For Sale By Owner - Perks and Pitfalls
For Sale By Owner (FSBO) — Perks & Pitfalls
If you are selling a house, and choose to do so without a real estate agent, then you'll be doing a FSBO- "for sale by owner." Your house is most likely the most expensive thing you have and your most valuable (and complex) physical asset. Is it a good idea to sidestep professional help and do it yourself when it comes to selling? Every home seller faces the same questions, "should I hire a Realtor™, or should I sell my home myself?"
To help you make this decision, we've put together some perks and pitfalls of both camps of thought and asked our Realtor™ friends to weigh in on both sides without bias.
WHAT ARE THE PERKS OF SELLING YOUR HOUSE WITHOUT A REALTOR™?
With the wealth of resources out there, it's easier than ever to find answers and guides, meaning if you're a go-getter with a knack for detail and research, you can find out a lot about the home selling process with a few internet searches. But you'll want to be mindful of the benefits of selling yourself and hiring a Realtor™. Do your research and do your due diligence before making the decision. There's a lot that goes into selling a home, and there's a lot that can go wrong along the way if you don't know what you're up against. This article on the "7 Steps to Purchasing a Home Without Regret" is an excellent place to begin your research process.
Perk #1 of FSBO: You're in the driver's seat when it comes to the real estate transaction, but you better know your stuff.
Unlike a Realtor™, who may be incentivized to sell your house and get out quickly with their commission, when representing yourself, you can slow down the process and be free of the pressure to accept early offers that don't satisfy you.
You can choose who gets to walk through the house, meet the eventual buyer, and determine the negotiated price without any middlemen. Negotiating real estate contracts requires skilled and confident communication, and another skill worth having and sharpening is de-escalation. Real estate negotiations can become heated, especially when parties find it difficult to agree on the contract terms.
Perk #2 of FSBO: Foregoing a Realtor™ can turn a more significant profit if you're savvy enough to pull it off.
You don't have to pay the selling agent's fee if you sell your own house, although you may pay the buyer's agent and several other closing cost fees. Know ahead of time what all the fees will be. When working with a Realtor™, this is part of their job. They even go as far as selecting the closing company on your behalf, ensuring all the communication and documentation gets done on that front. Before beginning negotiations, be sure to have a breakdown of all the costs and fees of the title work and who gets a paycheck once the real estate transaction is complete. Getting the numbers wrong from the start can significantly erode your profit.
WHAT ARE THE PITFALLS OF FOR SALE BY OWNER (FSBO)
Hiring a Realtor™ might be the way to go, especially considering some of the statistics we found regarding how selling your own home might miss the mark when it comes to desirable profits. Another reason is you'll want to hire a Realtor™ is how long your home stays on the market when you list it yourself. Let's break these down.
Pitfall #1 of FSBO: Selling a house without a Realtor™ might not equal more profit for you.
People mainly do FSBO to avoid paying commission to an agent. Well… it doesn't usually work like that in practice. Statistics show that houses sold by owners on average sell for a much lower price than houses with agents, and buyers lose money, even without paying the agent fee. The National Association of Realtors (NAR) 2018 Profile of Home Buyers and Sellers reports that "Sellers using the FSBO option sold their homes for less than the median selling price of other homes. In 2018, FSBO homes sold at a median of $200,000. That's a lot lower than the median price of $264,900 for agent-assisted home sales" (Dave Ramsey).
Pitfall #2 of FSBO: Selling a home is a major time commitment with multiple legal documents and contracts.
Another reason for FSBO is that sellers want to sell the house quickly and without extra hassle. But this rarely is the case. For one thing, selling a house is a full-time job, which is what the real estate agent does! Every step of the process contains complex details. We've all heard the phrase, "you don't know what you don't know." Having a Realtor™ guide you through the journey means peace of mind for you, especially if you've done the work of interviewing, vetting, and hiring the right professional Realtor™ who meets your needs and matches your customer service expectations.
Having an agent also gives you invaluable legal protection should things go wrong. Even in the age of the internet, there are some areas worth having an expert in your corner. And a property valuing hundreds of thousands of dollars is one place where legal protection might save you a considerable amount of money in legal fees and possibly penalties, in some cases criminal charges (yes, you read that right).
However, your agent is on your side, and they invest in your interests as their client. Your success is their success! In most states, they are under legal and professional obligation to keep your interest protected and under wraps (there are things about you and the transaction an agent cannot divulge to the other side of the table). They have expertise and experience you don't, which can be the difference between having a smooth selling process.
Another value of a real estate agent is that they are a third party who is not emotionally invested in the house itself. Remember how we mentioned how real estate negotiations can get heated? Well, navigating those tough conversations is what they do daily. Two professional Realtors™ hashing it out is always better than a homeowner and homebuyer going toe-to-toe and then having the entire deal fall apart.
What Do Realtors™ Have to Say About FSBO?
Joe Lindsey, Tulsa, OK Realtor™