FOR SALE BY OWNER?
FSBO Woes: Why It's So Hard to Sell Your Own Home
Granted, some people are able to sell their own homes without the services of a real estate agent. Some of these successful do-it-yourselfers are very experienced home sellers. Others are transferring ownership of their home to a child, a coworker or a tenant who's already living in the home. These circumstances are the exception, not the norm, however. For most people, a for-sale-by-owner (FSBO) transaction simply isn't in the cards. Here are five reasons why.
1. FSBOs can't list their home in the MLS. FSBOs aren't permitted to put their home in the multiple listing service (MLS) because these industry membership organizations are open only to licensed real estate brokers and agents. FSBOs are also locked out of many home search engines and Web sites, including the gigantic Realtor.com. Sure, a determined FSBO can put a for-sale sign in his or her front yard and run a tiny advertisement in the local newspaper, but the home won't receive nearly as much exposure as it would through the MLS.
2. Agents won't show FSBO homes. In a typical home sale, the buyer's agent receives a percentage of the commission that the seller pays the listing agent. Without a listing agreement, there's no guarantee that the buyer's agent will be compensated for his or her services, unless the buyer has signed a buyer's brokerage agreement that specifically provides for such compensation. Even if a FSBO offers to pay the buyer's side of the commission, most agents won't want to go through a transaction with an unsophisticated self-represented seller across the table. That means the pool of potential buyers for FSBO homes is limited primarily to unrepresented and probably unqualified prospects.
3. FSBOs usually overprice their home. Like most homeowners, most FSBOs honestly believe their own home is worth more than comparable homes in the same neighborhood. Usually, they're wrong. A real estate agent can provide an update on market conditions, an assessment of the likely selling price of the home and tips for improving the home's buyer appeal. Overpricing a for-sale home is a sure way to deter potential buyers.
4. Buyers will feel intimidated. Potential buyers will spend less time in a for-sale home if the owner is present during the showing, and they'll be shy about discussing its pluses and minuses with their own agent if the owner is within earshot. Buyers will also be less inclined to make an offer if they know they'll be negotiating directly with the seller. Having an agent on each side creates an effective emotional buffer between the seller and buyer.
5. FSBOs are likely to stumble into legal trouble. Real estate transactions are fraught with potential liability for unwary sellers, particularly due to extensive disclosure requirements. A FSBO who overlooks even one required form or legally mandated disclosure could face a protracted and expensive buyer lawsuit after the transaction closes.
If you still want to give it a try.
There is no law that says you have you use a real estate agent when selling your home. However, you should be aware of your responsibilities and the pitfalls you can encounter if you go the For Sale By Owner route.
Here are some details you must take care of:
Marketing - You must place your own ads, put up a For Sale sign and prepare neat, professional looking flyers for prospective buyers.
Pricing - You must determine the most reasonable price for your home, based on what similar homes have sold for recently.
Legal Requirements – You must be aware of your provincial laws regarding selling a home and protect yourself with the proper warranties and disclosures.
Open House – You must prepare for, advertise and attend any Open Houses you hold and be ready to handle strangers and neighbours going through your home.
Screening - You must be able to tell the lookers from the buyers, so that you don’t waste time with people who aren’t qualified to buy.
Follow-Up – You must return phone calls promptly and check on any buyers who make offers on your home.
Negotiation - You must be able to handle tough negotiations once someone has made an offer.
FINALLY you may have to help a prospective buyer arrange financing. You’d think the buyer would take care of that, but many buyers don’t’ understand what’s involved and expect the seller, or the seller’s agent to help. If you can’t the deal may die.