, from managing stagers and marketing to negotiating on your behalf with the buyer’s agent. Agents also “hang their licenses” with a single broker who is responsible for the legal and ethical actions of your listing agent.

Unlike lawyers, real estate agents are not paid by the hour. Up until signing a contract to use a particular agent, you are welcome to meet and discuss your options with as many agents as you like.

Without an agent, you may find it difficult to navigate the legal paperwork associated with selling your home as an FSBO. There is a strong chance that your agent will know the buyer’s agent as well. In this case, both agents already have a working relationship together and will be able to handle negotiations with relative ease.

Lastly, there is a high possibility that multiple offers will come in at the same time. A listing agent is your “first line of defense.” They will act on your behalf as the main point of contact. The buyer’s agent will always contact your agent should a question arise. In addition, your agent will help you translate every buyer’s offer and counsel you on its strengths and weaknesses.

Are There Other Selling Options?

Both the FSBO and traditional brokerage routes have one thing in common: Time on the market. If you wish to sell your home as fast as possible, consider selling your home at auction. Homes up for auction require few contingencies and no need to negotiate. (You can learn more at Selling Your Home at Auction: Five Things to Know.)

If you’re in a “buyer’s market” where supply is outpacing demand, you may have less success at auction.

How to Buy a House at Auction

Putting your home up for sale at auction follows similar principles to other non-real estate items. For example, you are able to set the asking price, you need not negotiate with any buyers (as they bid against each other in real time), and your home will close without contingencies.

However, the auction option is also not without downsides. If your home does not meet the reserve price, it will not sell. And even if your home hits its reserve price, bidding may stop, leaving you at a lower price than desired. Lastly, once the final bid comes in, the deal is done. (Auction buyers are pre-screened, willing to pay cash.)

If you’re looking for an all-cash offer with the flexibility of mutual acceptance, selling your home to an investor may be the right option for you. Selling to a real estate investor is a good option when your home is in less-than-ideal condition or if the market has turned south.

If you need referrals for real estate investors, speak to an agent. Real estate agents and brokers regularly work with investors.

Real estate investors, like auction buyers, also come prepared with all-cash. There are several types of investors on the market, and you may already be familiar with them thanks to the most recent trend in real estate: house flippers. Whereas wholesale and buy/hold investors time the market, flippers are interested in homes with fast resale potential. Also now on the scene are online home buyers like Open Door and now even Zillow. (To learn more about this latest trend, read Pros and Cons of Selling Your House via Cash Offer.)

Conclusion

Homeowners who opt for the FSBO route do not need to hold a valid real estate license. However, depending on your local laws, you may need a real estate agent (or even an attorney) to handle certain legal documents around closing time. In addition, if you wish to sell your house FSBO, by auction, or to an investor, you may encounter some non-legal obstacles along the way. Regardless of how you sell your home, it’s highly encouraged to consult with a real estate attorney before you start.