I have had a number of homeowners ask me my thoughts on selling a home as a “For Sale By Owner” (FSBO) transaction versus selling with the assistance of a real estate agent. First, I can tell you that before I was a REALTOR® myself, I did a great deal of research on this subject and decided to use a REALTOR® for my real estate transactions. My opinion about the importance of using a REALTOR® has only grown stronger as I have transitioned into the field of real estate and learned more and more about the liabilities and financial questions that will arise during real estate transactions.
If you are considering selling your home on your own, I encourage you to first answer the following questions:
1. In most transactions, the buyer’s real estate agent is paid through a commission paid by the seller. Because of this, the majority of buyers view using a real estate agent as a “free” option and will most likely use a real estate agent to negotiate their purchase. Do you feel confident enough in your real estate knowledge, contract and real estate law knowledge, and contract negotiation skills to negotiate with a real estate professional?
2. Even after a contract is initially negotiated, additional issues may come up that can make a contract voidable. These issues may include low appraisals, inspection problems, financing contingencies and more. Do you feel confident you can remedy these concerns on your own?
3. Do you have the time to be available to show your home with little to no notice at all hours of the day? In addition, will you have the time and availability to let any appraisers, inspectors, or other service providers necessary to complete the transaction into your home?
4. Do you understand the real estate sale process and disclosures well enough to prevent legal liabilities for you and your family in the future?
5. Do you understand the important time stipulations outlined in the contract (i.e. times permitted to get an inspection, times permitted to obtain an appraisal, times permitted for funding, etc) that may cause a contract to become voidable and/or fall through? If not, you may “take your house off the market” and lose potential buyers while working on a contract that falls through. Are you prepared to start all over again?
6. Do you know what to say to an interested party who calls about your home? Do you know what sales strategies to employ to get them in the door and what information you can and cannot share to avoid legal recourse?
7. Do you have the proper legal forms and disclosures necessary to complete a real estate transaction from start to finish?
8. Do you have the time and availability to field all the calls, faxes, e-mails, and other inquires that will come with multiple offers?
9. Do you have the solid understanding of market trends and real estate value needed to effectively price your home? Absolutely anyone can sell a home if they price it too low, but I would be surprised to meet any sellers who would not be upset to find out their home sold for far less than its market value. On the other hand, if you price your home too high from the beginning, you are missing the golden window for selling your home. Approximately 80% of market activity happens in the first 6 weeks a home is on the market and statistics show that buyers will offer less money the longer a home is on the market. “Time” truly is “Money” in this market. If you over-price your home from the beginning or a deal falls through because of lack of contract knowledge, your home will have been on the market longer and is statistically likely to sell for less. In this time, you have also lost any buyers who were initially interested but unhappy with the original pricing. They have moved on. In addition, even if you find a buyer who is willing to pay a price over market, you must now find an appraiser and lender who agree to this value to obtain funding.
10. Do you understand the real estate closing process enough to know what questions to ask your financial institution to be prepared for closing? Do you understand how much money you as the seller will have to bring to the closing table?
11. According to studies conducted by the NAR, 88% of home sale transactions begin online. Do you have access to the online marketing sites necessary to best market your home? Are you willing to pay for this marketing?
12. Do you realize that many buyers associate FSBO homes as a portion of the market where one may get a “deal” and therefore often make lowball offers? On the other hand, some buyers avoid FSBO homes all together as such deals have received a negative reputation over the years. Read more about this in the Wall Street Journal here.
13. As I mentioned before, most serious buyers are working with an agent. Agents may call you and ask if you are willing to “cooperate” with them (meaning pay a commission). Therefore, you are either giving up a portion of that money you were attempting to save as a FSBO seller or you are risking the repercussions of not paying a buyer’s agent’s commission. Do you believe agents will actively encourage their clients to view homes that are not “cooperating” with buyers’ agents? Fewer buyer showings = fewer offers = less money for your home. Therefore, do you realize the money you are attempting to save through a FSBO sale is drastically reduced? On the other hand, if you refuse to pay a commission to a buyers agent, the FSBO documents drawn up by the buyer’s agent may require the buyer to pay their agent’s commission. This may deter them for writing an offer on a FSBO home at all.
These are the questions I encourage any homeowner to answer for him or herself before deciding to become a For Sale By Owner seller. Each situation is different and only you can know your comfort level with the home sale process.
Whether you are a FSBO Seller who needs a question answered, a homeowner looking for an agent, or a buyer about to start looking for a home, please feel free to contact me any time.
JB Goodwin REALTOR®
Looking for More Information? Visit this articles:
USA Today: ‘For sale by owner’ can be a hard sell