Should I Go Fsbo

By Matt Unangst, 23 Jan 11:12

• Short for “For Sale By Owner”
• Homes sold by realtors sell for more than FSBOs
• Using an agent gives you more market exposure
• An agent will help negotiate the best price
• An agent can make sure a buyer is qualified

People often assume that selling their homes without an agent will save them money. Will going FSBO (For Sale By Owner) truly allow you to pocket money that would otherwise go to an agent as commission? There are a number of factors that can help you to determine whether or not going FSBO is the right decision for you.

Before deciding to sell their home, most people try to get a rough estimate of what it will sell for by looking at the prices of other homes in the area on for sale signs and in newspapers. They begin to think of things to do with the money, or if they are buying another home at the same time, use the estimate of their own home’s value to determine the price they are willing to pay for their new home.

When thinking about the windfall from a home sale, an item that always comes up is the real estate agent’s commission. Agents usually get around 6 percent of the home’s value as commission, meaning that you are usually giving up at least $12,000-$18,000. The main reason people go FSBO is to try to put that money in their own pockets instead of the agent’s.

While it sounds appealing at first, going FSBO is not an easy process. There is a ton of work that goes into selling a home; work that you will have to perform yourself if you do not hire an agent. Also, there are tasks you cannot perform yourself that you will have to contract out to other people (real estate attorneys, title companies, etc.).

There are a number of disadvantages to going FSBO that are important to think about before making your decision. A study conducted by the National Association of Realtors in 2006 showed that homes sold by realtors sold for 32% more than FSBOs. This calculated out to an average loss of $59,800, a good deal greater than the normal 5-6% brokerage fee.

Real estate agents use the Multiple Listing Service (MLS) to search for prospective homes for buyers they are working with. Since 90% of home buyers use an agent when searching for a home, going FSBO means that you are getting only 10% of the market exposure you would be getting with an agent. Some agents are less willing to take potential buyers to a home being sold by its owner than they would be for a home being sold by another agent.

The MLS also provides real estate agents with a great deal of information on other homes that have been sold in your area; information that can be used to generate a reasonable asking price for your home. Without access to the MLS, you will not be able to price your home as accurately, possibly leading to your home being under priced. Additionally, an agent’s experience in negotiation can be a huge asset in selling a home. An agent will be able to negotiate the highest price for your home, probably higher than what you will be able to get on your own.

Agents also can make sure that your buyer is qualified (pre-approved for a loan). And if a buyer isn’t qualified, an agent can help to get him/her qualified. You will not have the same ability to ensure a buyer’s qualification. Having an unqualified buyer can lead to a great deal of hassle if you do not have an agent to handle matters for you.

There are a number of other issues as well. For instance, you may cause legal problems for yourself due to a lack of knowledge of proper procedures for real estate transactions.

Despite all of this, going FSBO can be a fun and rewarding process, as well as possibly bringing you in more money than you would get otherwise. You can eliminate most of the drawbacks of going FSBO by working with professionals to handle many of the agent’s tasks for a fraction of the cost. An appraiser can determine the fair market price of your home; an attorney can help you with the legal issues and paperwork involved in selling your home; and a stager can help you to best present your home to potential buyers.

There are still a ton of things that you must do on your own. Here is a basic outline of the four main tasks that must be done to sell a home.

• Pricing
It is essential that you establish an appropriate price when listing your home. If you set the price too high, potential buyers will be scared off to the point where they won’t even come to see your home. Failing to set the price high enough will mean a loss of potential profit.

The key element in pricing a home is comparison to similar homes in the same neighborhood. Take some time and look around for what other homes have recently sold for by checking newspapers, the internet, and For Sale signs. It is important that you remain objective while doing this. People tend to overvalue their homes because of memories they have of the home – but no one else is going to be willing to pay for your memories, so they should not affect your home’s price.

There are four questions you should ask yourself when trying to set your home’s price:

• Does my home have the features and amenities necessary to attract buyers? If it doesn’t, what must I do to improve my home?

• Comparison: What are similar homes in my neighborhood selling for?

• Is the market softening or strengthening? If the market is getting weaker, the best option may be to price your home a little bit lower in order to ensure it gets sold.

• What do others think? As stated before, you can hire an appraiser to determine your home’s fair market price. You can also ask a real estate agent for a Comparative Market Analysis (CMA).

Preparation
Before showing your home to potential buyers, you need to do some work to make it more appealing. No one will want to buy a house that looks run down or dirty. In order to make your home most attractive to buyers, you should first repair anything that needs to be repaired. The buyer will have a home inspector inspect your home before they buy, so you should get any problems fixed early on. Follow up any repair work with a clean-up of your house. Pick up any clutter, as it makes rooms look smaller and less attractive. It is sometimes even desirable to put some of your furniture in storage to make your house look more spacious. If your house needs it, strongly consider repainting. A freshly painted house looks appealing to a potential buyer. There is a great deal of work that goes into presenting a home in the best possible light. The first impression that someone gets of your home is important in making a sale, and nothing makes a better first impression than a clean, beautiful home.

• Promotion
The advantages an agent has over an owner in this category are enormous. The MLS is a huge asset, but just one among many in a real estate agent’s arsenal that can be used to promote a home. In order to sell your home, you will need to get the same exposure with fewer resources. Here are some tips on how to best do so:

Don’t just put out For Sale signs. For Sale signs are certainly important, but you should also have a box containing fliers promoting your home with the sign. Put information about the best features and amenities your home offers, along with some good color photos.

Put out some ads. There are so many places that you can put real estate ads – newspapers, local real estate magazines, bulletin boards at local stores and community facilities, and the internet. Quite a few internet sites allow sellers to post ads for free. Put ads anywhere and everywhere you can, and be sure to include the price, square footage, and number of bedrooms and bathrooms in each ad to make it clear what exactly you are selling, eliminating hassle from buyers who aren’t really looking for what you are offering. You can also create your own website to market your home.

Hold an open house. Open houses rarely lead to sales; they exist primarily as a way for agents to market themselves to potential clients, but an open house can be a good way to meet people in the area who are interested or know someone who is interested in buying your home.

You should tell everyone you know that you are selling. Even if the person you are telling isn’t looking, they may know someone who is.

There are now companies that can provide you with a number of marketing services, including listing your home on the MLS. Look into these companies and see what services are right for you. One caveat with posting your home on the MLS is that you must pay a commission to your buyer’s agent if he/she found the home through the MLS. Offering a higher commission will bring more people to see your home, but also eliminate some of the cash windfall from going FSBO.

• Paperwork
The paperwork needed to complete a real estate transaction can be very complicated, possibly even too complicated for you to understand without assistance. To get assistance, talk to a real estate attorney, many of whom will review your purchase agreement and give you advice on changes to protect you from liabilities for just a small fee. It is absolutely essential that you fully understand your purchase agreement prior to signing it, as it is legally binding and any issues could become massive legal liabilities for you.

Even after you have received an offer, there is still a lot of work to be done. Any repairs that are needed must be completed before the transaction can be closed. Payment for these repairs must be negotiated between you and the buyer.

You must properly protect yourself from any future liabilities regarding your home. Most states require you to issue a full statement of disclosure with any information about flaws or hazards. Talk to a real estate attorney to ensure that you are fully protected from any liabilities.

In order to successfully transfer the title to your property, you will need to hire a title company or escrow agent. This person will oversee the closing of your transaction and make sure that your purchase agreement is fulfilled before the property and the money changes hands.

The main element in the decision to go FSBO is determining how much work you are willing to put into selling your home and if you have the personality needed for success. If you know that you will be uncomfortable with having strange people coming through your home at strange hours, you probably will struggle to show your home properly. If you feel uncomfortable with people calling you at all hours and making last minute requests, you will struggle to properly market your home. If you are uncomfortable negotiating with someone face-to-face, getting the best price for your home may prove difficult. If you are the kind of person whose concentration can wander, you may get lost in the middle of the process.

All of these things are important to think about before deciding to go FSBO. If you think you can handle the work that goes into selling a home by yourself, by all means, take a chance and try. Remember, if you figure out later that the process is not to your liking, you can always hire an agent to take over from wherever you have left off.

KEYWORDS: FSBO, real estate, real estate agent, for sale by owner, selling a home, marketing a home, real estate paperwork, purchase agreement, mls

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