Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.
Did you know you can legally sell your home WITHOUT a broker and list it yourself on StreetEasy, Facebook, or Zillow? So why not do it and save 1.5-3% in potential commissions? It doesn’t seem that hard, right? Take some nice pictures with your iphone, post them online and buyers will come running with offers.
This trend is called FSBO (“For Sale By Owner”) While some people have the time and experience to effectively sell without an agent, most FSBO home sales fail. It’s no surprise that the percentage of U.S. homes sold by owner has seen a steady decline. According to the most current data from the National Association of Realtors (NAR), FSBO sales accounted for 9% of total home FSBO sales have been steadily declining over the past decade from a 2004 peak of just 14%. Here are the reasons why:
1. Think you save money on commission? Think again
On average in 2015, in the US, homes sold by brokers trade at $249k compared to $210k for FSBO. If the FSBO seller sold to someone he or she knew, the median dropped to $151,900 (because your brother-in-law is doing you a favor, he expects a deal). Homeowners selling by themselves simply don’t have the time to devote to the process, don’t know the market value, don’t understand market reports and don’t properly market the property. When you find the right broker, they will price your property to get the most money in the shortest time, a combination that can mean 10-30% more. When you are considering saving 1.5-3% on a listing commission you should take that into consideration.
2. It takes a lot of time
When you decide to sell FSBO, be prepared to spend a lot of time. From staging and taking pictures to getting the marketing right. You’ll also spend time showing the apartment, entertaining potential buyers, and talking with buyer’s agent. Besides, when people want to buy a home, they expect someone to respond to their inquiries and show the home when they want to see it. But many FSBO sellers show the home only when it’s convenient for them. If you can’t communicate with buyers or show your home in a timely manner, expect the buyers to move on as you only own “another house on the market”.
3. Owners get emotionally involved
When selling a home, it’s a good idea to use logic instead of emotion. Otherwise, you might not take a strong offer from fear of making a bad deal. Your connection with the home can also get in the way. Sellers think of their property as their home, not just as another house on the market. They have an emotional attachment to it, and when they try to sell, the facts get lost and feelings rise. Sellers might know every part of the home, but that doesn’t mean they know how to show a house to prospective buyers. Also, many potential buyers are not comfortable sharing their thoughts and concerns with a homeowner which creates a communication problem, as the homeowner loses a valuable feedback. Lastly potential buyers like to project themselves into the house and do not want to see signs of the current owners (such as photos) or do not want to meet the owner at all.
4. Pricing Incorrectly
Pricing too high means fewer people see it, resulting in fewer offers coming (or the listing becoming stale).
More days on market will be a signal to buyers that something is wrong. Price it too low and you’re conveying that something is wrong with the property or that you are desperate to sell.
5. Low Ballers or scams
Owners don’t know how to scan for proper buyers. You attract investors and low-ballers who see your inexperience and ignorance as an opportunity generating a waste of time. Also, you will attract scammers: common scams include fraudulent papers (appraisals, loan documentation), foreign buyer deposits (scammer sends too much in a bad check and then requests a refund), purchases through a third-party (a fake attorney, etc.)
6. You pay the upfront marketing costs
When you FSBO an apartment, you may think you’re saving money but in reality, you’re often spending a lot of money up front with no guarantee of any return. Listing agents spend a calculated amount of money upfront to make sure a listing sells and ultimately pays both you and them fairly. Remember listing agents do not charge anything upfront to sell your home. If they spend thousands and can’t sell it for the price you want, they are out those thousands, not you.
7. Negative perception from buyers and buyer’s agents
The perception of FSBO sellers is that they are not serious about selling and are often just testing the market. They are often not taken seriously in the real estate community because they don’t see the value in representation by an agent or broker.
8. Insufficient Exposure to Buyers
In the US, 42% FSBO sellers rely on a yard sign, 32% rely on friends and family, and about 15% use social media. Because you are smarter, you might post your home on Facebook and Craigslist a few times, but you don’t have the access to the MLS. The multiple listing service can be accessed by licensed real estate agents, and is the way to get your home listed on sites like Realtor.com, Zillow, and Trulia. A large majority of home buyers begin their search on sites like these. It’s no surprise that homes sold via FSBO have seen a steady decline as online real estate has become the norm.
Everyone makes mistakes. A seller (or buyer) who doesn’t have the representation of a licensed agent pays for those mistakes. Attorneys can close a real estate transaction, but they don’t carry errors and omissions (E&O) insurance. Agents carry this Insurance which protects them when mistakes are made in contracts. When you sell on your own, others can make sure to exploit every little mistake you make and you become a target for lawsuits.
10. Agent Boycott
When you decide to sell your home yourself, you are telling other agents that you don’t understand their value in a multi-billion dollar industry. Agents often see FSBO sellers as easy marks to negotiate against because they have the upper hand. They don’t need to worry about treating you unfairly because the chance of them dealing with you again is slim to none. More often than not they will simply ignore your listing altogether to avoid the hassle.
Have you ever tried to sell your house “for sale by owner”? Tell us your tips and experiences at email@example.com