Why pay a commission if we can do it ourselves! It can’t be that hard to put up a sign in the yard, plus I can hold an ‘Open House’ on the weekend!… In the public’s eye, it must appear that selling real estate is just that easy.
In talking with some past sellers who started as for-sale-by-owners, many admitted that they originally perceived the process of selling a home to be similar to that of selling a used car or boat. In fact, this is the farthest from the truth. Often, an agent puts in countless hours in evaluation, preparation and marketing time prior to a sale and additional time to review offers, qualifying buyers, negotiating contracts, overseeing the escrow, meeting appraisers and ordering property inspections.
No matter what the market conditions, the real estate agent generally see’s a couple ‘For-Sale-by-Owners’ in the marketplace at any given time. Truth be told, many agents avoid the FSBO’s because they simply think it’s easier to just sell ‘MLS listed’ properties. The FSBO (for sale by owner) should know that the ‘MLS’ (Multiple Listing Service) has an agreement between all brokerages to pay their office a commission when a sale closes…and not all FSBO are honest.
FACT 1: The experienced real estate agents primarily only show a FSBO as a last resort and only after exhausting all homes on the MLS…more importantly, most buyers find a home before they would even consider looking at FSBO home. “This is a big purchase that buyer’s don’t take lightly”, Scott says “and they want solid representation every step of the way.”
If a real estate agent calls to show a FSBO home, the agent will (in most cases) ask the seller to sign a commission agreement (before bringing the buyer to the property) confirming the seller will pay them a sales commission when it closes.
FACT 2: More often than not, most FSBO homes are priced higher than the suggested list price. Real estate agents know the area and home values around a particular property, so it’s rare to ever see a property priced below value! In most cases the FSBO price is higher than the area comparable sales and this only hurts their property.
As a previous office manager, many of my agents would share stories of meeting with a FSBO who just wanted confirmation that they were priced right. Although, many times the seller would not agree with the agent and still challenge the suggested price hoping for more of a return.
FACT 3: It’s a numbers game…and the frustrating thing for the FSBO is that they only have one home to sell. This fact typically turns them into more of a sales person trying to convince the buyer to purchase one home rather than that of an agent working with other agents in the community who simply are trying to find the buyer the right home.
FACT 4: Studies have shown that when a buyer finds a home offered by the principle… (FSBO) they know there isn’t a real estate agents commission involved, so they know that there is generally a 5-7% bargaining chip (although commissions are not fixed, buyers see some similarities) when they write an offer. The FSBO should understand that the buyer has (in most cases) been shopping for a home, either online or with an agent. The knowledge the buyer obtained during this process most likely has helped them appreciate a good home at a good value! So if a deduction is considered…the FSBO is in essence, working for free!
FACT 5: The National Association of Realtors reports that 97% of all ‘For-Sale-by-Owners’ end up listing with a real estate. When asked, over 94% of FSBO’s agreed that they would gladly pay a real estate agent a buyer’s commission of 2.5%. That being said, the same buyer would in most cases come off their price another 5-10 percent…making this stressful transaction a losing transaction!
FACT 6: Most brokers are able to get a home sold at or above the asking price and sometimes more…if handled correctly. Most people are not trained in contract negotiations…or property marketing for that matter, so when it comes time to market a home, the local real estate agent is the best man for the job.
FACT 7: As California real estate disclosure laws get more involved, real estate agents understand the importance of avoiding legal disputes before and after a sale closes. If a seller is adamant about handling the sale himself, consult a real estate attorney to understand the proper disclosures needed to protect him in your transaction. Beware of the cost associated with this approach, although it is more important to protect your position. The real estate community has come to recognize that the law protects the buyer immensely so ‘sellers beware’!
FACT 8: Real estate agents work with each other to network and locate the right home for their buyers. As a FSBO, they only have one home to sell so they come across more needy and pushy. Buyers can generally sense desperation, so they should avoid being to aggressive and let the buyer walk through the home on their own.
FACT 9: Market knowledge is priceless! Some FSBO’s avoid paying a commission to save money, yet often price their property incorrectly or settle for a reduced offer because buyer activity was slow. When a property is effectively marketed by an agent the property will attract more showings and in some cases receiving multiple offers so that the owner gets the highest and best price for the home.
FACT 10: Selling real estate is a full-time job! Getting a buyer interested is just the beginning! Monitoring the lending process and making sure the buyer is qualified, coordinating buyer and seller repairs and inspections & appraisal, completing all the requires state and federal disclosures, while at the same time assisting in maintaining the flow of the transaction…takes experience! Most FSBO’s are regular people who have regular jobs, don’t take this lightly!
Of course, everyone wants to save money these days, but simply know your limits! Take a look at your job for instance…could just anyone walk in off the street and do what you do? Odds are they may try, although I doubt not nearly as well as you! A good real estate agent on the other hand will share a detailed marketing plan to effectively market your home as well as show you a list of past sales. The successful real estate agent will also be present online and have past client reviews to support past sales experience for you to review.
If you still choose to sell your home on your own as a ‘For-Sale-By-Owner’ and want to make the best of the process, consider doing the following:
- Put up a for-sale-by-owner sign in your front yard.
- Create a detailed property flyer and put it on your sign.
- Advertise you home online (Craigslist, Zillow.com & Trulia.com)
- Run print advertising.
- Fix the problem areas of your home before you market it. If it’s a problem for you…it will be identified by the buyer, so why wait, fix this problem now or discount it for the buyer.
- Hold open houses on the weekends.
- Go online or to the local bookstore to gather all the necessary disclosure forms or consult your attorney for copies.
- Review the purchase contract before you need one! A good contract is worth the money because it will cover most items.
- Order any reports you think may be needed prior to accepting an offer. This way you will be clear on your costs associated with the sale.
- Order the Pest Inspection report so you know what items need to be addressed.
- Contact a few local lenders in order to better understand the buyer’s qualifications when one asks you questions.
- Create a “Plan B”! Connect with a real estate broker you can trust for advice. If you can’t sell it yourself, at least you have tried and now you can keep moving forward with professional assistance without much down time.
With knowledge we can increase our ability to have success. I hope that this explanation helped deliver some insight toward the for-sale-by-owner approach for 2015. If you have questions and/or comments please let me know. I look forward to hearing from you.