Should You Try to Sell By Owner?
The truth is that only about ten percent of owners successfully sell their home on their own. That varies by region and the number goes up a tad for professional real estate investors because they are more familiar with real estate than your average homeowner.
Those that do sell their home successfully usually accept not only a lower price, but they net less than if they had sold it with a professional qualified real estate agent helping them - especially in an uncertain market with high inventory.
Like today.
It would currently take almost nine months to sell all the homes currently on the market at the current sales pace, even if no new homes came on the market. That is with all the advantages of a real estate agent and the Multiple Listing System (MLS) at your side. On your own, it's even harder.
So why is the MLS such a big help?
Well, if you run an ad to sell your home, you not only have to pay for the ad but you can only sell your home to those that see your ad. That limits demand. As everyone who has taken Econ 101 knows, the more demand for a product, the higher the price: The less demand, the lower the price.
By sharing information about your home via the MLS with all other Realtors and brokerages in the area, you increase demand for your home. Not only does your agent's company advertise, but so do many others. Since less than ten percent of prospects actually buy the home they see advertised, real estate agents have to find them another home to purchase.
Realtors find those homes in a database called the MLS. Unless you are an agent, you do not have access to the program. As a result, not only is your agent working to sell your home, but so are all the other MLS members, too. Your agent's efforts are multiplied by those of all the other agents in the area.
More demand. Higher price.
What are other problems with selling by owner?
A FSBO (For Sale by Owner) sign attracts lowball offers, for one thing. Think of buyers that want not just a deal, but a steal. Have you ever stayed up late and seen an infomercial about how to get rich in real estate? The number one method is to find a steal, often by taking advantage of someone who does not know what they are doing.
Then there are phone calls. Who answers them? What do you say? How do you convince them to come look at your home when you're available to show it? How do you convince them to write an offer? Where do you get the right forms? What forms do you need?
That's just the beginning.
Is the buyer qualified? Do they have money in the bank, good credit, can they get a mortgage loan? Is your buyer's loan officer competent and flexible?
There are also lots of details. Do you need an escrow company or a lawyer? Termite inspection? Home inspection? Warranties? Title inspection?
And when there is a challenge (a polite word for problem), as their always is, who handles it?
It isn't easy and we've just barely scratched the surface.
We're biased, of course, but we recommend a professional agent.
FSBO Woes: Why It's So Hard to Sell Your Own Home
For most people, a for-sale-by-owner (FSBO) transaction simply isn't in the cards.
By Marcie Geffner
Granted, some people are able to sell their own homes without the services of a real estate agent. Some of these successful do-it-yourselfers are very experienced home sellers. Others are transferring ownership of their home to a child, a coworker or a tenant who's already living in the home. These circumstances are the exception, not the norm, however. For most people, a for-sale-by-owner (FSBO) transaction simply isn't in the cards. Here are five reasons why.
1. FSBOs can't list their home in the MLS. FSBOs aren't permitted to put their home in the multiple listing service (MLS) because these industry membership organizations are open only to licensed real estate brokers and agents. FSBOs are also locked out of many home search engines and Web sites, including the gigantic Realtor.com. Sure, a determined FSBO can put a for-sale sign in his or her front yard and run a tiny advertisement in the local newspaper, but the home won't receive nearly as much exposure as it would through the MLS.
2. Agents won't show FSBO homes. In a typical home sale, the buyer's agent receives a percentage of the commission that the seller pays the listing agent. Without a listing agreement, there's no guarantee that the buyer's agent will be compensated for his or her services, unless the buyer has signed a buyer's brokerage agreement that specifically provides for such compensation. Even if a FSBO offers to pay the buyer's side of the commission, most agents won't want to go through a transaction with an unsophisticated self-represented seller across the table. That means the pool of potential buyers for FSBO homes is limited primarily to unrepresented and probably unqualified prospects.
3. FSBOs usually overprice their home. Like most homeowners, most FSBOs honestly believe their own home is worth more than comparable homes in the same neighborhood. Usually, they're wrong. A real estate agent can provide an update on market conditions, an assessment of the likely selling price of the home and tips for improving the home's buyer appeal. Overpricing a for-sale home is a sure way to deter potential buyers.
4. Buyers will feel intimidated. Potential buyers will spend less time in a for-sale home if the owner is present during the showing, and they'll be shy about discussing its pluses and minuses with their own agent if the owner is within earshot. Buyers will also be less inclined to make an offer if they know they'll be negotiating directly with the seller. Having an agent on each side creates an effective emotional buffer between the seller and buyer.
5. FSBOs are likely to stumble into legal trouble. Real estate transactions are fraught with potential liability for unwary sellers, particularly in states that have extensive disclosure requirements (e.g., California). A FSBO who overlooks even one required form or legally mandated disclosure could face a protracted and expensive buyer lawsuit after the transaction closes.
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