5 Con's of going "For Sale By Owner" (FSBO)

By
Real Estate Agent with RE/MAX Results

5 Reasons Why You Should Not For Sale By Owner! | Simplifying The Market

5 Reasons Why You Should Not For Sale By Owner!

In today’s market, with home prices rising and a lack of inventory, some homeowners may consider trying to sell their homes on their own, known in the industry as a For Sale by Owner (FSBO). There are several reasons why this might not be a good idea for the vast majority of sellers.

Here are the top five reasons:

1. Exposure to Prospective Buyers 

Recent studies have shown that 94% of buyers search online for a home. That is in comparison to only 16% looking at print newspaper ads. Most real estate agents have an internet strategy to promote the sale of your home. Do you?

2. Results Come from the Internet

Where did buyers find the homes they actually purchased?

  • 51% on the internet
  • 34% from a Real Estate Agent
  • 8% from a yard sign
  • 1% from newspapers

The days of selling your house by just putting up a sign and putting it in the paper are long gone. Having a strong internet strategy is crucial.

3. There Are Too Many People to Negotiate With 

Here is a list of some of the people with whom you must be prepared to negotiate if you decide to For Sale by Owner:

  • The buyer who wants the best deal possible
  • The buyer’s agent who solely represents the best interest of the buyer
  • The buyer’s attorney (in some parts of the country)
  • The home inspection companies, which work for the buyer and will almost always find some problems with the house
  • The appraiser if there is a question of value

4. FSBOing Has Become More And More Difficult

The paperwork involved in selling and buying a home has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons that the percentage of people FSBOing has dropped from 19% to 8% over the last 20+ years. 

The 8% share represents the lowest recorded figure since NAR began collecting data in 1981.

5. You Net More Money When Using an Agent 

Many homeowners believe that they will save the real estate commission by selling on their own. Realize that the main reason buyers look at FSBOs is because they also believe they can save the real estate agent’s commission. The seller and buyer can’t both save the commission.

Studies have shown that the typical house sold by the homeowner sells for $185,000, while the typical house sold by an agent sells for $245,000. This doesn’t mean that an agent can get $60,000 more for your home, as studies have shown that people are more likely to FSBO in markets with lower price points. However, it does show that selling on your own might not make sense.

Bottom Line

Before you decide to take on the challenges of selling your house on your own, let’s get together and discuss the options available in your market today.

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Rainmaker
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Mel Ahrens, MBA, Kelly Right Real Estate
Kelly Right Real Estate - Hood River, OR
Customized Choices for your Real Estate Needs

Here are some alternatives to consider for each issue mentioned: 

1 & 2. Exposure & Internet Strategy: These two points are the same issue, phrased a bit differently - Listing with a real estate broker is not a requirement to implement a well planned and executed internet strategy.  A Flat Fee Listing provides a local RMLS listings which all real estate brokers have access to.  The listing is also syndicated to hundreds (thousands) of other web sites.  Other options exist to generate a strong internet presence. 

3. Many People to Negotiate With - Yes, there are people to deal with in any transaction, often more than the example shows.  Many sellers have bought and sold multiple times, learning about the process each time.  Sellers can also hire expertise if needed.  Paying a high commission to a broker is not the only choice. Other options exist, such as an hourly fee for services.  FSBO Sellers can hire a real estate broker only for the services needed. 

4. FSBO’ing Has Become More Difficult - Yes, it can be difficult.  Buying a car can be difficult to.  Research and learning about the process help FSBO Sellers be prepared.  Again, as mentioned above, Sellers can also hire professional real estate expertise, if needed.  Paying a high commission to a broker is not the only choice. Other options exist, such as an hourly fee for services.  FSBO’s can hire a real estate broker only for the services needed while retaining more of their equity. 

5. Sellers Net More Money When Using an Agent -  This “fact” is a fantasy. Why the real estate industry continues to promote this “fact” is beyond my understanding. It may be a true fact but is misleading.  It is a great example of how to lie with statistics. The NAR study clearly states FSBO's tend to be lower priced homes; macro statistics for the country versus one property in a very local market is not a valid comparison, maybe even outright misleading.  

If a car salesman sells Ferrari's and another sells Fords, we know which one would generate higher sales prices per unit.  Is the Ferrari salesperson better because they generate more money for the seller?  Or they sell higher priced cars? Which one has a higher sales price when compared to other sales people in the same market (Fords or Ferraris only).  That is a more valid comparison.  Even the worst Ferrari salesperson should generate more revenue per unit than the best Ford salesperson. 

An economic study, which controlled for the local market, specific to Madison, WI, showed there was no difference between sold pricing for FSBO/agents. Certainly, not what the NAR and real estate sales industry want to hear, let alone disclose.  Note, the study also has some caveats to the conclusions.

An anecdotal example, actual sales activity: Two similar homes, in my market, on the same street, sold within weeks (33 days) of each other; one FSBO, one agent represented.  House 1 FSBO, 1,140 sq ft, 2 bed 2 baths sold for $224,000, sold June 1.  House 2 Agent, 2 bed, 2 baths, 1,190 sq ft, sold for $224,000, sold April 28.  We will even assume the FSBO buyer had representation, so the only commission savings is on the listing side.  For example’s sake, assume 2.5% listing commission.  FSBO property netted $5,600 more.  Certainly not $40,000 more.  And this is not the exception to the rule. I have seen many situations experience similar equity savings.

FSBO sellers generally sell on their own to save their equity; they do not perceive the value of the typical real estate commission. 

Conclusion:  The real estate industry needs to realize the consumer is looking for alternatives to the typical real estate commission compensation system. Over time, we can be sure of one thing, change.  Legacy systems will change over time.  The current real estate commission compensation model is a legacy system.  It will change.  

 

We need to listen to what the client is telling us and work with them to meet their needs by providing alternative solutions.

Aug 11, 2017 08:52 PM #1
Rainmaker
406,278
Stieg Strand
RE/MAX Results - Eden Prairie, MN
Always showing up and working hard for you

Mel,

 

Thanks for your insight. I think you have some great points to consider when looking at all your full service, broker assisted, fee for service, and FSBO options. 

 

 

Thanks!

Aug 11, 2017 09:20 PM #2
Rainmaker
525,764
Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

There is a lot more to selling a house than sticking a sign in the yard and going to closing to pick up a check. Most FSBO sellers eventually figure that out. 

Sep 11, 2017 06:36 PM #3
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Rainmaker
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Stieg Strand

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