Tuesday, October 31, 2017

FSBO means: Forget Selling by Owner!

I recently advised a resident in my neighborhood of the reasons he should not try to sell a home on his own, in other words, without a Realtor. If he does decide to do it by himself, I wish him luck and I really mean that. But…it is a bad choice and I hope to hear back from him in a few months and of course I will be happy to list his home when he is ready. But here are the facts I discussed with him regarding For Sale by Owner, commonly know as FSBO.

The 2016 Profile of Home Buyers and Sellers by the National Association of Realtors® (NAR) found that for sale by owner (FSBO) sales are at an all-time low, at only eight percent, versus the all-time high set back in 1981 at 21 percent. So why do you think this is the case? Here are some of the reasons:

  • There are many people to negotiate with - here is a list of some of the people with whom you must be prepared to negotiate if you decide to For Sale By Owner:
    • The buyer who wants the best deal possible
    • The buyer’s agent who solely represents the best interest of the buyer
    • Possibly the buyer’s attorney 
    • The home inspection companies which work for the buyer and will almost always find some problems with the house.
    • The appraiser if there is a question of value
  • Exposure to prospective buyers - Recent studies have shown that 88% of buyers search online for a home. That is in comparison to only 21% looking at print newspaper ads. Most real estate agents have an internet strategy to promote the sale of your home and Re/Max Alliance Group has an aggressive marketing program.  Where do buyers find the home they actually purchased? Most results come from the Internet –about 43% on the internet, 9% from a yard sign, 1% from newspaper. The days of selling your house by just putting up a sign and putting it in the paper are long gone. Having a strong internet strategy is crucial.
  • Slower Sale - Sellers who tackle the prospect on their own often don't have the marketing expertise to do it right. This means that the home may sit on the market longer, because fewer buyers see it. Since almost 90% of buyers search online for a home, an online presence is critical, and many FSBO sellers don't know how to generate a good one or don't have the tools to keep it up to date and in the sight of potential buyers. One of the reasons successful real estate agents are successful is because they have a large reach to find prospective buyers for their homes. This starts on the internet, where the majority of buyers start their search. An agent is able to post in all online venues, including those linked to the MLS. In addition, agents know the most effective offline advertisement venues, so sellers don't waste their time posting in newspapers that no one reads.
  • Owner selling has become more difficult. The paperwork involved in selling and buying a home has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons that the percentage of people FSBOing has dropped from 19% to 9% over the last 20+ years.
  • You will have to pay for your own advertising and marketing. Because you don’t have as many venues to market your properties as I do, you’d get a lot less traffic. Less traffic = fewer offers = less money. Nationwide TV, Print, Radio and Online Advertising generates 8 billion impressions. RE/MAX has a dominant share of voice in the United States – meaning consumers view RE/MAX advertising on national TV almost as much as all competitors combined.
  • The seller nets MORE money when using an real estate agent. Many homeowners believe that they will save the real estate commission by selling on their own. Realize that the main reason buyers look at FSBOs is because they also believe they can save the real estate agent’s commission. The seller and buyer can’t both save the commission. Studies have shown that the typical house sold by the homeowner sells for $208,000 while the typical house sold by an agent sells for $235,000. This doesn’t mean that an agent can get $27,000 more for your home as studies have shown that people are more likely to FSBO in markets with lower price points. However, it does show that selling on your own might not make sense.
If you are still thinking of trying to sell your home without an agent, ask yourself these questions:
  • Do you understand the contracts process well enough to not get into any legal problems or to explain to a buyers’ agent how you want things drawn up?
  • Do you have the time to field all the calls, faxes, and inquiries that will come with multiple offers? One missed phone call or fax could kill a deal.
  • Will you be able to let anyone in during the week to see the property? (if not, fewer offers = less money).
  • Will you know what to say and what not to say to those who call? (if not, less interest = fewer offers = less money).
  • Do you have the proper forms and disclosures necessary to do this on your own? (legal problems, no protection between you and a buyer).
  • Do you have the ability to make sure that the financing that your buyer has is good and won’t cause the offer to fall through?
  • Will you be able to meet the appraiser and/or inspectors to let them into the house? 
So here’s the bottom line. Before you decide to take on the challenges of selling your house on your own, sit with a real estate professional  (hopefully me!) in your marketplace and see what they have to offer. Sellers considering selling on their own have an uphill battle to face. It's always better to partner with an experienced Realtor such as myself, as doing so makes the process ahead much smoother and less stressful. Remember - Sarasota is my hometown and I know it well!

Sources and Credits: National Association of Realtor, Forbes, FloridaRealtorsTube, American Mortgage