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1. For Sale By Owner (FSBO) homes generally sell for less
In 2015, according to the National Association of Realtors (NAR) report, FSBOs lost about 16% of the sales price with a median selling price of $210,000 (Realtor-assisted homes sold for $249,000). If the seller sold to someone that they knew, the median dropped to $151,900.
- Eighty-seven percent of buyers recently purchased their home through a real estate agent or broker.
- Eighty-eight percent of buyers would use their agent again or recommend their agent to others.
- Only eight percent (down from nine percent) of recent home sales were FSBO sales. This is the lowest share recorded since this report started in 1981.
Homeowners don’t realize how much time & effort it takes throughout the complicated process, may not understand market reports and don’t have the resources & connections to market the property properly-on the Internet & to other Realtors who may bring the buyer.
2. For Sale By Owners spend more time on the market
Unless the homeowner knows someone who wants to buy their home, FSBOs take longer to sell than homes listed with a Realtor. On average, 18% of For Sale By Owner homes were unable to sell within their expected time and took a year to sale.
3. Paperwork can be overwhelming
According to 2015 National Association of Realtors’ Profile of Home Buyers and Sellers finding & understanding all of the paperwork was one of the most difficult tasks for the sellers, especially without the guidance of a Realtor. Depending on the state, there are a many legal forms that are required, including but not limited to a sales contract, property disclosures, occupancy agreements and lead paint records. Also how the escrow must be held in their state.
4. Marketing is limited when owners sell their own home
For sale by owners have limited resources to market their homes. The 2015 NAR Profile of Buyers and Sellers showed 42 percent use only a yard sign, 32 percent rely on friends and family, and about 15 percent use social media. Even paying to just be on the MLS listing isn’t enough because it doesn’t go on real estate companies’ websites & their various Internet connections. It also is not sent out to other Realtors, offices or discussed at Realtor Networking events or at “pitch” sessions. These are just a few of the many resources that professionals have at their fingertips.
5. Hidden costs can add up
Most For Sale By Owners’ first thought is about saving money. But they usually don’t realize they will be paying for a lot of extras: signs, flyers, photography, MLS listing, attorney (required in multiple states for FSBOs), home warranty (optional but hard to sell FSBO without one), home inspection, a wood destroying pest inspection, credit report for buyers (if applicable), contracts and the list goes on. The marketing costs are generally included in the Realtor’s commission.
6. Inspections can be problematic
Homeowners may not know which inspection companies are fully licensed & which inspections are required. Some states require a general home inspection, wind mitigation, 4 point and/or a wood destroying pest report. Homeowners who don’t know the rules may have unnecessary and costly repairs as well. A Realtor can advise & negotiate on the necessary repairs.
7. Liability is all on the seller
Everyone makes mistakes. A seller (or buyer) who doesn’t have the representation of a licensed agent pays for those mistakes. So if homeowner lists something as a feature and the buyer notices that this is incorrect, chances are the seller is going to pay for that mistake. A Listing Agent would have corrected the mistake before the home was listed. A Buyer’s Agent would have pointed out the mistake to the buyer, which could result in a lower price on the home.
8. Horrible as it sounds, scams can happen
Common scams include fraudulent papers (appraisals, loan documentation), fraudulent escrow deposit information, 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.) and asking for personal information to be used for identity theft.
9. Time costs the seller money
How much time does the homeowner plan to take to fully market the home? How much time does the homeowner plan to take off from work? Is the homeowner willing & able to answer calls from buyers at all times of the day & night? What will it cost & how much time will it take for an attorney to review the contract, if they choose one. How will the homeowner show the home, screen the buyers for safety, screen for qualified buyers, set up an escrow account, and maintain a marketing campaign? A For Sale By Owner home will take a homeowner a whole lot longer to sell. Homeowners don’t have the expertise or the access to the resources agents have.
These are just some of the issues that For Sale By Owner must address but there may be more.Realtors can save sellers time, money, liability and hassle while guiding them through this ever-changing complicated process.