What should a For-Sale-By-Owner know in 2015?

Why pay a commission if we can do it ourselves!  It can’t be that hard to put up a sign in the yard!  I can hold an ‘Open House’ on this weekend!…  In the public’s eye, it must appear that selling real estate is just that easy.

In talking with 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.

No matter what the market conditions, we as real estate agents always see a couple ‘For-Sale-by-Owners’ in the marketplace at any given time. 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 a fair commission when a sale closes.  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 far before they ever look at FSBO homes. “This is a big purchase that buyer’s don’t take lightly”, Scott Cary says “and they want solid representation every step of the way.”

As a FSBO, If a real estate agent calls to show your home, the agent will (in most cases) ask you to sign an agreement  (before bringing the buyer to your property) confirming you will pay them a commission if the sale goes together.

PRICING:  It is my observation that most FSBO homes are priced high! Real estate agents know the area and home values around the property, so it’s rare to ever see a property priced below value! In most cases the price is higher than the area comparable sales and this only hurts the property.

As a previous office manager, many of my agents would share stories of meeting with a potential seller who later became a FSBO.  It’s easy, I guess to simply call on an agent and get their estimate of value…so that you can sell it yourself.  And yet, many times, the seller still challenges the value the agent suggested – hence an over priced listing.   As much as price is an important step, the frustrating thing for you as a FSBO is that you only have one home to sell. This fact typically turns you into more of a sales person trying to convince the buyer to purchase your home rather than that of an agent working with other agents in the community who simply are trying to find the buyer the perfect home.

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 at open houses for a some time.  This knowledge the buyer obtained helps the them appreciate a good home and a better value!

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 eagerly 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! Most brokers are able to negotiate a higher offer, closer to the asking price or even above asking for a properly priced listing…if handled correctly.

NEGOTIATIONS:  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 you are adamant about handling the sale yourself, consult a real estate attorney to understand the proper disclosures needed to protect you 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’!

Here are a few facts that are worth considering:

Fact 1: Local real estate agent will show their buyer everything on the MLS (that fits their price range) first.  So the odds are the buyer will find something before ever seeing your home.

Fact 2:  Real estate agents work with each other to network and locate the right home for the buyer.  As a FSBO, you only have one home to sell so you come across more needy and pushy.

Fact 3:  Market knowledge is priceless!  Some FSBO’s avoid paying a commission to save in this category only to under sell a property by not being an experienced negotiator. A good real estate broker will educate the seller and market the property in a way to attract more showings and in some cases receiving multiple offers so that the owner gets the highest and best price for the home.

Fact 4:  This is a full-time job! Getting a buyer interested is just the beginning!  Monitoring the lending process, coordinating buyer and seller repairs and inspections & appraisal, completing all the requires state and federal disclosures, while at the same time assisting in maintaining flow of the transaction…takes experience!  Most FSBO’s are regular people who have regular jobs, don’t take this lightly!

A good real estate Broker will have a detailed marketing plan designed with tasks that will help draw attention to your listing, although if you choose to sell your home yourself as a ‘For-Sale-By-Owner’ and want to make the best of the process, consider doing the following tasks:

  1. Put up a for-sale-by-owner sign in your front yard.
  2. Create a detailed property flyer and put it on your sign.
  3. Advertise you home online (Craigslist, Zillow, Trulia)
  4. Run newspaper ads.
  5. Fix the problem areas of your home first!  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.
  6. Hold open houses on the weekends.
  7. Go online or to the local bookstore to gather all the necessary disclosure forms or consult your attorney for copies.
  8. Review the purchase contract before you need one!  A good contract is worth the money because it will cover most items.
  9. 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.
  10. Order the Pest Inspection report so you know what items need to be addressed.
  11. Contact a few local lenders in order to better understand the buyer’s qualifications when one asks you questions.
  12. Create a “Plan B”! Connect with a real estate broker you can trust for advise.  If you can’t sell it yourself, at least you have tried and now you can keep moving forward with a more professional approach.

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.  If you have questions and/or comments please let me know.  I look forward to hearing from you.

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