Understanding the Risks & Rewards of For Sale By Owner

When people decide to sell their home, they usually hire a real estate agent. Sometimes however, they choose to sell a home themselves. This is called a “For Sale By Owner” (FSBO) (also pronounced Fizz-Bow). FSBOs can be risky. Let’s look at this more closely:

Why Would People Choose FSBO?

1. Save Money on Agent Fees – Real estate agents charge a commission (a percentage of the home’s price) as their compensation for the work they do getting a home sold. Some homeowners want to avoid paying this fee and keep more money from the sale.
2. More Control – When selling on their own, homeowners have full control over the process. They decide the price, show the house themselves, and negotiate directly with buyers. Often these owners feel as though nobody knows their home well enough to highlight its best features. To them, no one can showcase their home as well as the person who lived there.
3. They Think It’s Simple – People believe they don’t need an agent and that agents don’t do much to earn their commission. Especially if the market is strong, or they already have a buyer lined up (like a family member or friend), they are willing to go it alone.

The Risks of FSBO

While FSBO might seem like a good way to save money, it comes with risks:

1. Pricing the Home Wrong – Without an agent’s expertise, homeowners may set the price too high, which scares buyers away, or too low, which means losing money. Agents look at all the recent sales and carefully compare condition and size of home to price the house accurately. It’s been shown that many owners price their own home too high because they don’t have the data that agents have and they simply struggle to remain objective about the appeal of their own home when compared to a lot of other homes in the same area or price range.
2. Limited Pool of Buyers – Real estate agents list homes on the MLS (Multiple Listing Service), which is broadcast out to a lot of real estate search sites that other agents use to help their buyers.  FSBO sellers can post their home on some sites, or hope that prospective buyers might see a sign in their yard., but actually might not get as much attention. That makes it harder to sell a home quickly.
3. Legal and Paperwork Mistakes – Selling a home requires lots of paperwork and legal knowledge. A mistake could cost the seller money or even lead to a lawsuit.
4. Time-Consuming – FSBO sellers have to personally coordinate everything, from marketing the home to showing it and negotiating with buyers. This can take a lot of time and effort.
5. Harder Negotiations – Without an agent’s experience, FSBO sellers may struggle to negotiate a good deal or handle tough buyers.
6. No Buffer – Buyers may be wary of dealing directly with a homeowner. There is an implication that if a homeowner isn’t willing to use a real estate agent, they may be harder to negotiate with or sensitive when issues with their home are brought up.

Statistics say anywhere from 80-90% of FSBOs end up using an agent.

The problem is that no one really knows how FSBOs end up, since there is no consistent reporting by these owners of what sold and whether they got their asking price. But a good majority of FSBOs doe end up with an agent after realizing that more goes into the marketing and exposure you need for your home to get the best possible price.

Selling a home on your own might save money upfront, but it can lead to stress, mistakes, and even a lower final sale price. For many people, the support and expertise of a real estate agent are worth the cost. If you’re thinking about FSBO, make sure you’re prepared for the risks and challenges!

What Are The People Who FSBO Overlooking? 

• Your agent’s compensation is fully negotiable 
• Whomever you hire should be able to tell you clearly what they will do for you, in exchange for the money you pay them
• Agents promote your home to thousands of buyers, which creates a larger marketplace for your home and potentially driving up interest
• As questions and challenges pop up, your agent is there to answer questions in an ethical & legal way (misstatements about a home or neighborhood can land you into legal hot water)
• Professionals have real-time access to data that can help you make smarter decisions (which is better than using biased emotions)
• A good agent will protect your home by tracking who comes and goes and schedule everything around your needs and wants
• The use of an agent signals to buyers that you are aware that buying and selling a home can be a complicated life event

There are so many agents to choose from. If you are considering selling your own home, it’s still a good idea to speak to a few to see how they differ and get a clear understanding of the kinds of services you will be giving up if you decide to DIY the sale of your home. A professional agent can easily explain how the bring value to the table that can even result in a higher return.

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