11 Reasons For Sale By Owner

is a
Risky Idea

Agents can save sellers time, money, liability and hassle

 

Key Takeaways:

  • FSBOs are more costly than homeowners realize -- including lower sales prices and hidden fees.
  • Selling a home is a complicated transaction -- sellers and buyers alike can get burned with FSBOs.
  • Time costs money -- a FSBO costs the seller valuable time, and it takes longer to sell.

 

1. Scams happen

Common scams include fraudulent papers (appraisals, loan documentation), 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.

 

2. 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. Attorneys can close a real estate transaction, but they don’t carry errors and omissions (E&O) insurance.  So if homeowner Sandy lists “hardwood floors” as a feature and the buyer discovers it’s just a wood veneer, chances are Sandy is going to pay for that mistake.  An agent would have either caught the mistake or covered it with E&O insurance. What homeowner wants to be a target for lawsuits?

 

3. Paperwork is daunting

The 2015 National Association of Realtors’ Profile of Home Buyers and Sellers showed that understanding paperwork was one of the most difficult tasks for FSBOs. Depending on the state, there are a variety of legal forms that are needed, including but not limited to a sales contract, property disclosures, occupancy agreements and lead paint records. Sure, ready-made contracts can be downloaded easily enough. But does an untrained seller understand what all that means? Would the seller know how to customize that one-size-fits-all contract?

 

4. Sellers can get stuck in a bad deal

FSBOs who sign on the dotted line and then realize an error are stuck. They have to pay the buyer (if they’re willing) to get out of or just take the deal.

 

5. FSBOs sell for less

In 2015, FSBOs lost about 16 percent of the sales price with a median selling price of $210,000 (agent-assisted homes sold for $249,000).  Homeowners selling by themselves simply don’t have the time to devote to the process, don’t know the market value, don’t understand market reports and don’t properly market the property.  If the FSBO seller sold to someone he or she knew, the median dropped to $151,900 (because cousin Sue is doing them a favor and expects a deal).

 

6. FSBOs spend more time on the market

Unless the seller knows someone who wants to buy the home, FSBOs take longer to sell than homes listed with an agent. For the same reasons, they can’t get the right selling price.

 

7. FSBOs lack representation

There’s no one looking out for the homeowners who sell on their own. They have no one to call if they have a problem or a question.

 

8. Inspections are problematic

Sellers who don’t know the rules can get stuck with unnecessary and costly repairs.  Home inspectors can also make mistakes that agents can catch before anyone pays or negotiates.

 

9. Marketing is limited

FSBOs have limited resources to market their home. Relying on the neighbors and Uncle Bob’s second cousin has its limitations. Even paying for the MLS listing won’t be enough because there’s no incentive for an agent to bring a buyer to a FSBO.

 

10. Hidden costs add up

The mindset for most FSBOs is saving money. Chances are, these sellers are being nickeled and dimed into a pretty big chunk of change. They’re paying for a lot of extras: signage, flyers, photography, MLS listing, attorney (required in multiple states for FSBOs), home warranty (optional but hard to sell without one), home inspection, a wood destroying pest inspection, credit report for buyers (if applicable), contracts and the list goes on.

 

11. Time costs the seller money

The biggest cost to a homeowner is their time. They don’t have the expertise or the access to the resources agents have. What is their own time worth to them? How much time will the seller spend researching the market and contracts? Is the seller going to leave work to unlock the house each time there’s a showing?

Source: Inman

 

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