The Temptations of FSBO
The process of selling a home is much like roof repair or tree removal – a daunting undertaking ideally left to experienced professionals. Yet every year a significant number of sellers opt to take the For Sale by Owner (FSBO) route.
There are a number of reasons for this. When an area is experiencing a fairly strong sellers’ market, like Central Florida is now, it is tempting to think that simply throwing a line out guarantees a quick, easy catch. Many sellers also feel that they know their home, neighborhood, and local market better than an agent, and they want full control over pricing, marketing, showing, and negotiating the final deal.
There is no question that FSBO sellers can access a far better selection of tools and resources than were available even just a few years ago, never mind in the pre-Internet days. When done skillfully, FSBO has a greater chance of being successful now, and even sellers who choose to pay a buyers agent fee to get their home listed on the MLS could still potentially save 2.5 to 3 percent on commissions.
Beyond other considerations, the commission dollars alone, particularly on a high-priced home, are easily enough to motivate a seller in favor of FSBO. But a wise seller should look beyond the lure of money to objectively assess the realities of the FSBO process and determine how likely it is to work out well in their particular case.
Price Your Deal
With the average American home valued over $350,000, getting a 3 percent FSBO bonus is nothing to sneeze at, right? Think again.
First, accurately price your house. Analyze the overall market, check local comparables, and spend $300-$600 on a professional appraisal. Remember to correctly value your sweat equity and price-in upgrades according to what is currently popular among buyers. Consider demand factors and adjust for how quickly you want the home to sell. Be careful. Miscalculations here will reduce the number of buyers who are even willing to look at your home.
Keep emotions out of the pricing process. Forget “my father built this house” or “our children grew up here”. The only thing that matters is how valuable your home might be to strangers.
Crunch the Numbers
Once you have a price, calculate 3 percent. Now adjust that number with an FSBO cost total. Include incidentals like the appraisal, various fees for tools and resources, and whatever your time is worth for the many, many hours it takes to prepare and run an FSBO marketing and sale campaign. If you are going to need to take time off work to handle showings, give up free time and family events to run open houses on weekends, and skip vacations to stay in town, be sure to add in those items as well.
Also remember that buyers will know that FSBO sellers are saving on commission. Their agents will make sure of that, and advise them to adjust any offer accordingly. That is, if you have paid the buyer agents commission. If you have not done so, many agents will simply avoid showing your FSBO to their clients. It is not easy to translate these effects into numbers, but try to do so then deduct them from your 3 percent.
About that Marketing and Sales Campaign
Unless you are in no hurry to sell, forget about the idea of sticking an FSBO sign in your yard and maybe an ad in the local paper. Those days are gone. A quick, efficient sale at a competitive price is going to require a comprehensive Internet strategy going well beyond a simple Craig’s List post.
Even with the wide variety of online resources now available, it takes a tech-savvy individual with a lot of time on their hands to really reach out to a large swath of potential buyers. If your coverage is thin, it will take time and luck to get the offer you are looking for. Don’t forget that time on market works against the chances of getting your asking price.
Are You Ready to Embrace Risk?
Think very carefully here. Fear is why most sellers and buyers alike automatically go to a real estate agent or lawyer for help with property transactions. Most people are naturally risk-averse, and when it comes to the largest, most complicated financial transaction the majority of us will ever encounter, fear can go off the charts. And rightfully so. Small mistakes can blow up a deal or cost thousands of dollars. Big mistakes cost tens of thousands or more and can end up with people facing off in a courtroom.
Risk can also make buyers agents shy away from showing your place. An agent will ask if buyers are interested in FSBO properties. If they do not want to deal with FSBO transactions, your home is off the table. Even when buyers are interested, the agent has little motivation to show them your FSBO home. Many realtors do not like working with unrepresented sellers because, as the only licensed professional on the deal, their reputation and license is at risk, with any mistakes or problems likely to land at their feet.
In contrast, buyers agents who relish FSBO deals can be a risk to sellers. Check this quote from a Trulia FSBO forum on that one: “I love FSBOs because, and trust me on this, a savvy buyers agent can “negotiate” a deal for their clients that will make the FSBO’s head spin. My last deal had the sellers coughing up $20,000 and they were represented by their listing agent. Sellers left $20,000 on the table in a “seller’s market” AND they were represented.”
Finally, consider real risk. Have you ever sold anything on Craig’s List? Do you relish the thought of answering calls and emails day and night, then showing numerous un-vetted, un-prequalified strangers into your home? Thefts and other intrusions are quite common occurrences during professionally-hosted showings and open houses. Moreover, the physical risks that even street-wise veteran real estate professionals cannot avoid when showing strangers around homes are very real. Recent assaults and murders during showings of vacant homes have made this fact amply clear.
In the best-case scenario, an FSBO seller will need professional help to accept an offer and close a deal. Few buyers are willing to hand deposit and purchase funds directly to a seller, so escrow services are a necessity. Sellers cannot provide the title insurance needed to protect the buyer and satisfy any lender involved, and preparing the documentation associated with a real estate sale is not something most sellers will be able to take on.
Going the FSBO route calls for having a solid, trustworthy partner to back you up and cover the necessities. Look to a reputable company like The Closing Agent to cover you from a legal standpoint and when it comes to taking care of title, escrow, and closing requirements. The cost is negligible when you consider the returns in terms of confidence, peace of mind, and greatly increased chances for a smooth, profitable transaction.