section contains a collection of findings and experiences
that I have encountered with FSBO sellers. I have tried to organize
the information in outline form. Refer to the section or sections that
concern you. I hope the information provides insight and answers your
questions about selling your own home. If you want to talk about it
- call me.
Let’s be honest,
the #1 reason why sellers attempt to sell their own home and
that is they want to avoid paying real estate commissions.
Some frequently stated reasons are:
A. Sellers believe the commission is too high:
1) Possibly because they do not understand how the commission
gets distributed among ALL parties (Sellers’ agents,
Buyers’ agents, respective brokerages, etc. [see commissions]
) When you consider an agents actual operating expenses, an agent
nets less than 20% of that overall commission.
When a seller tries to save the commission, they are still most likely
to encounter buyer’s agents and still have to develop (and pay
for) a marketing plan. So the seller who is not represented
will still pay about 2/3 of a full commission anyway,
plus they are out there on their own without a life-net. The buyer's
agent may seem helpful and willing to "do the paperwork for you"
but remember who that agent represents. Who is guarding
2) Possibly because they do not see the value of an agent’s
service. If so, they are very likely to believe they
are able to do the job just as well themselves. The seller's perception
here is reinforced by two factors:
first, honestly, there are some agents
who probably are not worth their commission, and
the majority of agents (Realtors) who save clients the huge dollars
by avoiding problems, negotiating a strong deal and keeping the
whole deal together during the process usually do so very skillfully
and often behind the scenes that it creates the illusion that anyone
can do it.
more than 90% of FSBOs wind up going to a Realtor. The problem is
that many of them lose significant time and funds in the process and
than ask the agent to sell a property that has already tarnished in
the eyes of prospective buyers.
Other sellers feel forced to sell
the property themselves because they honestly believe
they cannot afford the services of a Realtor. (In some cases they may
be correct. Remember, commissions get paid from the proceeds of the
sale, that is, the equity that has accrued over the period the sellers
have owned the property.) Some cases that I have experienced where the
proceeds may not be adequate to pay the commissions are:
1) They have been in the home only a short time with 100% financing.
2) Longtime residents have refinanced to 100% (or more) or market
value and now have little or no equity in the property.
3) There are liens (tax and/or creditor obligations) that have been
attached on the property to be resolved when the property transfers.
4) The home owner has fallen on difficult times and their credit rating
is in jeopardy.
5) The home owner has fallen behind in mortgage payments and is in
danger of being foreclosed.
Recommendation: If you find yourself in a
situation where it looks as if your home may be in danger, start developing
a plan as early as possible. Some tend to “stick their head in
the sand” and that is not a responsible act. If your credit begins
to take a hit, many options may close down to you – stay on top
of things. Selling through an agent may be difficult and many agents
may not even talk to you. I will talk to you and at least give you the
benefit of my experience – whether it is a deal or no deal. At
a minimum you should fully understand the dangers.
2. If your primary motivation
is not an attempt to increase the sales proceeds,
you are apparently a die-hard do-it-yourselfer and figure “what’s
the harm?” There are volumes written about the dangers and potential
problems that can occur – too much to go into here. The quick main
A. Remember, you are dealing with real property which is highly
regulated. Realtors are highly trained, undergo strict and
continuing education requirements, must stay current on local market
and real estate issues. For your protection, make sure that any agent
you consider to represent you is a Realtor® (i.e. a current member
of the National Association of Realtors) who are bound to a strict Code
B. Meetings and discussions between buyers and sellers are not
good for the sales process.
1) Buyers feel they cannot objectively tour the home and comment among
themselves with the owner lurking about (see Walk The Goldfish).
2) Sellers often become unnerved if buyers discuss their dislikes,
especially if it is a feature that the seller takes great pride in.
3) With the sellers present, the buyers may ask some questions that
can better be handled agent-to-agent. The last thing you want to do
is say sometime that becomes a primary reason for the sale that does
not fully, 100%, live up to the buyers’ expectations.
4) Maybe the seller and the buyer really hit it off and you become
instant buddies. Lost in the conversation, the seller assumes the
buyer is qualified and accepts the buyers’ offer. 30 to 45 days
later the seller finds out they are not qualified. Do you start over
or lower the price $50,000? Remember, this is not a social tea.
Market prices include the cost of real estate commissions
(Broker Fees). Properties sold without a Realtor seem to automatically
receive offers 8 to 10% below the market price. So you are more likely
to get a higher price (and bottom line proceeds) when using a Realtor.
(Actually, research conducted by the NAR (National Association
of Realtors) show that the median selling price of a FSBO (For Sale
By Owner) was $198,200 compared with $230,000 for Realtor assisted
home sales. Whether it be this (over 16%) statistic or the automatic
8 to 10% that buyers deduct, not only does a Realtor DO all the work
and take the burden off your shoulders, a good Realtor will more than
pay for him or her self.)
D. Buyers are often skeptical and do not feel the integrity
and security that comes from having a Realtor standing behind the deal.
Buyers know a Realtor is bound by a strict code of ethics - to be honest
and truthful with all parties. They also know where to find the Realtor
after the sale – they do not have that feeling about the seller.
E. Buyers know that since sellers are more personally and emotionally
attached to the property, they are much more likely to eventually
cave-in to a sub-par offer.
3. If you are comfortable with
the items above and feel you must give it a try – then I guess you
just have to go for it. I wish you clear sailing and may the wind be at
your back. Just remember, finding someone who wants to buy is
the easy part. Getting them to the settlement table is the challenge.
Understand how the people looking at your home may view the deal. Buyers
are often skeptical of sale by owner deals. Buyers see one person selling
a property and are concerned about unseen problems (especially if they
have no realtor guiding them.) The buyer does NOT even know “where
the seller lives” (after the deal). Buyers often view FSBO’s
as bargain bin sales and expect bargain prices.
Compare this to a car deal for a certain make/model car you are looking
for. The car is on the lot of a reputable car dealer priced (accurately)
at say $20,000. If you found an identical car (including mileage, apparent
condition and goodies) parked on the side of the road with a “For
Sale” sign on it, how tempted would you be to check it out? How
secure would you feel about the off-the-street deal? Stop and think now:
how much would you be willing to pay for the off-the-street car if you
suspect you will never see the seller after the deal? Calculate the difference
and multiply that difference by the number of times 20,000 goes into the
value of your home. THAT is approximately how much a good Realtor is worth
to you when you sell your home.
If you decide to go-it-alone, here are more tips. As a bare
A. Sellers must verify each potential buyer’s financial
ability. (It’s been found that unqualified buyers –
those with bad credit, no credit, no down payment – think they
can get around their money troubles by pursuing sales by owners.) You
do not want to accept an offer to will obviously fall apart 30 or 45
days down the line.
B. Research the actual lender (not a broker who may
write the pre-approval letter) and particularly their underwriting procedures:
that is where many problems occur.
C. Gain as much exposure as possible. You want as many people to be
aware of the property as possible. An online presence, with plenty of
photographs and/or a professional virtual tour, is highly recommended.
You want to strive for multiple offers and the ability to select the
best possible offer (TIP: the property and it's features should be the
subject of each photograph, not stuff like furniture – you are
not selling the furniture.) DO NOT PHOTOGRAPH VALUABLE ARTIFACTS
OR COLLECTIONS – you do not want people casing the place.
D. BE SAFE! Have a sign-in sheet that YOU fill out
for each person as they enter your home. You complete the name and address
from the buyer’s driver’s license and add other contact
information such as their e-mail address and phone number(s). Look under
Stuff For FREE for a free sign-in sheet.
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