Should I “FSBO” For Sale By Owner in Renton, WA?
July 10, 2013 by
Jana Schmidt in
Stats, Tips for Home Sellers
Save Money Selling Your Home by Hiring a Professional Realtor
Are you thinking about selling your home by owner?
I love “For Sale By Owners”, I understand whole-heartily why they do what they do. As a passionate D-I-Y (Do-it-Yourself) I respect and admire the courage it takes to learn something new and completely understand why a person would want to take on the challenge and save all that money.
However, before you run to the local hardware store to buy a handful of signs, take a moment to read the following. This small investment of time now, could save you a lot of money and time down the road.
What are the true savings of selling by owner?
The first thing the FSBO seller needs to know is that while it may seem that the savings are 5 to 6% of the total commission, in reality, true savings on an extremely successfull FSBO are really only about 1 to 2%. Unless you already have a buyer that wants to buy your home, these are the factors that are going to chunk away at your savings.
Home Buyer’s typically love their agents, and why wouldn’t they? Their agents drive them around, make getting into homes easy, they give them advice on all the complexities of the upcoming transaction and help them understand resale value on this huge investment. That being said someone trying sell on their own will soon recognize that they will need to offer to compensate a buyer’s agent.
I’ve seen many FSBO’s offer 1 to 2% to the buyer’s agents with little success. Selling a FSBO to a buyer takes more work for a buyer’s agent than selling a home listed with a full-time agent. Additionally, if there is no contract signed before the Realtor shows your home to their client, they run the risk of getting cut out of the deal and not getting paid at all. For these reasons, many agents prefer to not even show FSBO homes to their buyer clients.
Additionally homes that are listed for sale with a Realtor are easy to show. A FSBO will have to compensate in the price to make it worth the buyer’s efforts to search Craigslist and do all the driving and appointment setting themselves. Consider this thought very carefully: What kind of buyer is going to go to the trouble of searching FSBO properties? The answer is usually someone looking to make a deal.
Even Real Estate Brokers make bad “FSBOs”‘
Here’s an interesting point, even Realtors make bad FSBO’s when they try to sell their own homes. Many Realtors price their own home too high and allow personal feelings to get in the way of good negotiation on the sale of their home. Just as a smart attorney would never represent themselves in court, a smart Realtor will also hire another professional to sell their home. In fact, my office prohibits us from selling our own homes because our insurance company said the risk for lawsuits is too high. Selling a home is riddled with legal complexities, and personal feelings can sometimes be a bad guide when navigating these transactions, a professional and experienced Realtor who is not personally attached to the home is worth every penny in this regard.
I’ll take a moment and brag, what makes me a good Realtor and a tough negotiator is my market knowledge. I see about 20 homes per week, or 100 per month or 1,200 homes per year. If a FSBO really wants to make sure they get the right price, they need to know what the competition looks like which means a lot of footwork. Ask yourself, do you have the time to personally see every comparable property on the market?
FSBO works great when you already know the buyer. Otherwise, the chances of an individual owner capturing a buyer on their own who is willing to pay top dollar is a tough proposition. A well networked Realtor with the powerful tools of the local MLS’s can leverage the thousands of buyer agents already working with them. Powerful stuff.
Breakdown of the potential savings:
- Total Real Estate Commissions average 5% to 7%
- Only if you have a buyer already in place can the above be negated
- Pay a buyer’s agent 2 to 3%, savings now cut in half
- Be available to show the home at a moments notice usually only works if someone is home all the time
- Actively preview all the comparable properties so you can stay up to date is a full-time job all by itself
- Not having an objective professional help coach you on price and terms can turn buyers away or worse make for a legal nightmare
- All the above and we haven’t even discussed managing the transaction, understanding the buyer’s loan process, and the work involved to accommodate a smooth closing.
- Now take all the above and remember that a home buyer who is willing to go through the hassle of working with a FSBO is probably looking for a deal themselves and whatever savings you have worked towards now is going to have to be negotiated with the buyer directly.
The savings for the FSBO only equate to 1 or 2% and that’s if they do all that footwork themselves. In a market that is either appreciating or depreciating faster than the maximum possible savings, selling on your own becomes a risky proposition.
Last thought, ask them if they would personally buy a home for sale by owner and if so would they actively search the ads for “by owner” transactions? And if so, why? Many buyers that exclusively want to buy FSBO are simply looking for a bargain for themselves.
Here’s what I share with my friends. If you really want to sell a home, become a real estate agent and sell other people’s homes. It’s a whole lot easier than selling your own home and it’s a worthwhile career that can be lucrative. I’ll even mentor you and teach you everything I know.