Sometimes homeowners think it’s better to skip the agent commission and sell their house themselves. Why it may be a bad idea:
- Price - They may underprice the home, or they may over price it, and either way it will affect the sale process.
- Scams - FSBO scams happen to both buyers and sellers with little recourse other than taking legal action (i.e. loss of earnest money; fraudulent papers such as appraisal, loan documentation, foreign buyer deposits, purchases through a third party; etc.
- Liability is all on the seller - Everyone makes mistakes. A seller (or buyer) who doesn’t have the representation of a licensed agent pays for those mistakes. Attorneys can close a real estate transaction, but they don’t carry errors and omissions (E&O) insurance. For instance, if a seller lists “hardwood floors” as a feature and the buyer discovers it’s just a wood veneer, chances are Seller will have to pay for that mistake. An agent would have either caught the mistake or covered it with E&O insurance. What homeowner wants to be a target for lawsuits? They happen all the time.
- Paperwork is overwhelming - The 2015 National Association of Realtors’ Profile of Home Buyers and Sellers showed that understanding paperwork was one of the most difficult tasks for FSBOs. Depending on the state, there are a variety of legal forms that are needed, including but not limited to a sales contract, property disclosures, occupancy agreements and lead paint records.
- Sellers can get stuck in a bad deal - Any seller who signs on the dotted line and then realize an error is stuck. They have to pay the buyer (if they’re willing) to get out of or just take the deal.
- FSBOs sell for less - Homeowners selling by themselves simply don’t have the time to devote to the process, don’t know the market value, don’t understand market reports and don’t properly market the property. In most instances sellers don’t even know how to do a proper showing. Ninety percent of the time they end up selling for less.
- FSBOs spend more time on the market - Unless the seller knows someone who wants to buy the home, FSBOs take longer to sell than homes listed with an agent. For the same reasons, they can’t get the right selling price. No one is “behind the curtain” running the marketing show. On average, 18 percent of FSBOs were unable to sell within their chosen time frame last year.
- FSBOs lack guidance and advice - There’s no one looking out for the homeowners who sell on their own. They have no one to call if they have a problem or a question.
- Inspections are problematic - Sellers who don’t know the rules can get stuck with unnecessary and costly repairs, or just see their deals die in absence of appropriate handling.
- Appraisals can kill your deal - Appraisals can be a big challenge in our market, but a seller will not know how to deal with a bad appraisal, or how to negotiate, and they can lose a big chunk of money or just lose the deal.
- FSBOS lack exposure - Homeowners have limited resources to market their home. The 2015 NAR Profile of Home Buyers and Sellers showed 42 percent rely on a yard sign, 32 percent rely on friends and family, and about 15 percent use social media or Zillow. This is far from what a seller needs in terms of exposure to find a buyer for their home. Even paying for the MLS listing won’t be enough because there’s no incentive for an agent to bring a buyer to a FSBO. In fact, most agents refuse to show FSBOS.
- Time costs the seller money - The biggest cost to a homeowner is their time. You might hear that it doesn’t take an agent that much time to sell a house. And honestly, given the technology at our disposal, that’s true — to an extent. But it will take a homeowner a whole lot longer. They don’t have the expertise or the access to the resources agents have. What is their own time worth to them? How much time will the seller spend researching the market and contracts? Is the seller going to leave work to unlock the house each time there’s a showing?
