Potential problems when doing a For Sale By Owner (FSBO)
The prospect of selling your home, especially when you find yourself in a seller’s market, builds excitement because perhaps this will allow you to potentially upgrade your home, cash in your profits and downsize, allow you to move to a different part of the country, or maybe pay off some bills just to name a few.
After interviewing with some real estate brokers, that excitement may diminish some when you discover that the vast majority of For Sale by Owner (FSBO) sellers pay the overall commission that could be up to 6% of the sales price of your home, as we outlined in the “Sell Your Home – Traditional” page.
At first, the notion of saving some money on the sale of your home sounds intriguing, but before you decide to go down that path, here are some things you may want to consider:
- Statistics show that For Sale by Owner (FSBO) sellers are successful at selling about 14% of the time. However, out of that percentage, 7% already knew who they were selling to home to ahead of time (friend, relative, neighbor, etc.), so technically that stat might be more like 7% of the time.
- 71% of all real estate litigation comes as a result of one party not being represented in a real estate transaction. This is classic FSBO because the buyer will usually have an agent representing them and their best interests when the seller does not when trying to sell their own home. As a result, For Sale by Owner (FSBO), sellers get sued more than any other group in real estate and that could end up costing far more than hiring a real estate professional in the first place.
- Real estate transactions are complex and require immense attention to detail coupled with organizational skills. There are lots of pages of documents and several types of forms in a typical real estate transaction that need to address State real estate laws. If you are trying to sell your own home, you need to be intimately familiar with each one as these forms and what goes with each transaction as there are several pitfalls you can fall into along the way that could have serious legal consequences to you. You are also involved in a contract that becomes legally binding once you sign the dotted line. A good broker will be worth their weight in gold in helping you navigate this process in addition to all the other services they should be providing you.
- There are multiple channels a good broker will have at their disposal to help you adequately market your property, and a properly marketed property will attract multiple offers often creating a bidding war. A good broker will be able to help you effectively market your property and help get a good offer for your home.
- According to the National Association of Realtors, a real estate professional can get the seller a 10% to 13% higher price for their home on average over someone trying to sell themselves. If you are still having a hangup on the commission part of the transaction, this can more than compensate for a commission while potentially adding even more money in your pocket than you were originally expecting.
- Most buyers will engage the services of a real estate professional since their commission is usually paid by the seller. Not only does this provide representation for the buyer and not the seller in an FSBO, but you also have the potential legal consequences and pitfalls in a real estate transaction to contend with and many agents representing the buyer might steer clear of the transaction with a For Sale by Owner seller, or at a minimum outline this to the buyer and let them decide if they even want to entertain getting into a real estate transaction with an FSBO. This might also be a telling sign of why FSBOs have such a low success rate in selling their property.
In the long run, working with a professional can actually save you money, especially if litigation were to ensue after the sale if the FSBO wasn’t absolutely diligent in working within the State’s real estate laws throughout the transaction and sale of the property.
Every state has its own real estate laws, but to be a licensed real estate professional, a rigorous Federal and State exam had to have been passed, continuing education is mandatory, and a real estate professional deals with real estate transactions on a daily basis building their experience with these transactions.
Coupled with a litany of ever-changing rules and regulations and missing the fine details in a transaction could have devastating consequences if overlooked.
Just as you wouldn’t want to perform surgery on yourself to save a few bucks overusing a doctor or surgeon, you should carefully weigh the consequences of doing a real estate transaction on your own as these are often some of the biggest financial transactions we will make in our lifetime and shouldn’t leave these to chance.
A good professional and the services they bring to the table should far outweigh the few bucks you might save trying to do it yourself.
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Some careful thought was given in outlining some of these pitfalls many people fall into when working with someone, and hopefully, you have got a feel for what we might be able to do for you. If you are interested in learning more, please take an additional 5 minutes and complete the questionnaire below, and we will have someone get right back to you.
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