For Sale By Owner

For most people, the biggest financial transactions they will ever experience will be the purchase and sale of their home.  The process of selling a home can be time consuming, and it is very complex.   Consider, how often does a person sell a home?  There are many legal and financial ramifications involved.  And, how will the home be marketed?  

Home sellers must also keep in mind that buyers feel the need to be counseled and protected.  It is going to be one of their largest financial transactions also.  They tend to shy away from dealing directly with a seller.  It can be a costly and frustrating experience to do a FSBO (for-sale-by-owner).

The obvious appeal for homeowners to sell it themselves is, of course, avoiding having to pay a commission that is normally earned by a Realtor®.  After all, how difficult could it be to sell a home?  Isn't it just like selling anything else?  So there is that temptation to try it, and possibly save a lot of money.   What more does it take than sticking a sign in the ground?  Well, it really isn´t quite that simple.  In fact, it is reported in national statistics that only 8 percent of all 'For Sale By Owner' efforts are successful.  And unfortunately, for their efforts, they net 1% LESS than if they had paid an agent to handle the whole transaction.  Yes, only one out of every twelve actually results in a completed sale, and the sellers net less money than if they had sold using an agent.  Why deal with the risks and frustrations?

For-sale-by-owners should be prepared to stay close to their home for weeks and maybe months to show the home to prospective buyers.  The home sellers will need to be accessible during regular working hours --  that is when most showings occur.  And, they need to keep in mind that they will probably be showing the home to people not qualified to buy it, or who are looking for a bargain. 

What are the pitfalls in selling your home yourself?

1. Bargain hunters know that the owner is not paying a sales commission.  They will deduct that amount that the seller is saving from their purchase offer.  And since an owner may be inexperienced in negotiating, or in the pricing of the home, the homeowner may be in for more trouble than the perceived savings are worth.  The property may end up being tied-up in an escrow with a buyer that is not performing, or is trying to negotiate price and repairs all the way through the escrow process. 

2.  For-sale-by-owners end up letting complete strangers inside of their home.  They don't have the opportunity to meet these potential buyers in advance.  In addition, most buyers do not like to be followed around the by the owners of the homes that they are viewing.  They want to open closets and cabinets, and talk amongst themselves.  For sellers to follow them around would make them head straight for the front door.  Real estate agents, on the other hand, know who they are showing homes to, and are, in fact, responsible for these people's actions.  

3.  Sellers don't even know if the people they are letting into their home are qualified to buy any home.  That can be a lot of wasted time and effort.   And since most home buyers are already working with an agent, or are searching on some source of the MLS (Multiple Listing Service), for-sale-by-owners are drastically limiting any potential buyers

4.  There can be a great deal of emotion displayed by sellers who are selling their prize castle, and buyers who are making the largest purchase of their lifetime. Without a responsible professional who has the confidence and trust of both buyer and seller, negotiating a sale of this magnitude will be difficult.

5.  Many sellers are emotionally attached to their home.  They may rationalize that their home is worth much more than the similar home down the street that just sold.  Buyers, however, will compare the home, and the asking price, to similar homes on the market, or those homes that have been recently sold.  If the price is too high, buyers will reject it and move on to the next listing.  The longer a home sits on the market, the less marketable it becomes.  Buyers begin to wonder if something is wrong with the home.   Many  'For Sale By Owner' properties are overpriced.  They sit on the market for a long time before they finally list with a real estate agent.  At the other extreme, many for-sale-by-owner homes are sold at an unfair, below-market price due to the inexperience of the seller.  That can be a high price to pay for not having an agent assist and protect you.  How many sellers are actually aware of all the state-required disclosures?

6.  Real estate contracts and negotiations can be intimidating because they are complex.  And, executed purchase agreements are binding on  sellers, but not on buyers.  Buyers can back out of a purchase contract, but it's not that easy for a seller to.   Often times, sales are lost when the buyer is ready to buy, but no one gets a signed purchase agreement or an earnest money deposit.