Tuesday, July 26, 2011

For Sale By Owner: Why Going Solo May Not Be Going Smart

Some people opt to sell their own home for the purpose of avoiding the payment of commission to a real estate agent. But what most people fail to understand it the fact that selling a home is a complicated process. It can be challenging to under any kind of market condition and more so in the prevailing real estate environment.

When you choose to take the route of “For Sale By Owner” or FSBO, you are basically listing your own home. Since you are already a homeowner, you sure know the time consuming process, the complex paperwork, and a ton of legal language that was involved in the home buying process. Selling a home also involves its share of legalities, risks and liabilities. There are very few homeowners that are proficient in the ever-changing rules and regulations of real estate
sales and those that are may be able to pull off a sale on their own. However, the vast majority of homeowners do not have the in-depth knowledge and intricacies involved in selling a home.

Lack of knowledge and training in real estate transactions can hurt most FSBO sellers in many ways including failure to set the right asking price, staging the home properly, wasting a lot of time showing the home to bargain hunters or unqualified buyers, not getting professional recommendation regarding repairs and enhancing the home’s appeal, and most importantly, they miss the professional advice of an experienced real estate agent that can help them comply with the pertinent legal and paperwork requirements.

According to t
he National Association of Realtors (NAR) Profile of Home Buyers & Sellers survey, the median price for homes sold with the help of a real estate agent was 21 percent higher than for those sold For Sale By Owner without professional assistance. Nationally, 86 percent of buyers relied on a real estate agent to buy a home. NAR studies have shown that 83 percent of real estate sales happen because of agents’ contacts, past clients, testimonials, referrals, personal contacts, or family and friends.

Setting the right price is critical. Real Estate agents do this for a living and they are aware of local neighborhoods, trends, available amenities, schooling, buyers’ hot buttons and other aspects that are essential in helping sellers with the right asking price. In a typical FSBO scenario, the for sale sign in the yard is the only primary marketing channel. However, real estate agents can help sellers by listing the home in the multiple listing services (MLS) databases, periodicals, newspapers, various websites, and by spreading the word through their large network of contacts via events, blogs, social media, and member association meetings.

Over-pricing and under-pricing can also make a big impact. An over-priced home may generate a lot of initial interest, but when buyers see similar homes in local neighborhoods that are priced lower, the interest levels drop precipitously. Similarly, under-pricing can be misconstrued by potential buyers as a sign of desperation and they may try to push down the prices further with the hope of scoring a bargain.

Real estate agents are required to undergo ongoing continuous education regarding disclosures, limiting seller’s liabilities, state and federal laws, fair housing standards, environmental regulations and contractual responsibilities. The soup-to-nuts process of listing through closing of a home is considered a team effort. The team members include lenders, attorneys, home inspectors, appraisers, and repair experts. Real estate agents have the advantage of a readily available team of experts. Most people that choose to sell on their own don’t have the network or knowledge in these areas, which could expose them to unnecessary risks, and liabilities.

When it comes to negotiations, real estate agents can deal with potential buyers objectively without any emotional attachments. They can also deftly manage buyer contingency responses, timelines for appraisals, inspections, and financing issues.

In conclusion, a very small percentage of owners that sell their homes on their own are successful. However, for most people, the convenience, knowledge, expertise, ease of paperwork, professional advice, and the peace of mind that comes by working with a real estate agent is worth way more than the cost of commission.

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