"For Sale By Owner" What’s the Risk?

While some may argue that homeowners who attempt to sell their home on their own is more profitable, statistics show that when a real estate agent is involved it is quite the contrary. The median price of “For Sale By Owner” (FSBO) homes that sold in 2004 was 15.4 percent less than the median price for homes that sold with an agent.

There are many risks when selling without an agent. One risk, is that you might end up selling too low. FSBOs will attract mostly buyers who are looking for a deal. Just the same as FSBO sellers who are looking to save money, FSBO buyers are looking for the same discount. The seller wishes to save money by not paying a commission and in turn, so does the buyer. Therefore, a FSBO buyer would likely think they can negotiate an even lower price than the seller had expected.

To ensure the best possible price, a seller needs to obtain maximum exposure of their home. Multiple offers and higher sale prices are the result of exposing the home to multiple buyers, not simply to a friend or neighbor. According to the National Association of Realotrs (NAR), 48% of all buyers find and buy their properties through agents. The main reason for this is due to the fact that agents do a lot of their marketing to other agents. Why other agents? Because they know that other agents are working with numerous potential buyers. NAR also states that 15% of all buyers find the home they purchase through a yard sign. Putting up a sign in your yard that buyers recognize is powerful and denotes a high level of quality. 12% of purchases are friends, neighbors or relatives, 9% are newspaper or magazine ads, 8% from the internet, 3% from open houses and 6% from other sources. A seller can gain maximum exposure through an agent who uses all these avenues.

Another big problem for FSBO sellers is determining what price to ask. The big risk here is possibly not asking enough or getting overexcited when the first buyer shows up. An agent has seen most of the homes in your neighborhood and will have a pretty good idea of how yours compares. They will also have the tools necessary to provide you with a good market analysis. Agents provide detailed Comparative Market Analyses on a daily basis.

Selling without a licensed professional can also be tricky when trying to close a transaction. Actually going through the process of closing a transaction is a huge deal-breaker for most FSBOs. They have to find a buyer that has been qualifed for financing. A good agent will make sure that you don’t accept an offer from a buyer who isn’t qualified. FSBOs will need to negotiate a reasonable sales price. This is a no-brainer, but an experienced agent has been through this process many times and can handle delicate situations. FSBOs need to process the appropiate paperwork, disclose all that needs to be disclosed, set up inspections and find a way to transfer the deeds and close the transaction. These are the reason’s why so many FSBO transactions collapse. There’s no one with experience working to move the transaction along and to resolve problems when they occur. All the steps mentioned that are necessary to close also need to be done lawfully or both seller and buyer run the risk of being taken to court. A knowledgable agent understands the proper steps and mandatory disclosure requirements and can aide in all selling processes.

Lastly, now that the market has changed significantly, FSBOs will have a hard time selling without the assistance of a sales professional. FSBOs in the last couple of years sold their homes quite easily, simply because very few homes were on the market. Now that the number of available homes have more than quadrupled in number, FSBOs are being overlooked without the proper advertising. With the aide of a sales professional, sellers have the added support to obtain maximum exposure and the best possible sales prices.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply