As real estate agents, we all know someone who has decided to go it alone and sell their home themselves. For sale by owner (or FSBO, pronounced fis-bo, as it is often called in the industry) is an often contentious topic amongst those in the real estate industry, so we thought we’d take a little bit of time on the blog to talk about it. It comes as no surprise that agents don’t like to see For Sale By Owner signs in front of a home. Why would we? As selling homes is our job, we’d much rather we were a part of the process…if everyone sold their homes themselves, we’d be out of a job and looking for a new career. Some people might mark this up as simple self-preservation, but there are much deeper roots to it than that.
Why Go For Sale By Owner?
Of course, the ideas behind going For Sale By Owner are control and money. Not having to pay a commission to a listing agent and being able to run the sale your way are the key factors in why people choose to sell by themselves. Perhaps someone had a bad experience with a Realtor. Perhaps they know a bit about real estate themselves. Whatever the reason, there will always be people who choose to go it alone.
The control issue is obvious. We as agents do like to tell you what to do – we ask you to declutter and stage your home, we suggest a list price, give advice on the offers that are made, and offer insight during the negotiation of a contract. That’s what you pay us to do. In the end, we sell your home and collect our commission for the work we’ve done.
Commissions are probably the biggest issue to a For Sale By Owner – saving money is the name of the game. By eliminating the commissions, the seller is in control of all the proceeds to their home. Everyone likes to save money and make more of it. Who can blame someone for that?
The Downside of Going For Sale By Owner
Of course, there is always another side to the story. Your average For Sale By Owner may see this in a different light, but there are some important disadvantages to selling a home on your own.
Access – Do you know who’s coming and going in your home? You definitely should. Being present for all showings might solve this problem, but of course, it also presents some other issues (most buyers are uncomfortable with a seller hanging around). Here in San Antonio, we use Centralized Showing Service to schedule showings (so we have a record of who is scheduled to show your home) as well as Suprakey lockboxes (which keep records of entry). By utilizing these two items, we know who has been in your home in case there are any problems. These two items also give you the freedom of not having to be there for every showing.
Trying to schedule showings yourself? Of course you can do this. What we have learned throughout the years though is that if you’re not available when the buyer is ready to look, they will often move on and go look elsewhere. It happens to us as agents as well. If a buyer calls us and wants to go now, but we’re not available, they will often call another agent and see if they’re available (of course, if they are our clients, we make the time and schedule it). One missed phone call or denied showing can cost you the sale of your home (and that applies to both For Sale By Owner and agent based sales).
Price – This one can be very concerning, as many For Sale By Owner homes are overpriced or worse yet, undervalued. Since Texas is a non-disclosure state, sales data is not available to the public. This is what we base our comparative market analysis (CMA) on as agents. We have access to the sales data via the MLS, but the public does not. Many sellers will use sites like Zillow and their Zestimates to do their own market analysis, but these sites do not show a true picture of what is happening in your neighborhood. We are not against these sites, as they provide a starting point and are widely used by people who are just beginning to think about selling their home. While we believe that a buyer or seller should educate themselves on the real estate process and that these sites provide an excellent treasure trove of information, we also know that they should not be used as the final word in real estate – from pricing to the differences in local customs and laws, much of the information these sites provide is based on a wider, national view. Use these sites to gather base knowledge, but turn to local real estate agents to get a deeper understanding of how that works for your area.
When a buyer sees your For Sale By Owner signs, a certain mentality takes over almost immediately. The buyer knows that the pricing of a home also includes the cost of commissions, so in their minds, they can discount your list price by the cost of a commission. They see your home as a deal. In doing so, they might even slash their offer price by more than the cost of what they think the commission would be – effectively reducing the amount of money you might have made on the sale of your home. You don’t have to take their offer, of course, but the fact remains that the buyers out there are looking for a deal and will always try to get one (who wants to pay more than they have to?).
The exact opposite can happen as well – the For Sale By Owner can overvalue their home. When a home is listed too high, it often languishes on the market. Time spent on the market drives up the cost of the sale. Every time you make another mortgage payment, you are lessening the value of the sale. Mortgage interest is not recaptured upon sale, only principal reductions are. If you’ve been in the home a short time and are still paying the weight of your mortgage each month as interest, then you are not getting much value out of each payment.
Exposure – For Sale By Owners used to get little more than a sign in their front yard for exposure and maybe a few classified ads when the newspaper still ruled real estate marketing. Times are different now and the internet has helped level that playing field. FSBOs now have access to many of the same tools that we have, in some cases, even the local MLS. This is the hardest argument to make to a seller who wishes to go it alone. Being on the MLS is a huge benefit. Not only does it get you searchable within our system and gives agents and their clients the information about your home, but it gets you on Realtor.com and allows you to be shown on thousands of individual agents’ websites through the power of IDX. IDX is what powers the search on sites like this one, with data being fed from the MLS to homes searches on agent sites, brokerage sites, and even national real estate franchises. It’s easy to see how one listing in the MLS can suddenly be seen around the world on a multitude of sites, thereby increasing the exposure your home receives.
Exposure isn’t just about slapping some photos on a website though. Many of us practice SEO (Search Engine Optimization) techniques on a daily basis in order to get our listings and sites to be ranked higher up in the search engines (such as Google). By working at it everyday we’re able to get more exposure than a website that was thrown together and forgotten. Agents also talk about their listings to other agents all the time – word of mouth can be a very powerful tool.
Legal – Let’s face it, selling your home is a legal process. The forms we use are written by lawyers for a reason – to protect the parties involved and give them legal remedies should a problem arise. Although the One To Four Family Residential Contract Realtors use here in Texas is pretty simple to fill out, it’s the words that we don’t write that matter most. The wording of these contracts and addenda have been tested in the court of law over and over again and refined to provide a secure footing within the laws.
The Texas Real Estate Commission maintains the Real Estate Recovery Trust Account (FAQ – PDF file) for consumer’s protection. Every real estate licensee pays into this fund and when we are sued, the fund is one of the methods a party can look to for recovery of their losses. If you are selling your home as a For Sale By Owner, guess who’s responsible for paying any judgments if you lose the case? That’s right – you, the seller. Real estate agents also carry E & O insurance (Errors and Omissions Insurance) that helps protect us in the event of judgments. We’re covering your legal bases and ours. As a For Sale By Owner you’re covering all of them on your own. Imagine trying to save a few thousand dollars and suddenly you’re paying out a judgment of tens (or hundreds) of thousands.
image courtesy of Images_of_Money