For some time, consumers have been encouraged by marketing companies to sell their own themselves. With promises that the process is easy and less expensive, many have taken this step. And, they’ve suffered as a result. For Sale By Owner or FSBO, homes often sell for considerably less than what homes sell for when a REALTOR is handling the transaction. The proof is in a recent study.
Reports Indicate For Sale By Owners Sales Cost Sellers Valuable Equity at the Sale
A study conducted by Collateral Analytics looked at the differences in homes that sold through traditional real estate agents and those sold by FSBOs from 2016 through the first half of 2017. The results are shocking. The study found For Sale By Owner homes lose an average of nearly 24% on home sales. The figures differ throughout the country, but all point to the same thing – a property sold by a real estate agent, on average, sells for a higher price. In 2016, the typical FSBO property sold for $190,000, but the typical property sold by a real estate agent sold for $249,000.
The question is why. Why does this occur? There are several key reasons, according to the same study.
Strategic Buyers
Some buyers recognize that since the seller is not working with a real estate agent, he or she is not paying commissions on the sale to cover service & administrative time by industry professionals. As a result, they discount their bid on the home by this amount. These buyers logically believe the seller is likely to take a lower price because they do not have to pay a commission. In this situation, bids on homes are just lower; often much more than any amount of commission.
Less Exposure Limits Sales Successes
While there are plenty of websites supposedly helping owners sell their homes, they offer a significant lack of marketing reach. It is up to the property owner to invest in advertising to sell the property. The seller must pay more out-of-pocket to advertise to the right buying audience to attract a buyer. They do not maintain accounts or have access to third-party vendors needed for key advertising outlets with additional pictures, visual tours, etc. This lack of access creates more expensive and less effect means of promotion and reach, and reduces the end take away from the home sale.
Sites Simply Do Not Handle the Listing
To further this point, many homeowners lose money during the negotiation process of a sale. Many property owners assume their listing on a website such as FSBO.com will give them the support they need to sell their home. This just does not happen. The majority of FSBO Sellers are expected to conduct the negotiations on their own and often do not understand approved state contracts or required seller disclosures for any residential (or commercial) real estate transaction. Because most of the knowledge & education of the Seller falls to the REALTOR representing the Buyer, many Buyers Agents are hesitant to work with FSBO sellers. And, if a buyer attempts to navigate these waters alone, it’s like the “blind leading the blind”, and someone is inevitably going to be left short in the deal.
Owner Financing Risks
Owner financing poses its own concerns. A Contract for Deed is the most common form of owner financing. In this case, the bank is skipped in the financing process and the buyer and seller come to an agreement for payment and the buyer makes payments to the seller over a period of time to eventually purchase the home. But, buyers are often nervous about this strategy because the seller is in control and has numerous opportunities to get out of the deal. Many forego this option and turn to traditional mortgage means to finance the purchase of their home.
However, some banks are leery about lending to FSBOs, as well. There’s no true professional involved in the transaction. The transaction lacks a licensed professional to represent the contract and process. More so, inspections, appraisal appointments, and even mandatory maintenance done prior to the sale to ensure underwriting is in the hands of an inexperienced individual. This is compounded if the property is in a City requiring pre-inspections of a home before it can even be listed for sale. This can make it harder to obtain the best loan terms possible.
Recognize the Risks Before You Try Selling Your Own Home
Revenue loss, long listing home for sale, and simply a lack of interested buyers hurt For Sale By Owners. If you are thinking about selling your own home, recognize these key facts:
- Your method of marketing the home is limited and costs more out-of-pocket to attract the ideal audience.
- Buyers worry about these homes. They want a professional involved in the transaction as it gives them security in moving forward. Simply, they want to know a licensed professional is present or they simply will not consider the home.
- Real estate agents are incentivized to sell the home fast and for the highest value. You never have to worry that our agent isn’t working for you to achieve your goals.
- Listed properties sell faster. Homes listed FSBO take longer to find a buyer. As a result, buyers may shy away because of the long time the home is on the market.
- Your property doesn't stand out in real estate inventory. It is missed by the most likely buyers.
Working with a real estate agent ensures you get the highest dollar for your home. It also gives you peace of mind, better access to qualified buyers, and negotiating power. Home sellers, recognize these factors before you invest.
You Have Options: Work with a Licensed Real Estate Agent
In today’s real estate market, experience, negotiation skill, and strong marketing ensure the best possible outcome for the sale of any home. Lisa Ash, a top real estate agent specializing in Twin Cities real estate, has experience to create the best possible outcome. Her award-winning seller's strategies ensure every home sells for the best price to the ideal buyer. Contact her to learn more about how she can help you get the most for your home.
