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Why FSBO's Don't Sell!

By
Managing Real Estate Broker with Heart Realty Group, Inc.. IL-471.002355

I have been a licensed real estate agent since 1992 and during that time I have done a variety  of sale transactions.  From short sales, foreclosures to traditional sales, but until now I have not been a party to an actual For Sale By Owner transaction.  Although these types of transaction are getting fewer the recent addition by the big portals of allowing FSBO's to list their homes on Zillow and Trulia as well as,  FSBO only sites listing on the MLS you and your buyer's may have the opportunity to be involved in one.

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Hopefully, my experience is not typical but here is my personal opinion why they are prone to fail.

 

The seller has an over optimistic idea of why their home is "better, prettier, different, etc." than other homes in his/her neighborhood listed by real estate professionals.  Over priced listings whether by a FSBO or a professional just don't sell.  Unless its a "cash" deal and no appraisal involved - it will need to pass valuation process.  If the value is not there at the agreed upon price - there is no sale!

 

The seller's motivation is just not there...worse than a seller "testing" the market, the seller believes they are better able to showcase their home and all its amazing features than a professional that does this 24/7.  Yes, they spend a lot of time on HGTV and they know how easy it is to sell a home because of this.  They don't understand that just because the seller is not available until certain times - buyers also have their own schedules and if the home is not available when they want to see it - they won't see it!

 

I too, watch TV and sometimes I think because I watch Grey's Anatomy that I might be able to operate in an emergency...bu really would you want me to be the one to do a tracheotomy with my Bic because I saw it done on TV????  I'm just thinking that your answer would be a large "H$*## - NO!"

 

Lack of knowledge on the negotiation phase  - Here is a big hint FSBO's!  Everyone knows that you are trying to avoid paying a realtor a commission so they will low ball their offer even more because of that. Buyer's figure that if you are "saving" the commission that the "saving" should go to them....not you, so their offer will be less.  FSBO Seller's - remember this - the first offer is just testing the water....so if you don't show that you are willing to negotiate by lowering your counteroffer - the buyer may decide that it's not worth the effort to keep negotiating.  Rarely will the first offer be the final offer unless you are in a highly desireable area with limited inventory, the best of everything and multiple offers is the current standard for your area.

 

Paperwork and the lack of paperwork.  - Most seller's have no clue about the various disclosures necessary to close a real estate transaction.  They think that all attorney's are all the same and will use an attorney that is a friend who will give them a "cut on their services" but who has not seen a "standard" real estate contract and basically decides that they know better than the group of attorney's that put the "standard" contract together.  Flexing their legal prowess they alter the contract and the buyer, buyer's agent and buyer's real estate attorney decide that its just not worth the headache dealing with unreasonable parties.  With rider's that make sense to the seller because it gives them additional protection why giving the buyer additional headaches for their lender underwriting department - again - the deal will fail!

 

The percentage of FSBO's that are able to complete an actual sale are in the minority.  According to the latest NAR stats from 2015 "Profile of Home Buyers and Sellers" - only 8% of home sales in 2015 were sold without an agent - the fewest percentage since NAR began keeping tracks of these sales in 1981.  Did you know that 89% of sellers use a real estate agent?  That's a 5% increase from 2005!

 

The most common reason FSBO's go DIY is to save on commission (48%), selling to a relative, friend or neighbor (21%) or contacted directly by a buyer (18%). 

 

Yes, real estate has changed and is evolving.  The internet has made it easier to search for a home and some leading edge real estate models hope to change the role of a real estate agent.  Most buyers and sellers have no idea that Zillow, Trulia, Realtor.com and similar real estate portals are there to make money by selling leads back to realtors while at the same time making themselves appear like they are the experts in the home selling market....but these are just websites with a ton of information that needs to be put in the "right frame" to make sense of.  Zestimates, automatic valuation models, etc.  They all have a margin of error.  If you decide to price your home based on the wrong "estimate" plus your own emotional attachment to your home....guess what - you will NOT sell your home or you will sell it for much less than a licensed professional could!

 

With a real estate agent, the buyer will get the unbiased information needed for them to make an informed decision on where to start their negotiation.  The agent is not emotionally attached to the home, unlike a FSBO seller who is emotionally attached to his home and will take every offer as a personal affront to their "baby".  Worse is when a agent decides to "sell" their own home because they are "licensed" but only used the licensed to buy thier own investment property.   Unless you are active in the day-to-day real estate market in residential home sales, you are not able to keep up with the latest information or stay emotionally detached from your home vs a "house" that is being marketed.  

 

Taking the already emotionally charged transaction to a "business analysis" of whether this suits the buyer's lifestyle, pocket book and will stand up to the lender's requirements are just a few of the skills that a buyer's agent brings to the mix.

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When a seller is represented by a listing agent - the agent can help the seller not take each low ball offer as an insult and keep it as a logical progression in the negotiation phase!  The agent will be able to give you the latest sales activity in your subdivision that will allow a lender to actually give the buyer a mortgage on the home.  An overpriced home without being able to appraise out will have issues getting a buyer to actually buy it unless they pay cash and don't have an agent letting them know that they are buying an overpriced home.

 

Just like HGTV makes rehabbing look easy by condensing it into an hour or less show....selling your home on your own may look easy but in the long run you will be just as frustrated as if you started your own DIY project by watching TV only to find out that you don't have the skills to complete it!

 

My personal experience with the FSBO seller ended up with no contract, a seller who was upset because they could not understand why the buyer walked away due to the seller's mismanagement of the negotiation process.  No one wins!

 

 

 

 

 

 

 

 

Posted by

Evelyn Santiago

Managing Broker/Owner - 630-251-0059

Heart Realty Group, Inc.

We are Passionate About Real Estate!

Comments (1)

Shawn and Angela Miller
Berkshire Hathaway HomeServices Amabassador Real Estate - Lincoln, NE
Lincoln and Omaha, NE REALTORS®

You nailed this blog perfectly!  Great job!

Jun 09, 2016 02:40 AM
Evelyn Santiago, Managing Broker Heart Realty Group, Inc.

Thank you Guys!  Not many out there DIY but for those that do hopefully this will enlighten them.

Jun 09, 2016 03:05 AM