For Sale By Owner (FSBO) the subject comes up at just about every meeting and training session I attend by real estate agents trying to figure out a way to capture this market. It is a fair discussion since studies show that 80% of FSBO sellers eventually sign up with a real estate professional. Having said this I can understand when a seller wants to save him/herself some money. A 6% commission on a $500,000 home is no small drop in the bucket. In the defense of my industry I will say that real estate agents really do earn their commissions.
But back to some of the reasons FSBO sellers eventually do sign up with agents, or some of the realities of selling your home yourself. Reason one is pricing. A FSBO owner checks the prices of homes that have sold in his/her area. The information is available through the internet and sometimes from local agents. Then the seller chops off the 6% commission from the sale price of a similar home and sets his price there. So with our example of a $500,000 home, the asking price becomes $470,000. Sounds like a bargain right? Well for one thing if his home does sell for $470,000 then he has just lowered the prices of all the homes in his area by 6%. That means the next guy who does use an agent now has to use $470,000 as the starting price of his home which reduces his profit by $30,000 right off the top. This can lead so some unhappy neighbors.
The second reason is negotiating. Most of us aren’t trained negotiators. We may ask for a small discount for something at the flea market, but we pretty much pay the price listed at the grocery store. Many buyers of FSBO properties however view the price the FSBO owner has set as the flea market pricing. Buyers expect a FSBO owner to drop their prices significantly. After all you aren’t paying a 6% commission so why shouldn’t I offer you 10%-15% less than your asking price? Then the FSBO owner is stuck with trying to explain why his/her house is worth more, usually without much ammunition to back up them up.
Reason three is viewings. In order to sell your home, you have to find a buyer who wants what you are offering. To do this you have to advertise. Just ask any small business how hard it is to come up with advertising dollars. The big boys have lots of contacts in the advertising business and may even have special arrangements with others to be able to advertise prominently on their sites. You don’t get to the top of the Google search list by accident. A FSBO owner usually doesn’t have access to the most popular places buyers shop. This leaves the FSBO seller with a limited amount of traffic and fewer potential buyers.
In tandem with reason three is reason four which is showing your home. You are responsible to show your home to prospective buyers. This means you have to rearrange your schedule to coincide with the buyer’s schedule. If you are working full time and the buyer wants to see the home during a work day, what do you do? I don’t have any answers so you are pretty much on your own. How do you know if this prospective buyer can even afford your home? How do you know that this prospective buyer is actually a real buyer and not someone meant to do you or your home harm? I don’t mean to scare you but opening your door with a gun in your hand when a prospective buyer comes to the door opens a can of worms I don’t even want to think about.
Reason five is contracts. During my buyer’s series I mentioned that unless you wanted to take up studying real estate full time, you should probably leave contract writing to a professional, either agent or lawyer. As a FSBO seller you have to ask yourself how you plan to work the contract issue. Do you know all of the disclosures you are responsible for providing to the buyer? How do you plan to respond with counter offers? While handshake contracts are still valid in some states when selling a home, do you want to wind up in court in a he said/she said course of action?
My intention in this post is not to talk you out of trying to sell your home yourself, that is just not my personality, but I hope I have offered some things you need to think about when undertaking this task.