Why “For Sale By Owner” Can Cost You Money

While “For Sale By Owner” initially sounds like an intriguing idea — as you envision the sizable amount of money saved by foregoing the realtor’s commission or fee — selling your home without an agent can actually wind up COSTING you money. According to the National Association of Realtors (NAR), only 8 percent of home sales last year were those in which the seller went through the process without an agent — known as for-sale-by-owner sales or FSBOs — the lowest percentage since NAR began tracking these sales in 1981. In fact, FSBO sales have dropped 5 percent in the last 10 years, down from 13 percent in 2005. And there’s a reason for that. In addition, FSBO homes sell for an average of 16% less than those listed by an agent. A FSBO may sound like it will save you money but you will never know how much you are leaving on the table if you don’t put your house on the market and get full exposure that only an agent can provide.

While most sellers love the idea of saving money, they are often short-sighted when it comes to the area of FSBOs. They often overlook the following 5 issues, which may wind up costing them more than they originally projected.

1. Marketing costs. Not only do real-estate companies invest sizably in weekly advertising in real estate websites, but they’re also investing thousands of dollars in high-end photography and production costs to create those beautiful four-color brochures, floor plans and property websites. In addition to funding this marketing, realtors know how to prepare a home so it looks its best for sale. They work with buyers every day and know what turns buyers off or excites them. They also have access to photographers who are experienced in taking real estate images and can present your house in the best light. Now is not the time to take dark, out-of-focus images on your phone and post them to the internet yourself. Images that look like they belong in a magazine are the ones that attract the most interest on the internet — and that then convert to the most showings of your home. And the more people who see your home, the greater the chance of receiving an offer. When listing by FSBO, you will have to pay for these marketing costs yourself, and you most likely will not be able to prepare as professional of a brochure and comprehensive marketing package as your real estate agent can.

2. Pricing the house either too high or too low. This is perhaps the most dangerous mistake you can make when listing by owner. Your real estate agent has access to past home sales and current comps in your neighborhood, which they will use to strategically price your home. And they have actually seen and may have listed or sold these homes. Without this detailed level of information, you may either underprice your home or overprice it. When it’s underpriced, you’re leaving a substantial amount of money on the table. And when it’s overpriced, you run the risk of your home staying on the market for an indefinite period of time. A typical scenario of many FSBOs is that they overprice their house, which then sits on the market for a number of months with the owner investing in weekly newspaper and internet ads. The owner ultimately winds up having to drop their price substantially in order to have it sell. Whereas, if they had listed it with a real estate agent from the start who had listed the home in its correct price range, the home would have sold within a short period of time for a much higher price, with the buyer making a higher profit — even with paying the realtor’s commission.

3. Negotiations. If you’re not a skilled negotiator, you may wind up accepting far less than a real estate agent could negotiate for you. They’re trained and experienced in the area of real estate transactions and can negotiate the contract terms that work best for you and maximize your profit.

4. Pre-qualified buyers. When selling FSBO, you’ll be letting virtually any Tom, Dick or Harry in off the street to see your home and make an offer. You don’t know whether Tom’s salary can support his mortgage payments or whether he truly has enough money in the bank for his down payment. In today’s market, most realtors are presenting offers from pre-qualified buyers — buyers who have already been vetted by a bank or mortgage broker and are capable of paying what they’re actually offering. If you spend two weeks in transactions with Tom and it turns out that he can’t afford his offer, you’ve not only lost time and potential other offers, but you’ve most likely spent money in legal fees during attorney review — only to start over from scratch.

5. You’ll need to coordinate the closing yourself. Real estate agents not only market your home to potential buyers and bring in contracts, but they also oversee the entire process AFTER a contract has been signed to ensure that the deal goes through when it’s supposed to. When you list your home FSBO, you will be in charge of everything yourself, which includes coordinating everything with the home inspection, the real estate attorneys, the title company, and the buyer’s lender. Any missing information, improper paperwork or missed appointment could mean a delay in your closing or even worse, legal issues, which could mean a loss in money and a broken deal — leaving you to start all over again. An experienced real estate agent will do what it takes to make sure everything is completed on time and you have a smooth closing.

6. You will have to be home to give access for showings. Accommodating buyer showings is inconvenient. If you aren’t working with an agent who has the ability to install a monitored MLS lockbox on your property who will be there to let people in? The more showings that can happen easily the better for you so don’t underestimate this logistical issue. Who will show the house while you are at work or away for the weekend? Also, how do you know who is coming in the door? With a lockbox only licensed agents can enter and each showing is tracked. This is much safer than opening the door to strangers. On top of this, the seller’s presence at a showing makes buyers uncomfortable and will reduce the likelihood of their connecting to your property and making an offer.