One of the hottest topics in real estate is whether to retain the services of a real estate agent or to put your home on the market as an FSBO – for sale by owner. Just as there are any number of reasons why people may be selling their house, there are just as many reasons why someone would try to sell their house themselves.
One reason of course is that the seller is not obligated to pay a commission to a real estate agent. In most markets that can be anywhere from 5% – 7% on the sale price of the home. A few years ago 8% -9% was acceptable. That is not the case today. If an agent has a client whom he believes may be interested in buying a FSBO property, the agent may approach the seller and ask if they would entertain the idea of paying the buyer agents commission. Many times the FSBO seller will be happy to do that. If not, the agent can still present the property to the buyer, but in all liklihood, the buyer would be responsible for the agents commission. That alone will many times knock the buyer out of the market. Of course by not being willing to pay a commission to an agent, you limit the amount of traffic or prospective buyers that you may encounter.
There are many times when a FSBO makes sense and I would encourage a seller to look at that as an option. For example: if you are selling your property to a relative or someone you know, it may simply be a question of dotting the “i”s and crossing the “t”s and processing the paper work. But even a FSBO (not including relatives) need to comply with certain legal requirements such as a property disclosure statement.
Recently I talked to someone who was telling me that they had sold their house by themselves (this was several years ago when the market was hot) and he was very proud of that fact. He went on to explain that he had mold in the basement of the house and was very glad to get rid of the house. I asked him how the buyers handled the mold issue and he replied that he didn’t tell them. I asked him if he had provided the buyer with property disclosure statement and he replied quite assuredly that he did not have to because he sold it FSBO. Not true. Unless you are selling to a relative or in a few other circumstances, you are required to provide a property disclosure statement. In the case I mentioned above, neither the seller nor the buyer used a real estate agent.
FSBOs can encounter several unexpected issues that they have to content with, such as the property disclosure statement. They also have to handle any advertising that needs to be done and it must be done consistant with the law. For example: you can not market your property to a specific age group, or race or even religion. Mentioning that your property is within walking distance to a partcular church may be in violation of the law. These are issues that a licensed real estate agent can walk you through.
Additional issues may be handling phone calls, showing the property and then the negotiating of the price and any others items to be negotiated.
There are two issues that FSBOs will encounter in handling the transaction that can be a stumbling block. The first one is determining the listing price. When a real estate agent does a CMA (Comparative Market Analysis) they use a wide array of data and experience in determining the listing price. It is important to detach the emotions involved in the property when determining the price. All to often FSBOs list their property based on what they want out of the transaction rather than what the market determines.
The second stumbling block is the negotiating process. Buyers look at the property and think about the money they are spending. The beautiful red paint in the dining room that the sellers recently applied is the first thing the buyers may look at and determine they will have to spend money to repaint the dining room. That is when the feathers begin to fly.
I remember clients I had that were looking at a property and commented that they would have to paint the interior. The sellers, who had not left, reacted instantly and were offended that they did not like their “designer” paint. Feathers flew and they did not buy the house.
Studies have shown that statistically speaking, homes that are sold with the use of a real estate agent typically sell for 17% more than FSBOs. Even if you deduct the commission most FSBOs would be better off utilizing the skill and expertise of a real estate agent, especially in this market.
Never the less, there are some sellers who want to do it themselves. And that is OK if they know what they are up against and are willing to deal with that. I would suggest that anyone who is thinking of selling their property by themselves to at least talk to a REALTOR® to get the facts on the market conditions. REALTORS provide much more service than what I am covering in this posting and it is important to look at all the information before making this decision.
Most REALTORS® that I know would be happy to spend some time with FSBOS and talk about the process. Some may even be willing to hold an open house for you provided you will pay their commission should they find a buyer. In any event, and as I have mentioned many times, talk to a REALTOR® to get the facts.
As always, if there is anything I can do to help you with any of your real estate needs, please don’t hesitate to text or call me at 615 417-8182 or email me at RolandLow1@gmail.com.