Should you, as a homeowner looking to sell your home, consider selling the property yourself or take the conventional route and hire a real estate agent? That’s the $64,000 preverbal question, or if you use the existing home national median sales price of $268,000, the $16,000 question. Based on pure value, this is a question that really should at least be worth considering.
Obviously, For Sale by Owner (FSBO) is not for everyone. I really don’t know why that statement has to be made: NOTHING (with the exception of air and water) is for everyone. Now let us return to the point at hand.
Why should you consider FSBO?
First, save money – a simple statement to make. How do you save money? You don’t pay the typical 6% real estate commission associated with listing and selling real estate. It’s not just any money, it’s home equity tax-free (usually). Money that you have ultimately earned either through appreciation, home improvements, sweat, or smart real estate investment. Whichever way you cut it, it’s YOUR money. It is often said that buying a home is the most important and largest purchase of an individual’s life. Isn’t it logical that selling a house represents the most important “Sale” of an individual’s life? The National Association of Realtors will tell you that FSBO homes sell for 16% less than Realtors sell for. The problem with their calculations is that they use a faulty formula to support their argument: they use a MEDIAN price instead of an AVERAGE price. The median is a “middle number” in a series of numbers; the average is the sum of all the numbers divided by the total number, which is what matters to an owner.
Another consideration is that a FSBO may take all or part of the real estate commission savings and deduct it from the price of your home to speed up the sale. This works great in a “soft” market or if you simply have to sell your home in a limited amount of time. Consider this example (I’ve used this unlikely scenario simply to prove my point). You own a 1300 sf condo – 2 bed/2 bath. Your adjacent neighbor has the exact same unit with the same level of finishes and has listed it with a realtor for $485,000. Put the 6% real estate commission into the equation, and best-case scenario, your neighbor walks away with $455,900, that leaves you with $29,100 to negotiate. If I’m a buyer and see the exact same condo next door for $30K less, I can tell you which one I’m buying! To be honest, I’ll buy it if I can spare ANYTHING! This works great if you bought into a strong real estate market and the market has now softened to the point that you actually paid more than you can sell. Selling FSBOs can allow you to at least keep your head above water; remember that we are talking about 6% of the value of your property.
Another reason people consider FSBOs is a bad experience with real estate agents. Realtors are like any other field: there are “good” realtors and “bad” realtors. Like many industries, they have a self-governing “Board” that they can be brought to and face punishment. That said, real estate agents also carry E&O and litigation insurance to protect themselves and their clients.
Do you need a real estate agent in a hot real estate market? I would say not! If houses on your street or neighborhood are selling within 2-4 weeks of listing, do you really think some realtor is responsible for it? The market is responsible. It could be related to all kinds of things, including the local economy, zoning, school system, new amenities, or a host of other factors, but it’s rarely, if ever, due to a real estate agent. List your FSBO home – it will sell just as fast and in the same price range
FSBO also offers a significant level of control, you control when and if exhibitions or open houses are held. Personally, I am not convinced of the value of open houses for FSBOs – I know the value for realtors and more often than not it is for their own benefit rather than the benefit of the owners. Real estate agents use an open house to “troll” for potential clients. It’s unlikely they’ll buy the house where they’re having an open house, but they’re buying a house, and they probably won’t have an agent if they’re having open houses.
Another advantage of selling FSBO is the simple fact that you know your home better than a real estate agent. Interested buyers will ask very specific questions, such as what kind of perennials are in the yard or what the neighbors like. To be fair, this can also be the other way around; some owners do more harm than good, they can’t help themselves. I personally attest to this with the listings on FreeFSBO.com that seem to go on and on. It’s important not to overwhelm a potential buyer to the point that they never want to risk exposing themselves to that situation (the owner) again.
Why you shouldn’t consider FSBO:
There are more than 2 million licensed real estate agents across the country. Most are highly trained and experienced professionals. Can a single FSBO compete with this? Maybe (14% of all existing home sales are FSBOs).
Real estate agents may have clients looking for a property just like yours. That being said, they will usually approach you if they do: they will ask if you are willing to cooperate and will probably ask you to formalize and sign a document agreeing to pay their commission. Be careful if they ask you to sign a listing agreement that lasts longer than 48 hours, they may just be trying to grab your listing and the “buyer” is fictitious – pay no more than 3%.
You may simply not have the time to conduct an FSBO – for every four people who say they will come to view the property, one is likely to show up, get used to that fact. Don’t let your feelings get hurt if someone doesn’t like your taste or property, that’s just reality. If a potential buyer calls and wants to see his house right away, you may have to stop what he’s doing and run home to show him his house. If you are not prepared to deal with that, then perhaps FSBO is not for you.
He does not possess any sales or marketing skills. I know it’s not easy to admit, but if you’re an introvert, forget it. The most successful real estate agents are outgoing and spend countless hours attending social functions, clubs, associations, golf courses (sorry I had to mention that) to generate leads and contacts. They have typically taken countless sales training courses, and more importantly, they know how to close a deal.
Multiple Listing Service (MLS) – In my opinion, this is the most important advantage real estate agents have over FSBO. MLS is made up of approximately 500 individually owned and operated MLS organizations. It is essentially a nationwide repository of existing properties available for sale. It gives both real estate agents and buyers the opportunity to locate properties using a number of search criteria including, but not limited to, geographic location, size, price, bedrooms, bathrooms, etc. There are two factors to consider here – one – you can buy a county or national flat rate MLS and take advantage of the marketing exposure that MLS gives – it will cost you in the range of $299 – $599 and a deal to pay 2 – 3% to a listing agent if a real estate agent sells your home. However, you retain the right to sell your property yourself without paying a commission. As far as the “quality” of exposure, I honestly believe that an online FSBO listing is superior (in appearance and functionality) to an MLS or real estate listing. That being said, no FSBO website enjoys the level of traffic and potential buyers that Realtor.com offers.
In conclusion, obviously undertaking a successful sale by owner is not for everyone; We can all agree with that statement. It’s worth a try? Definitely!