10 misconceptions about For Sale By Owner
In this age of the small business resurgence and the DIY-er, For Sale By Owner (FSBO) has become a slightly more popular way to begin selling your house. To be clear, the vast majority use a Real Estate Agent, however I have heard enough times, in my community and even on television shows, that For Sale By Owner can save you money on paying an agents commission, however, that just isn’t true.
Did you know that less that 10% of FSBO’s actually sell? Selling your home might seem like an easy job, maybe you’ve even had an agent and thought “they aren’t even doing anything”, “I could do that job”. being a Real Estate professional is actually very complicated, and the bulk of what they do is done behind the scenes, you won’t even see it. Research suggests that as many as 80% of Real Estate Agents quit within their first year!!
Here are some common reasons why a FSBO may fail and we will bust some myths along the way!
#1 Listing your house before it is READY!
The aesthetic appeal of your house plays a huge role in whether it gets showing requests and offers in! If you are looking to prep your house here are some helpful tips
Give the rooms fresh paint
Professionally clean carpets
Complete any neglected repairs
Replace outdated light fixtures
Make sure your home has good curb appeal!
All of these are small things a homeowner can do that will greatly enhance the way your home shows to potential buyers.
#2 Screening potential buyers
This issue can be an enormous pitfall for owners. They do not know what kind of questions to ask to verify their buyer! You will waste countless hours opening your home to unqualified buyers, and possibly get into a deal with someone that had no way to complete the sale, leaving you back at square one. If you’re considering going For Sale By Owner I strongly suggest you connect with a local lender you trust that can help answer questions you might have, and make sure you insist your buyer gets pre-approved for the loan amount. If they haven’t been preapproved, do your lender friend a favor and send your buyer their way!
#3 They aren’t able to be available to handle all inquiries
It is a VERY common misconception that real estate agents make a boat load of cash and don’t have to work many hours to do so. This is FALSE. Real estate agents spend many hours of their day handling countless inquiries, and scheduling showings. One of the biggest reasons For Sale By Owners fail is being they just don’t have the time to devote to handle inquiries and juggle the showing schedule. Home buyers are often looking at several potential homes at a time and if they do not get at timely response, they move on.
#4 They Don’t Allow Potential Buyers to View the Home Without Pressure!!
Home buyers want to be able to walk through the house and freely talk about their likes and dislikes, this is uncomfortable to do with the owner there! One possible solution if you are planning to do For Sale By Owner, greet your buyer at the door and let them walk through the house without you, stay outside!
It is common knowledge among Real Estate professionals that a Seller has a lot of say in the deal they will accept. However, the purchase contract also has many avenues for the buyer to exit the contract and take their earnest money with them. Leaving the seller to re-enter the market again, possibly losing money on repairs they already made for that particular buyer, losing other potential buyers while being tied up with the first buyer, and months of prime time off the market. There are many timelines, clauses and contingencies in the contract that need to be adhered too by both the seller and the buyer, navigating not only the negotiations with a buyer, but the timelines of the contract is a complex job.
It is common practice for home buyers to get a home inspection from a qualified inspector. This report is in depth and so the likelihood that an inspector will find something wrong with the house is pretty high. Most inspection reports are a several pages long! Without having an agent to handle the emotional side of a buyer asking the seller to fix something in their home they never felt was an issue, this part of the buying/ selling process gets ugly fast. A buyer can exit the deal at any time during the inspection process and so when tempers rise and the seller decides they are not fixing anything, you can lose your buyer in a hurry.
#7 Buyers Agents
Often For Sale By Owners chose this route to “Save money on an agents commission” we will tackle this myth further on. However, most buyers have an agent and it is wise to have someone representing you, especially in a For Sale By Owner. I would dare to say being on the buyers’ side without an agent is far scarier than selling without an agent!
If this is the case, on either end, you may not be willing to negotiate in your buyers’ agents commission. For Sale By Owners often lose out on deals because they do not want to work with a buyers agent. Agreeing to pay a buyer’s agents commission is actually very wise if you find yourself trying to sell your home without an agent. The Buyer’s agent can write up the contracts needed to complete the sale, manage timelines, coordinate signings and make sure that neither party ends up in litigation.
#8 Lack of Marketing and Exposure
The Network of Realtors is vast, they can post your home in your areas Listing service, Zillow, craigslist, etc. They also have the tools and reach to put in newspaper ads, and run ads across various social media sites. For Sale By Owners often fail because the seller is not equipped to get their home enough exposure. When you hire a Realtor to sell your home, you get a comprehensive marketing plan that utilizes several markets.
#9 Incorrectly pricing their home
If your planning to do For Sale By Owner, I would recommend you pay for an appraiser to come out and give you a value for your house. Commonly, owners’ price their homes too high. An agent’s commission is built into the sale of the home, therefore, when pricing your home without an agent you would need to deduct commission costs. It is a common misconception that using an agent, takes money away from your net profit, this is actually not true! Appraisers use very specific methods for finding a value, but one of their methods is to pull comparable (similar) properties that have either sold, or are for sale to get a good market value for your home. However, the pitfall comes because the appraiser knows that when they pull homes from the market, they are being sold with an agent and so agent commission is coming out of the deal, so your home value will be marked down since the sale price of your home wouldn’t include any commission.
#10 They Don’t know how to Ensure the Deal Actually Closes
To legally close the deal, there are quite a few things that need to be done. Owners often have no idea what the next step is once an offer has been accepted and that there are timelines to be adhered too. Some helpful tips for next steps are;
Buyer obtains written mortgage commitment
Inspections are completed and negotiated
Attorneys approve contracts
Title work is reviewed
If you decide to take the For Sale By Owner route, I hope you have found this helpful! Use the tips above to hopefully help you avoid a lot of extra time and money spent. Also, take a short dive into the world of google on FSBO pitfalls, there are more than just the ten mentioned here. The biggest myth of all to bust, is that it actually costs the seller money to hire an agent, it does not.