For Sale by Owner – Financial Pitfalls of Selling Your Home Yourself
The plethora of information readily available on the Internet has turned each of us into “experts” in any field we want. Videos, articles, graphics and much more provide, in detail, how we can solve a problem ourselves if you only take the time to learn it, and do it. So, it’s no wonder that homeowners who are looking to sell their home are taking matters into their own hands—especially if they think they can save money.
Why pay a real estate agent a 6 percent commission fee when you could simply sell your home all by yourself? If you’re selling your home for $200,000, that’s $12,000! You’d be stupid not to skip the real estate agent and pocket that money, right?
As one of my favorite sports analysts puts it, “Not so fast!”
As a seller, you might think you have the knowledge and experience to sell your home yourself. Even if you live in a great neighborhood, you’re going to encounter obstacles throughout the selling process that could hurt the deal, and ultimately lose you some serious money.
What Are the Financial Pitfalls Awaiting a FSBO Listing?
Homeowners who want to sell their homes themselves are mainly trying to do one thing—save money. But does selling your home “by owner” really help you save money in the long run?
“One of the biggest mistakes I see people who are selling their own homes make is over-inflating the asking price,” says Bill Gassett, one of the top real estate agents in Southborough, Mass. “This is the kiss of death in real estate sales. There is nothing that will stop a home sale quicker than the wrong asking price. Many who list FSBO do not seek the guidance of either a local real estate agent or a local real estate appraiser. If more FSBO homeowners priced their homes correctly out of the gate, they would stand a much better chance of being successful.”
Homeowners who list their homes FSBO can often capitalize off a real estate agent’s marketing efforts when they bring buyers into a neighborhood where other properties are for sale, Gassett emphasizes. “FSBOs who price their home as it should be can acquire a buyer and end up saving a commission. This, of course, is the ideal scenario. FSBO listings are not always afforded the luxury of being surrounded by other homes for sale,” he says.
The benefits of working with a good real estate agent are numerous. According to Gassett, the best Realtors provide exceptional online marketing, outstanding printed marketing material, professional photography, and the one thing that is often really missed: expert advice!
“Getting a buyer to write a contract is only half the battle. It is what comes after the offer where having a real estate agent in your corner can be golden,” Gassett says. “This is not to say that every real estate agent is exceptional. That is certainly not the case! Finding a great agent is where a number of people make a mistake. In fact, they may have had a bad experience previously, and that is why they have tried to sell on their own. If more FSBOs took the time to find the best agent, there would most likely be a higher level of satisfaction.”
Bottom line, he says, if you think you have what it takes to sell a home for sale by owner, make sure you understand all of the pitfalls and what you are giving up by not have agent representation.
What Are the Issues Facing FSBO Listings?
On top of financial pitfalls, there are several issues facing those who wish to skip the real estate agent and sell their home themselves.
Bruce Ailion, who has been involved in over 4,500 transactions over the past 37 years selling real estate in Metro Atlanta with RE/MAX Town Country, puts things into perspective.
“Home selling is difficult and challenging even for those trained,” Ailion says. “Of the 80 percent of people who spend the money and take the time and energy to complete a 70- to 100-hour course, pass the state exam, pay the licensing fees, interview, get hired by a broker, pay for additional training, business cards and supplies, office fees, and Realtor fees, leave within 12 months. Ninety percent leave within five years. The average Realtor sells just four homes a year and 50 percent sell none. It is not as easy to do as people think it is. If it were that easy, everyone would do it. In fact, in California, one in 15 adults has a real estate license; that doesn’t mean they sell a home.”
Even so, more homes are being sold by real estate professionals, and fewer by FSBOs, Ailion says, referencing the National Association of Realtors “2015 Survey of Home Buyers and Sellers” just released in November.
“An all-time high of 89% of transactions involved a real estate professional,” Ailion says. “The share of FSBO sales was just 8 percent, the lowest since data collection started in 1981. This reflects the increased complexity in compliance, fair housing, disclosure, and marketing needed to have a successful sale. While there is more information data than ever available to sellers than ever before, understanding and interpreting that data requires more skill than the typical person that sells a home maybe once every 10 years or so.”
Even those FSBO sellers who offer to pay a buyer’s agent a commission and avoid the listing agents fee face an uphill battle, Ailion says.
“The real estate professional often views the FSBO seller as cheap, difficult, and unreasonable. Even if that’s not the case, most real estate professionals feel they will be doing twice the work for half the fee as the seller have questions and issues with the inspections, appraisals, repair resolution, contract changes, amendments and settlement that need to be addressed and resolved,” he says. Resolving these details and problems typical falls to the seller’s listing agent, who is in the best position to advise a seller.
“Without that advice from a professional representing them, a sale can fall apart,” Ailion says. “As a broker with a strong buyer who makes a reasonable offer on an FSBO, the chance that offer is accepted and goes to closing is much lower with a FSBO. And who takes the blame? Most likely, it’s the agent who introduced the buyer to that seller.”
Nearly every experienced agent has had an FSBO seller promise to pay a commission and then found a way around that payment, Ailion says. “When they said they wanted to save the commission they meant it, even if it involved a lawsuit.”
Time can also be a major issue, according to Karen Stone, a licensed associate real estate broker and representative with Town Residential.“Does the seller work outside the home? Can they afford to run home for every showing, be there for the inspection, work with the lender, etc.? If they have unlimited free time, maybe this is an option, but the agent has an expertise that could make the process take less time, thus giving the owner more time to do other things,” she says.
So Should You Even Attempt To Sell Your Own Home?
If you’re still thinking about selling your own home, you need to make sure you go about things the right way.
“FSBOs that have the most success tend to have the following characteristics: They are priced accurately. The home is located on a well-traveled road giving the property good exposure. And the home is located in a neighborhood with other similar homes for sale, where buyers will end up seeing a sign,” says Gassett. Even though these factors can line up a sale for a FSBO, Gassett still thinks the better option is working with a real estate professional.
Even with the possibility to save some money going FSBO, the downside for the homeowner can be very risky.