The number of owners who sell their land independently of a real estate agent has experienced a sharp decline in recent years. In fact, it’s fallen six percentage points in the past decade, according to the latest figures from the Chicago-based National Association of Realtors. In early 2007, only 12 percent of all real estate transactions were for sale by owner or FSBO.
One factor influencing the statistics may be homeowners’ frustration with a fluctuating real estate market. The owners also have other things against them. They cannot list properties on the MLS, one of the most popular search tools for property buyers. A real estate agent is needed to list a property. Real estate agents may also have more connections and more skills, experience, and training that could lead to higher offers.
Property owners, on the other hand, will know more about factors such as the specific strengths and weaknesses of the home, neighbors, and schools. However, they may shy away from putting a high price on their home and agree to go down too quickly. From mid-2005 to mid-2006, five percent of real estate transactions were closed by real estate agents who took over a failed FSBO. Just one percent of the transactions within the same time period were sellers who started out with real estate agent representation and later switched to FSBOs, according to the NAR.
FSBO transactions, particularly when handled by first-time sellers, have been said to take longer, sell for less, cause more headaches, and add to confusion. So why would sellers want to try? The average real estate commission is around six percent and many homeowners view FSBOs as a way to pocket more cash. In reality, though, NAR statistics show that homes typically average about 16 percent higher when sold by realtors.
For sellers absolutely determined to go it alone, there are a few key points to remember. There are some internet websites available now that are very professional looking and offer FSBOs an alternative to the elusive MLS listings. Plenty of high-quality photos are crucial with any marketing, and Internet marketing is undoubtedly one of the most effective methods. Many of these FSBO listing websites will now offer additional benefits such as yard sign rentals and print advertising.
It’s important to be patient, to price your home fairly, but also to allow some leeway for the inevitable price haggling, and to be very careful to avoid unqualified buyers. This can help prevent deals from falling through. However, to reach a deal in the first place, sellers must market their property and not hesitate to offer incentives such as a decorating allowance or paying buyer’s agent fees. Among the buying community, FSBOs are notoriously associated with great deals. Make sure you arm yourself with the tools to avoid becoming a victim of that mentality.
FSBOs also have a reputation for misleading buyers about such things as the true condition of the home or the severity of the home’s problems. This is not always intentional. Many homeowners do not really know the extent of the damage and do not intend to deceive. This is where a crackerjack home inspector can come in handy. A home inspection can not only help justify the price of the home, but it can also put the buyer’s mind at ease and perhaps help close the deal faster.
Another good reference tool is a local competitive market analysis. This can help ensure that a FSBO sells for what it’s really worth. The lender’s desk is the worst possible place to find out that a seller overcharged for a home, but it happens all too often.
Real estate agents have much more experience and knowledge in everything related to real estate, from sales techniques to legal matters. However, at the very least, a seller would be wise to hire a real estate attorney to ensure the legality of the transaction. It’s also a good idea to involve a bank, as opposed to the seller alone, in the process of handling escrow funds.
FSBO transactions can be smooth if the seller has related experience. FSBOs can save money if the seller avoids going too low in price. However, if the seller is stuck with no end in sight, it is best to go to a real estate agent as soon as possible. The longer a house sits unsold on the market, the worse off the seller will be. It looks bad to potential buyers and they will wonder why the house hasn’t sold. In reality, it may simply be a matter of ineffective marketing on the seller’s part. Time is money, and a house sold on commission is better than a house that doesn’t sell at all.