Is For Sale by Owner Worth It?
Current escalated home prices and lack of inventory may lead some homeowners to think this is a great time to sell their home on their own. However, by doing so, will you be walking away with less money?
ACHIEVING HIGHEST VALUE
If you listed your home For Sale by Owner (FSBO) in a balanced market and received your asking price, you would probably be satisfied with the outcome. But if this were to happen in today’s market, where inventory is at an all-time low and prices continue to rise, you would be left wondering if you underestimated your home’s worth and missed attaining a greater profit.
The key to achieving maximum value for your home is to create a bidding war. To generate a bidding war, you need a high volume of qualified buyers to view your home. Unfortunately, FSBO listings attract fewer buyers and offers than agent-listed properties.
According to the National Association of Realtors, 1 in 10 home sellers went the FSBO route last year and sold their homes at a median price that was 10% less than those who sold with a real estate agent. At this rate, sellers would net more by paying a commission to a realtor.
INSUFFICENT EXPOSURE TO BUYERS
Real estate agents have a much broader reach to find prospective buyers. Brokers are generally members of their local MLS (multiple listing service) and will list your home online with other participating brokers. Agents have access to a large network of online sites as well as social media venues for maximum exposure. A strong internet presence is crucial to marketing your home since 95% of buyers start their search online.
EXTRA EXPENSES
In addition to having to pay for online representation, there are other costs that would normally be covered by the real estate agent. Professional photography, signage, flyers, and advertising just to name a few. More importantly, how much is your time worth? How much time are you willing to spend researching the market? Are you willing to leave work to unlock the house each time there is a showing and answer calls to all potential buyers? Are you willing to weed out unqualified buyers and are you opening yourself up to scams?
NEGOTIATIONS – BEST VALUE
The home selling process can involve several negotiations, and most homeowners are not proficient negotiators. Homeowners can become emotional about the process, and without an agent to guide them, are more likely to make a poor decision. Not only will you need to negotiate with the buyer, who of course is looking for a deal, but in some cases, you may be negotiating with a buyer’s agent. Many FSBO sellers choose to cooperate with buyer’s agents. In this case, you will save a fee on the list side, but you will pay a commission to the buyer’s agency. Remember, a buyer’s agent solely represents the best interest of the buyer and you will now be negotiating with a professional.
There is not only price to consider when negotiating an offer, but also provisions of the contract such as a mortgage, home sale contingency, home inspection, appraisal, and closing date. Even if you have sales skills, you lack the specialized experience to negotiate a home sale and the knowledge of what to be mindful of in each situation. For instance, if there are concerns that the home may not appraise, a seasoned realtor will know to look for a larger down payment and ask the buyer to cap or waive the appraisal.
Recently we listed a home where the owner was originally going to sell to their neighbor for $575,000. We listed the home for $599,900 with the neighbor as an exception. The listing produced multiple offers and the seller settled on $625,000. The sellers would have left $50,000 on the table if they were to sell to their neighbor. Additionally, we negotiated a cap to the appraisal and a rent-back which allowed the sellers to remain in the home after closing. The rent-back set the sellers up to be in a strong “buy” position by eliminating a home sale contingency on their purchase.
The home inspector, who usually finds something wrong with the house, is another place where negotiations can happen. Not understanding the report and process can be incredibly stressful for sellers. An agent guides these negotiations, knowing what is worth fighting for and what is worth conceding.
LEGAL RISK
A seller can be held liable for fraud, negligence, or breach of contract if they do not disclose properly. If you fail to disclose a hazard, nuisance, or defect – and the buyers move in and find a problem – the buyer could sue you. Agents can make mistakes too, but they have professional errors and omission (E&O) insurance to protect themselves and give the buyer recourse, so the buyer may not need to pursue the seller for damages.
BOTTOM LINE
Listing a home on your own leaves you to manage the entire transaction yourself and most homeowners simply do not have the time to devote to the process. Before you decide to do a For Sale by Owner, make sure you understand all the challenges you will be taking on, especially in the current frenzied market. For many, the value that real estate agents bring is well worth the commission costs, particularly when the goal is to have a smooth transaction and achieve top dollar for your home.
If you would like more detailed information on your local market or would like to determine the value of your home, please give the Paradise Team a call at 732-899-3338.
