For Sale By Owner Problems too Much to Justify Saving on Realtor’s Commission?
I’ve notice fewer homeowners choosing the FSBO or for sale by owner route to selling their home this spring. Why the apparent drop? If the reason for FSBO was valid in previous years, wouldn’t it be valid right now? Well, the main reason might be that homes are taking a lot longer to sell right now, even in Calgary, Edmonton, and Vancouver which are the hottest markets. In the US, the situation is much worse and just getting a property sold is a miracle. There’s other reasons noted below.
Why is that some people choose to try to sell their home on their own?
We assume the homeowner just wants to save on paying the real estate agent’s commission which is often in the 5% range and on a $400,000 home, that represents about $20k in savings. That seems reasonable if they really can do a good job of selling and close the sale at the price they want. If the property is in really high demand and in a highly visible location, they may indeed get a good bid on the property. You have to wonder how most FSBO sellers can get the exposure for the home they need though. There are lots of tire kickers and window shoppers these days, but closing a sale is a different matter. Without the MLS listing service, exposure on the property might be minimal. Most real estate transactions begin with many brokers making their clients aware of the property, and house hunters can look up mls listings online. That’s a lot of exposure to forego.
Realtors closing the sale. Realtors have more experience and skill in presenting, negotiating and closing real estate deals. A homeowner usually doesn’t. There are hidden pitfalls homeowners aren’t aware of. One of them is post sales legal issues, which is a definite problem. When a home is listed FSBO, there’s no doubt many prospective buyers might be predatory. They’re looking to get the property at a real deal price and will work the homeowner until they give up in frustration. They work the contract so that they can come back after the owner for things that may be wrong. Here’s one published account of an FSBO nightmare:
“It’s been insane, I’ve had three different lawyers, and I’m out at least $10,000 dealing with this,” says Alan Jacobson, a newspaper design consultant.
And FSBO sellers can be naive because they’re so focused on saving the realtor’s commission. Penny wise and pound foolish is often the afterthought.
“Never, never, never buy a house without a real estate agent, said Alan Jacobson (in a report on his FSBO nightmare several years ago), sounding like a walking advertisement for the National Association of Realtors. “Even if the seller is your mother, always use a Realtor.” He adds that he’s kidding about distrusting your mother but only barely: “I’ve learned you can’t trust anybody.”
Here’s some stats from NAR:
For Sale By Owner (FSBO) Statistics
FSBOs accounted for 9% of home sales in 2010. The typical FSBO home sold for $140,000 compared to $199,300 for agent-assisted home sales.
FSBO Methods Used to Market Home:
• Listing on Internet . . . 27%
• For-sale-by-owner Web site . . . 11%
• Yard sign . . . 46%
• Friends/neighbors . . . 39%
• Newspaper ad . . . 12%
• Open house . . . 14%
Most Difficult Tasks for FSBO Sellers:
• Getting the right price . . . 23%
• Preparing/fixing up home for sale: 18%
• Selling within the planned length of time: 14%
• Having enough time to devote to all aspects of the sale: 13%
• Understanding and performing paperwork: 10%
They list their properties on for sale by owner websites such as forsalebyowner.com, homesbyowner.com, fsbo.com, byowner.com, or propertysold.ca. These sites and services can provide exposure but it might be that it’s exposure to the wrong people. Most buyers don’t care if the homeowner has to pay the commission. Buyer’s know that it’s a whole easier working with an agent and having their experience on their side.
There’s been studies that suggest both agent assisted and FSBO sellers come out better using either. Who do you believe? The truth might be that sellers with easy to sell homes might be more likely to use FSBO services and those who have a tough sell use a realtor’s services. That creates some skewed statistics.
If you’re going to sell your home FSBO, it might be wise to sell as is. Of course the legal papers will have to be air tight to stop the buyer from launching law suits to have you fix whatever he didn’t know about. Ask your real estate lawyer how to sell your home fsbo. Make sure your lawyer has explained each aspect of the sales process and the sales contract itself. Purchase a good quality sign for your yard as a low quality sign sends the wrong message to potential buyers.
Make sure you check out the buyer thoroughly. Get a credit check done and ensure they have a preapproved mortgage. Have them pay for and do their own home inspection and never agree to post sales conditions.
If you’re an agent, do you have a unique value proposition that clearly explains the value of your services and why FSBO is not a good option for homeowners? Can you counter any negative thoughts about their previous failures with agents? For many agents, the issue of FSBO is troublesome, since they can’t explain why and how using a realtor is better. Just one of the many issues involved in real estate marketing. Look to Realty Market Leader for a complete marketing solution.