You have seen a Fore Sale by Owner, or what those of us in the industry affectionately call FSBO. An individual has decided to sell their own home without the assistance of a licensed professional. I will not tell someone automatically that this is a bad idea and in many instances, it can be a smart decision, but it is essential to know if your situation is one where selling your own home is the best choice for you.
The best person to sell their own home is someone who already knows to whom they are selling. If your best friend’s sister has already told you that she is going to buy your home and the two of you are on good terms to a point where you have worked out a price you can agree upon then much of the Real Estate process can be handled by yourself. There are even some licensed brokers who will provide Transaction Services where they fill in the forms for you at your direction and charge a small fee instead of offering full services and a commission.
Another good time to sell your property is if you sell a lot of homes. If you buy and flip homes (I don’t like the term flipping houses, but I’ll use it) then saving money on the commission can be accomplished because you have such broad experience in the sale of Real Estate yourself that you have become your own professional. Home builders often obtain their license or partner with a licensed agent. You can usually find both of these sellers will receive their Real Estate licensed and join local REALTOR® boards to have all the advantages of being a REALTOR®.
But what if you are neither a person selling to someone you know or someone who sells homes frequently as part of your income?
The best example I have comes from a personal experience where I was representing a buyer client who decided he would like to view a home that we had found and was for sale by owner. To allow me to serve my buyer in the transaction and prevent my buyer from paying additional costs, I presented the seller with an “Authorization to Show Unlisted Property” form. The buyer wanted to see the home the next day, but because of the complexity of the form, even though it is standard through the state he had not seen it before, he requested a week to have someone review it for him. This reasonable request for time to review the document left my buyer with the time he needed to find a house listed by a REALTOR® and put in an offer on the other house.
Would the buyer have wanted to purchase the home at which we were trying to look? It’s possible, but never have brought them into the house there was never a chance to sell them the FSBO.
Another argument I frequently hear from sellers is they want to list the home themselves to save paying commission. In this example, I’ll use my last listing commission and do not imply them as a standard rate or infer that they are the same across the industry or my office. Listing with a 6% commission with 3% going to the selling agent (the one representing the buyer, I know, but that’s what it’s called) the seller hopes to save 6%. The agent will first request his commission be paid by the seller and not his buyer. If the commission is funded by the seller then the agent’s first discount on the price will be the 3% (often 5%) off of the market value of the home before making an offer. If his buyer is forced to pay the commission you can expect closer to a 10% discount from the market value in the initial offer. Notice I didn’t say these prices were off the list price. The selling agent will likely not take the FSBO list price into account unless it is lower than what he calculates as the market value with discounts.
Assume that the home is priced 5-10% higher than market value, which is common when a homeowner prices their property even when they have all available information. The homeowner will need to leave the house on the market for some time, normally 30 days, before making a price reduction (hopefully to the market value). Unfortunately, after being on the market for 30 days, the homeowner will need to discount lower than the market value as home shoppers can see the number of days on the market and will question why the home has gone stale.
All of this, however, doesn’t explain the simple fact that I, a licensed REALTOR® in the state where I own my home, plan to hire a REALTOR® to sell my home for me when the time comes. My reasons have to do with convenience. I can’t be present to manage all the intricate details of marketing and showing of my property, my life is too busy. And the loss in time from doing all of these additional tasks will hurt me more financially than the small percentage it will cost me to list with another agent. Real Estate is a full-time job, and if you don’t want to sell your home to become your full-time job it is best to find someone else to do it for you.