With the area experiencing the lowest inventory of homes for sale and home prices rising, some homeowners may look to sell their home on their own. Known in the industry as a For Sale by Owner (FSBO), here are five reasons why this might not be a good idea for the vast majority of sellers.
1. Limited Exposure to Prospective Buyers
Recent studies have shown that 94% of buyers search online for a home. Studies have shown that 51% of buyers found the home they purchased on the internet and 34% found the home through a Real Estate Agent. Top notch real estate agents have an internet strategy to promote the sale of your home. The key to selling your home now is a strong internet strategy. Yard signage and newspaper ads aren’t going to work in this market. Only 9% of buyers found their home from a yard sign and a measly 1% found their home from newspaper ads. Only realtors can list homes on the Multiple Listing Service (MLS), which is one of the biggest online tools real estate agents use. There are some limited ways to just pay for an MLS listing but there is no guarantee a buyer will find you because there’s no incentive for real estate agents to bring buyers to your FSBO.
2. Negotiating with Professionals in the Real Estate
You will need to wear many hats during the process and be knowledgeable with real estate terms. There are many people with whom you must be prepared to negotiate with. Also, keep in mind that everyone makes mistakes. A seller (or buyer) who doesn’t have the representation of a licensed agent pays for those mistakes. A real estate agent has the experience to work through the entire sales process efficiently, stepping in when there are financing problems, dealing directly with buyers’ objections and complaints keeping everything on track, and facilitating the contracts and escrow to a successful, smooth close. Here are just some of the people you will need to negotiate with during the process:
- A buyer who is looking for the best deal possible
- The buyer’s agent who represents the best interest of the buyer not you
- A buyer’s attorney
- The home inspection companies, which will find some problems with the house and result in repair requests
- The buyer’s lender if the appraisal comes back with a question on the value
3. Mandatory Contract and Legal Paperwork Requirements
The paperwork involved in selling and buying a home has increased as industry disclosures and regulations have become mandatory. The National Association of Realtors’ Profile of Home Buyers and Sellers showed that understanding paperwork was one of the most difficult tasks for FSBOs. Depending on the state, there are a variety of legal forms that are needed, including but not limited to a sales contract, property disclosures, occupancy agreements, mineral rights and lead paint records.
Preparing all of the legal forms is the seller’s responsibility, and if you’re unfamiliar with the guidelines and requirements, you take the risk of financial and legal liability. Yes, ready-made contracts can be downloaded but would an untrained seller understand what all the terms mean? Would you as the seller know how to customize a contract so that it pertains to your specific details?
4. Profit More Money When Using a Real Estate Agent
There’s the risk of selling your home for a lot less than it’s worth. Statistics have shown that the average FSBO home sells for about 15% less than homes sold through a realtor. Homeowners selling by themselves simply don’t know the market value and don’t have access to market reports that professional realtors. Many homeowners believe that they will save the real estate commission by selling on their own. Keep in mind that the key reason buyers look at FSBOs is because they also believe they can save the real estate agent’s commission. The seller and buyer can’t both save the commission.
5. FSBOs take Longer to Sell
Unless the seller knows someone who wants to buy the home, FSBOs take longer to sell than homes listed with an agent. For the same reason, the selling price won’t be maximized. After an extended time on the market, sellers typically lower their price hoping to sell it! On average, 18 percent of FSBOs were unable to sell within their chosen time frame last year. If you need to sell quickly, you’ll want to work with a professional real estate agent.
In conclusion, FSBOs are often more costly than sellers realize, selling a home is a complicated transaction. Before you decide to take on the challenges of selling your house on your own, sit with a real estate professional in your area and see what they have to offer.