Most economists anticipate the housing market moving sideways, propped up by strong employment and low mortgage rates but dragged down by low inventory…
There Are Reasons For-Sale-By-Owners (FSBO) Fail
Selling your home without the help of a real estate agent can seem like a good idea. In an ideal world, homeowners would save a lot of money — not having to pay a commission is a strong motivational factor. But is the “for sale by owner” (FSBO) option really as good a choice as it may seem?
Selling a home without a real estate agent isn’t easy. And statistics seem to show that less than 10 percent of for sale by owner sellers actually succeed. But what is it, actually, that prevents FSBO sellers from being able to close their property sales?
Here are some of the mistakes that FSBO sellers make; they illustrate why local real estate agents’ expertise is invaluable.
1. Failure to prepare a property
If a home isn’t appealing to buyers, homesellers are wasting everyone’s time. This doesn’t just mean making sure everything is tidy; the condition of the house needs to be perfect.
This will involve…
1. Doing repairs. Removing unnecessary furniture and clutter. Painting and decorating neglected rooms in a way to make them look as appealing as possible. Having a professional cleaning.
Houses that don’t have excellent curb appeal or have obvious things wrong are going to be challenging to sell. And they’re not likely to command top dollar.
2. Lack of marketing experience:
If the FSBO property listing isn’t put in front of the right people, it will never be sold. The real estate agent will have the knowledge and experience to get this right; the owner usually won’t. There are also quite a few powerful online marketing channels that won’t let FSBO homes be listed. An agent will be able to market the property far better than a novice seller could ever hope to.
Many for-sale-by-owners don’t realize the power of the multiple listing service (MLS) and the wide net it casts.
3. Dealing with potential buyers:
A big part of the real estate agent’s job is handling inquiries. Many people who try FSBO aren’t ready or able to deal with queries. You have to be able to stay on top of calls and emails, and be prepared to show the property when it is convenient for the interested potential purchasers.
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Another problem is spending time on inquiries from people who aren’t in a position to buy. If you don’t understand how to screen genuine buyers, you are going to end up wasting a whole lot of time.
FSBO sellers often don’t understand that they should find out if the interested person has been pre-approved for a loan or needs to sell their house first. If they haven’t or they are only pre-qualified, they may not be able to buy the house even if they fall in love with it.
Even if the seller can find a pre-approved buyer, there can still be problems when showing the home. It’s all too easy for a homeowner to put pressure on the potential buyer when all they want to do is be left alone to view the property: The buyer won’t feel that they can discuss the property honestly, they will want to avoid saying the wrong thing to the owner. This situation isn’t going to increase the chances of a sale.
One of the critical roles of a seller’s agent is to screen potential buyers.
4. Unwanted inspection results:
A home inspection may turn up some problems with the house that the owner doesn’t agree with. Most buyers will want a home inspection, and very often, they will highlight some problems with the house. This can upset the owner and can lead to the FSBO falling through when the owner is unwilling to correct the problems found.
Real estate agents can be a great sounding board when it comes to inspections. They have been through the process many times and can offer their expertise in negotiating a successful outcome. Getting through a home inspection is often about give and take.
5. Negotiating with buyers:
Pricing your home correctly can be difficult to get right if you don’t have the experience. The number one mistake FSBOs make is pricing their property incorrectly. Negotiations over this price can also be problematic if the owner has unreasonable expectations.
The purchase contract also needs to be negotiated. Is the buyer putting down the right amount of earnest money? Is the time the buyer is asking to procure a mortgage reasonable?
Someone who isn’t familiar with real estate contracts can find them confusing. The homeowner may not fully understand what the contract holds them to, and when they need to negotiate with the buyer.
Contingencies and clauses may need to be changed so that the seller gets the situation they want. It isn’t just about negotiating on the price; the contract needs to be paid careful attention to as well if the sale is going to close successfully.
A significant reason why so many for sale by owners fail is because they priced their home incorrectly!
6. You might net less:
The big attraction for most homeowners selling without a real estate agent is commission savings. But what if you net less even without paying an agent’s commission? The possibility is very real. You can forget about having a bidding war when selling as a FSBO.
Given how strongly the market has favored sellers over the last few years, having a bidding war is not uncommon at all. Homes selling significantly over asking price has been relatively routine in many parts of the country.
You’re almost certain to give up that chance when selling without a real estate agent.
7. Closing the deal:
If the FSBO seller is lucky enough to get an offer, things can still go very wrong. The homeowner can very easily make mistakes in the process after an offer is accepted, which can lead to failure.
A specific order of events needs to take place for the sale to close. This will involve many different parties, and if they aren’t contacted at the right times, the sale can be delayed or even canceled.
If you, or someone you know, still decides to go ahead with the FSBO route despite reading about the many pitfalls, it can be a gamble with less than a 1 in 10 chance of success.
Hopefully, our highlighting of some of the common mistakes will allow you to succeed where so many others fail.
Selling a house for sale by owner is risky. Make sure you have a backup plan in place that entails interviewing multiple top local real estate agents.