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Why People Are Afaird To Buy Your Home (FSBO's)

By
Real Estate Agent with The AmyBSells Team - Keller Williams Advisors

Attention: For Sale By Owners! Why People Are Afraid To Buy From You!

Many homeowners believe to maximize their home sale they should sell it themselves. At first glance, they feel selling a home is simple. Why should they pay a broker fee for something they could do themselves? In fact, 12% of all the homes sold last year were sold For Sale By Owner (FSBO).

However, close to half of the FSBO's said that they would hire a professional next time they sold. Thirty percent said they were unhappy with the results they achieved by choosing FSBO. Why?

Many FSBO's told us the time, paperwork and everyday responsibilities involved were not worth the amount of money they saved in commissions. For others, the financial savings were even more disappointing. By the time they figured the fees paid to consultants, inspectors, appraisers, title lawyers, escrow and loan officers, marketing, advertising, they would have been better off to have paid the broker’s fee that would have included many of these charges.

Selling a home requires an intimate understanding of the real estate market. If the property is priced too high, it will sit and develop a reputation for being a problem property. If the property is priced too low, you will cost yourself serious money. Some FSBO's discovered that they lost money as a result of poor marketing decisions. In the final outcome, this far outweighed the commission they would have paid.

Before you decide to sell FSBO, consider these questions and weigh the consequences of assuming the responsibility versus employing a professional. A little time spent investigating now could pay off tenfold in the end.

Questions To Consider

Do I have the time, energy, know how, and ability to devote a full forced effort to sell my home?

One of the keys to selling your home effectively and profitably is complete accessibility. Many homes sit on the market much longer than necessary because the owner isn’t available to show the property or return phone calls within 3 hours. Realize that a certain amount of time each day is necessary to sell your home.

Am I prepared to deal with an onslaught of buyers who perceive FSBO's as targets for “low balling”?

Another challenge of selling a home is screening unqualified prospects and dealing with “low-ballers.” It often goes unnoticed that much time, effort and expertise is required to spot these people quickly. Settling for a “low ball” bid is usually worse than paying broker commissions. In addition, buyers looking for FSBO’s want to share in your savings, so they will often offer much less to share in the savings you are getting as a result of not paying a commission.

Am I offering financing options to the buyer? Am I prepared to answer questions about financing?

One of the keys to selling, whether it’s a home, a car... anything, is to have all the necessary information the prospective buyer needs and to offer them options. Think about the last time you purchased something of value, did you make a decision before you had “all your ducks in a row”? By offering financing options, you give the home buyer the ability to work on their terms. You’ll open up the possibility of selling your home quicker and more profitably. A professional real estate agent will have a complete team for you to profit from... lenders... title reps... inspection companies... they’ll be completely at your disposal.

Do I fully understand the legal ramifications and all the necessary steps required in selling a home?

Many home sales have been lost due to incomplete paperwork, lack of inspections or not meeting your state's disclosure laws. Are you completely informed of all the steps necessary to sell real estate? If not, you may want to consider consulting with a professional.

Am I capable of handling the legal contracts, agreements and any disputes with buyers before or after the offer is presented?

Ask yourself: “Am I well-versed in legalese? Am I prepared to handle disputes with buyers?” To avoid any disputes, it is wise to put all negotiations and agreements in writing. Many home sales have been lost due to misinterpretation of what was negotiated.

Have I contacted the necessary professionals... title, inspector (home and pest), attorney, and escrow company?

Are you familiar with top inspectors and escrow companies? Don’t randomly select inspectors, attorneys, and title reps. Like any profession, there are inadequate individuals who will slow, delay and possibly even cost you the transaction. Be careful!

My hope with this report has been to educate you and help you avoid the pitfalls many FSBO's go through. I hope you found the idea's valuable and if there is ever any way I can be of service to you or anyone you care about, please contact me Amy Broghamer at 513-377-3637.

Comments (12)

Karen Luke
South Metro Property Management, LLC - McDonough, GA
Henry County Real Estate
Excellent blog. You are so right.
Aug 28, 2007 02:34 AM
Rebecca Savitski
BSR Real Estate Group - Cary, NC
NC Real Estate Listings
Great post I just hope your targetted audience (FSBOs) take the time to read before they stick the sign in the yard. Good work.
Aug 28, 2007 02:35 AM
Ian Butler
John R Wood Realtors - Naples, FL
PA, ABR - Naples, Florida
Technology and the internet has become the mainstay of buyers/sellers in my market, however this no substitute for a professional Realtor that is in it every day.  A computer can't read moods and personalities, nor patch up a deal gone south.
Aug 28, 2007 02:38 AM
Richard Iarossi
Coldwell Banker Residential Brokerage - Crofton, MD
Crofton MD Real Estate, Annapolis MD Real Estate

Some people just don't want to pay a commission.  In our market a commission on a $500,000 house could easily be $30,000.  When you do a sellers net sheet that figure really gets their attention. 

The only thing I would add to your excellent list is "Are you capable, and are you prepared to spend the money MARKETING your home?"  Many unrepresented sellers (FSBO's) think that they can just pocket the money required for marketing.

Aug 28, 2007 02:43 AM
Dan Norton
Sand Dollar Realty & Sand Dollar Referrals - Orlando, FL
Well put -- one of the better posts I've encountered.  Here's hoping some potential FSBOs see it and change their tune...
Aug 28, 2007 03:07 AM
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI
Amy, great job with this post.  I gave it a "high 5" as it is so easy to read, informative, and so very relevant!
Aug 28, 2007 03:24 AM
Anonymous
Dorothy

Yes indeed they want to save that marketing expense.

Here in New Jersey and in New York 99% of all transactions will have a lawyer for both parties. So the Realtor doesn't have to get involved with any legal stuff. Some will draw up the contract only for it to be changed by the lawyers. Some let the lawyers draw up the contract from scratch.

The home inspector checks out the home. So the Realtor doesn't have to get involved with that.

The Title co. deals with the property details. So the Realtor doesn't have to get involved with that.

The appraisal and the mortgage don't involve the Realtor.

Any tax advice is done by a CPA. So the Realtor doesn't have to get involved with that.

The NAR says that usually the listing agent isn't the one to find the buyer. So he doesn't have to deal with the buyer.

So yea, the FSBOs don't want to pay for the marketing. But some say that many Realtors just put the listings in the MLS and wait for a buyers agent to find the buyer. So how much marketing expense is involved with that? Some say the marketing done by the big franchises really won't sell your home, but will attract more customers for the company.

So if FSBOs are able to market the home themselves, then Realtors would be in big trouble. Everything else in the transaction can and is taken care of by somebody else, right?

Very interesting! There are a lot of websites out there looking to replace the MLS. hmmmm

Aug 28, 2007 05:44 AM
#7
Dan Norton
Sand Dollar Realty & Sand Dollar Referrals - Orlando, FL

With all due respect Dorothy, I think that's an idealistic view from the eyes of someone who would sell their own home.  I'm not in NY/NJ so I can't say with certainty, but I'd bet my firstborn child that your 99% figure is ummm.... a bit generous.  I can imagine lots of lawyers do get involved in the big city, but far from the majority, especially when standardized purchase and sale contracts with any needed addenda are typically the way to go.

Realtors not only get involved with Home Inspectors, but they typically handle the appointments and networking to get the right inspectors there, if they work with buyers.

The title company performs the title search, but I have not only seen Realtors get involved in clearing title clouds, but saving the deal completely by tracking down and negotiating deals with lienholders to clear title just days before closing.  The title company can always delay a closing, but a Realtor wants your home to close on time!

Appraisal -- known as 'more art than science'... A good Realtor can help to guide the appraisal with insightful info on the area, the home, and relevant comparables to make the appraiser's job easier and could ultimately make or break the deal.  Often they will know their farm area's details much better than an appraiser.

Mortgage -- How many buyers are able to stay on the phone many times a day in order to check up on their mortgage guy/gal just before closing, taking care of the outlandish problems that can creep up during a deal?  I'd wager to say Realtors have helped to save more deals through mortgage issues than most any other type of problem.

Yes, more often than not, it's another agent who brings the buyer into the deal, but remember -- that keeps the listing agent working exclusively for YOU, the Seller.  If they represent the buyer, your best interests are generally compromised and reduced to a transaction brokerage relationship.  Plus, the Realtor doesn't get that big commission check on his/her own -- that's what a co-broke split is for; the buyer's agent gets paid for bringing a buyer to the table, while the listing agent is paid for all the work they do in marketing and in overseeing the deal and your best interests.

If a Realtor just 'puts the listings in the MLS and waits', you've picked the wrong agent, but that's what pre-listing interviews are for.

Your posting had a number of "The NAR says...", "Some say this", "Some say that"... Well, some people say lots of things, but the fact remains that Realtor-listed homes have traditionally sold for approximately 16% more than FSBO homes, AND they take tons of headaches away from the homeowner, too... Not to mention a dramatically shorter sales time.  For most people, that's well worth hiring a Real Estate Professional to handle the sale, especially in a market where even one negative will just cause a buyer to move on to the next home.

If a seller reads Amy's blog above and can honestly handle the issues she brings up, Go for it!  ...but for the other 95% of would-be sellers -- just call a professional and let them deal with it for you.

Aug 28, 2007 05:02 PM
Laurie Manny
Long Beach CA Real Estate - Long Beach, CA

Amy,

You say:

For others, the financial savings were even more disappointing. By the time they figured the fees paid to consultants, inspectors, appraisers, title lawyers, escrow and loan officers, marketing, advertising, they would have been better off to have paid the broker’s fee that would have included many of these charges.

I am curious, exactly what fees, other than the marketing and advertising, that you mentioned in this statement actually come out of your fees?  

Aug 29, 2007 06:36 PM
Anonymous
Amy Broghamer

I say that because in my experience of being a buyers agent with a FSBO on the other side, they often feel that

they need to hire a real estate attorney to make sure that the contract is in their favor, a cost to them (something a Realtor would do, included in their fee),

they may even hire an appraiser to define the value to list their home, a cost to them (something that a Realtor would do, included in their fee),

they might not have an established relationship with a title company like a Realtor or Broker would have and thus pay more for their title work, deeds etc (not included in the Realtor fee, but discounted through a Realtor). 

Marketing on the Internet is crucial for sales in this day and age is almost impossible for FSBO's and with out a Realtor, they have the ability to put it on Realtor.com and other places with virtual tours and extra photos that a FSBO can't really even do for any amount of money (included in the Realtors fee)

Much of the print advertising can be bought in bulk as a Realtor as well, (reduced cost through a Realtor, Realtor pays these fees)

Realtor provides free sign, and really invaluable knowledge and experience that a FSBO would need to hire these others to give them. 

 Time is a cost too, and as you may know when a home is not search-able through a computer, it will not be in the list when buyers agents show the homes to their buyers, thus this creates a longer time on the market, more advertising costs, mortgage payments (one or two homes), utility bills, snow removal or grass cutting during that time all add up. 

Realtors sell homes faster and for more money that FSBO. 

Realtors don't get paid until they accomplish the sale, if they don't, then the seller pays them nothing.  If they try to sell FSBO, and don't succeed, then they pay all of that advertising, sign, etc, etc, for nothing and then wind up hiring a Realtor for another 6% fee. 

I think 85% of FSBO's end up hiring a professional Realtor in the end. 

If you start with a Realtor, I'd say they really would SAVE you money in the end.  Some people need to learn the hard way.

Aug 30, 2007 02:36 AM
#10
Donna Paul
Keller Williams Realty Gold Coast - Dix Hills, NY
Long Island Home Specialist,All About Real Estate

Great blog... I really enjoy reading it.. now I can be more defensive when getting a FSBO listing

Aug 30, 2007 11:50 AM
Anonymous
Scott

Great article and I agree that many folks who try FSBO are unprepared for the time commitment, and as a result for most of the country the commission may be worth it. However, I disagree with that view in high priced cities like Manhattan or San Francisco where 6% is $100,000 on average. There's no justification for that kind of fee especially in a hot market where an owner can easily hold an open house or two herself. I've done it myself a few times, and it has been hard especially fending off broker cold calls who don't have clients. Most recently I used a service that listed me on about 80+ sites including the local interbroker database OLR. I didn't pay 6% either plus I remained in full control. Check out hauseit.com - was a good find and hope more folks will eventually be empowered to sell FSBO :-)

Oct 05, 2015 03:28 AM
#12