FSBO stands for ?For Sale By Owner? a term used to describe a homeowner who tries to sell their home without the professional assistance of a Realtor?. The number one reason FSBO?s decide to go this route is to avoid paying for Realtor commission, which is usually 6% of the purchase price (but can greatly range).? The number two reason is because of a prior negative experience with a Real Estate agent. This section is devoted to de-bunking common FSBO myths, as well as to provide tips for FSBO?s on how to best sell their property.
First, let?s look at some sobering stats:
- 84% of FSBO?s eventually hire a Realtor? (realtor.org)
- According to a 2006 study by NAR? , only 12% of homes were successfully sold by the owner (realtor.org)
- In 2006, only 5% of buyers purchased directly from owners they didn?t know (realtor.org). The vast majority of FSBO sales were to friends or relatives (and if you?re selling to a friend or relative, it?s almost guaranteed that you aren?t getting full market value for your home).
- 91% of buyers are represented by a Realtor? (car.org)
- According to the NAR?? 2006 Profile of Buyers and Sellers Report, the median sales price of sold FSBO homes was 17% LOWER than the median sales price of homes sold through Realtors?
Just like with any other venture, there is no law that states you must use a professional. By choice, you can sell your own home, do your own taxes, do your own divorce, and represent yourself in court. It goes without saying that unless you have the time, money, resources, dedication, efficiency, and inner workings of the profession you are taking on?your results can be disastrous.
? Before attempting to sell your home, make sure you have a clear and thorough understanding of what it takes to sell your home.
Let?s analyze the common pitfalls, mistakes, and problems FSBO?s come up against:
Properly pricing your home
Realtors? have direct access to homes that have sold, are pending, and are active. An active Realtor? in your area will also have intimate knowledge about the features of SOLD homes, and can provide an in-depth ?Comparative Market Analysis? to give you a realistic range of what your home is worth. In fact, Realtors use this CMA information to base the list price (and target end price) for their client?s home. Pricing a home is a delicate process, because it takes many features into account beyond just the neighborhood: size, condition, floorplan, style, updates, landscaping, lot position, views, remodeling?all of these are features that will affect your home?s desirability. A true CMA cannot be garnered by just a click of the button! Thus, simply garnering a list of SOLDS in your neighborhood does not tell you enough. Why is proper pricing so important? Because over-pricing your home is the kiss of death. You?ll have significantly less traffic, less interest, and less qualified buyers. As a FSBO, you?re already fighting an uphill battle?overpricing your home puts the final nail in the coffin. My suggestion it to ask a Realtor? to price your home for you. Let them know that you intend to sell your home yourself, but you would appreciate their input. Most Realtors? are more than happy to offer you any help possible, because they know that the rate of FSBO-to-Realtor? conversion and they hope to be the one you call if you decide to list your home. Just be honest with your intentions from the beginning. Another option is to hire a professional Real Estate Appraiser to appraise your home, which will cost you a few hundred dollars. Make sure that the appraiser you choose is familiar with your area, and that they know that the appraisal is for re-sale.? If you?d like a list of qualified Appraisers, please let me know.Marketing
When selling your home yourself, you are taking on the job of the Listing Agent. You should prepare your home for showing just as you would in a Realtor?-assisted sale. Clear out the clutter, make repairs, spruce up your home with fresh paint and flowers. Ask a friend or acquaintance to come in with a neutral eye to give you an objective opinion of how your home shows. It is often very difficult to see your own home through the eyes of a buyer; how we live in our home and how we market it are very different indeed. You?ll also need to put away a budget for FOR SALE signs, newspaper ads, flyers, postcards, and a personalized website for your home. Unfortunately?you do not have access to the MLS (Multiple Listing Service), which happens to be the most effective marketing tool in home sales. You simply cannot get around the fact that 91% of buyers are represented by a Realtor?, and Realtors? find homes for their buyers through the MLS. Because of this, you will have to push harder and be much more patient in finding a potential buyer. Expect to have your home ?FOR SALE? for a few months, especially in our current slowing market.Finding A Buyer
No matter how many newspapers/websites you advertise your home in, how many Open Houses you hold, or how big your FOR SALE sign is in your front yard?the fact is, you are not reaching the majority of qualified buyers To reach the bulk of buyers,? you will have to market to their Realtor?. Confused as to how this works? Let me explain how Realtors? get paid:In the majority of home sales, sellers will hire a Realtor? to sell their home. The average commission/marketing fee is 6% of the sale price, which is only paid out to the Realtor? after she has successfully sold your home. That 6% is divided in 4 ways.??????????????? Typically, half of the 6% goes to the Listing Agent (the Realtor? selling your home), and the other half is offered to the Buyer?s Agent (the Realtor? who finds the buyer for your home). Thus, each agent receives approximately 3% of the sales price each. Of that 3%, each agent must then split that once more with the Broker that they work under. Splits vary greatly, but can be as much as 50/50. After this final split, both agents are then required to put aside as much as an additional 30% for taxes (agents are independent contractors). The remaining amount is the agent?s net; in reality, the Realtor? receives only about 1-2% of the sale price (MYTHBUSTER: Agents are overpaid!). ????????????? This entire set-up (compensation amount to buyer?s agent) is all communicated through the MLS (Multiple Listing Service). ????????????? The cold hard facts:? It is unlikely that most agents will even know of your home?s existence. The ones that do, have absolutely NO incentive to show it to their clients?nobody likes to work for free. ????????????? In fact, even listings that offer less than 2.5% commission to the Buyer?s Agent get passed over repeatedly. And since 91% of buyers are represented by a Buyer?s Agent, you can readily see the importance of motivating Buyer Agents to show your home.
Most people will observe the house down the street as it prepares for selling: an agent comes by, puts up a FOR SALE sign, sends out a few flyers, does a couple of Open Houses?two weeks later the house is SOLD. It looks so easy! But this is only ?surface? marketing. More important activity occurs behind the scenes. After the ?For Sale? sign goes up and flyers are printed, your agent?s main job is to market your home to other agents, who represent buyers?not buyers themselves.
This is essentially why the failure rate for FSBO?s is so high. So what can you do? My advice is to find an agent who will list your home on the MLS, which usually involves a small fee. Because you will not be paying this agent for full service, you will have to take on the marketing and contract negotiations yourself, which, incidentally, is no small chore (but let?s take things one step at a time). But, listing your home on the MLS with a minimum 2.5% compensation to the Buyer?s Agent increases your selling chances exponentially.
- Safety Issues It?s an issue even us Realtors? have to contend with, but since the vast majority of Realtors require a buyer to become pre-approved before showing homes?at least we know our buyer?s background, name, and personal information. You, on the other hand, will be allowing strangers to enter into your home. My advice is to always have someone with you when showing, especially at the Open House. You may want to carry a bottle of Pepper Spray or Mace and very discreetly hold it in your hand as you show your home. Don?t turn your back to the buyer, and have them ?sign in? with their personal info.
- Buyer Trust In an industry that is dominated by professionals with distinct roles?the truth of the matter is, many buyers just won?t trust you. The idea of paying out hundreds of thousands of dollars without any professional mitigation or representation is simply too frightening to most. I once had buyers that found a FSBO home on craigslist.org?it fit all their needs perfectly and because it was FSBO, there was no bidding war to contend with. They contacted the owner and requested that I represent them in the contract. The seller refused, and pressured them to deal directly with him. My buyers balked at the idea and grew distrustful of the seller and his aggressive approach. We found a home for my buyers on the MLS shortly after. The seller never sold his home?after a few months he gave up completely and continued living in it. ????????????? How are some of the ways you can gain trust? For one, don?t be pushy. You have to be as professional as a Realtor? would be in your shoes. Show the buyer that you have honest intentions by having home and pest inspections readily available. And lastly, reassure your buyer that you happy to give them however much time they need to do their own inspections to their satisfaction.
- Buyer Qualification One other issue that FSBO?s come up against is buyer qualification. In the industry, it is standard to pre-approve buyers before they start their home search. When you sell your own home, you often deal with buyers who aren?t serious. They aren?t pre-approved, they aren?t financed, and they?re really just ?looking around.? If they were truly serious about finding a home to buy?they would have retained a Realtor?s? representation. You may want to consider requesting that only pre-approved buyers view your home, and ask them to bring a copy of their pre-approval with them. This will help you eliminate the non-serious buyers from the real ones. ??????????? Ironically, the buyers that FSBO?s tend to attract the most are bargain hunters?people who are looking for a ?deal? and to avoid paying top dollar in a crazy market.
- Legal Problems?Part of the fees that we pay to our Brokerage from each commission check covers our hefty Insurance costs. Real Estate is a very litigious industry. If is often said that if you haven?t gotten sued?you aren?t doing enough deals. With that said, selling your home directly opens you up to a lot of legal vulnerability. Protect yourself by doing what I recommend as my number one FSBO tip: hire a Real Estate Attorney. He will be especially useful during the contract negotiation period?a very delicate process that can easily turn nightmarish with a blink of an eye. I cannot stress enough how important I think it is for FSBO?s to hire an attorney. It?s simply not worth the risk or money to find yourself slapped with a lawsuit several weeks, or even several years down the line. Don?t be penny-wise and pound-foolish.??????????? I hope you have found these tips helpful. I would be happy to answer any questions you might have about the process. The odds are clearly stacked against you as a FSBO, but there are many things you can do to improve your chances. Patience is key in a FSBO sale. If all else fails? Consider hiring a Realtor?! The advantage to hiring a Realtor? is that she only gets paid after a successful sale?the agent puts in her time, energy, and her own money to sell your home for top dollar.? You lose absolutely nothing by letting an agent try to sell your home. And don?t forget?on average, Realtors? sell homes for 17% higher than FSBO?s. That?s almost THREE TIMES the average commission cost!
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Source: http://longbeachcarealestate.wordpress.com/2012/09/15/thinking-of-selling-dont-go-it-alone/
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