For Sale By Owner: Pros & Cons
It’s only natural that you want to make as much money as you can from the sale of your home. Some home owners decide to sell their home without a realtor to save some money, which is understandable. There are pros and cons to selling your home without the assistance of a professional. Just be sure you realize the drawbacks as well as the benefits before you decide to go that route, here are some factors to consider.
Costs Involved When Selling Your Home
PRO: Save on commission fees
When you hear people talking about why it’s better to sell a home FSBO (For Sale By Owner, pronounced fizz-bo), the usual argument is that you’ll save you money because you won’t have to pay commission fees (usually 6%; 3% to both the listing and the selling agents). The listing agent’s commission covers the time and money that go into selling your home. This includes things like staging the home, taking pictures, listing the property on MLS, marketing, hosting open houses, showing the property to potential buyers, etc. Even if you successfully list, show, and sell your own home, you may not escape all the commission fees. If your buyer is represented by a Realtor, they will most likely ask for a 3% commission for their services.
CON: You have to do all the work
Without a Realtor, you will need to do your own staging, pricing, marketing, showing, paperwork, etc. These are skills that you probably aren’t very experienced in, and may also underestimate the amount of time and effort involved. Here are some things to keep in mind.
– Buyers always start online and if your property isn’t listed on the major real estate websites, you’re unlikely to get the exposure you need.
– It’s difficult for sellers to view their home objectively or know how to stage it to appeal to the broadest audience.
– FSBO sellers don’t realize how draining it can be to set up showings and vet qualifying potential buyers.
– Preparing your own paperwork can be tricky unless you have a background in dealing with contracts and law.
Pricing Your Home
PRO: Have control over the asking price
When you sell your home yourself, you are in complete control of the sales process. You do not have to listen to anyone’s opinions about how you will price the home, how you negotiate, or any other decisions. For about $300-$500, you can get an independent appraiser to give you a fair market value for their home. There’s also plenty of data and tools online to give you a sense for what your home may be worth.
CON: Risk overpricing your home
There’s no substitute for actual market knowledge. If you don’t know how to price your house, you might be way off. The danger in overpricing a home is that it will languish on the market and the home then becomes stigmatized; even if you lower the price later. Buyers are likely to offer less when the home has been on the market an extended period of time.
While the point of selling without a Realtor is to keep more profit in your pocket, it’s important to consider that a local real estate agent likely has more expertise in pricing strategy. It’s possible that the profit you earn from a FSBO could end up being lower than if you had listed with an agent. Studies show that you generally get more money from a sale of a home with a Realtor. One study by the National Association of Realtors found that in 2008 the median price of homes that were sold by an agent was $211,000, while those who were FSBO were $153,000.
Negotiating the Sales Price
PRO: You can use the knowledge of your house to your benefit
Ever buy a car before? There are plenty of points to negotiate on before the actual sale takes place, and the same applies with home sales. Repairs to the house, lawn upkeep, and even additions can be negotiated in the contract that may ultimately affect the price; but can be negotiated almost entirely outside of the price discussion. With a recent home inspection report, you’ll be able to verify the status of the home’s components if they come up in negotiation.
CON: Inexperienced negotiators won’t get top dollar
Real estate agents firmly believe they can get you more money through the art of negotiation, leverage of local knowledge, use of incredible marketing tools, access to a greater marketplace and ability to qualify buyers.
While you are your own boss, you’re losing the valuable counseling and expertise of a potential professional. Houses for sale by owner leave a seller to do the negotiating. You’ll be relying on your own skill to finalize a contract, leaving yourself open to potential legal problems and a smaller profit when all is said and done. If the buyer is represented by an experienced agent who is determined to get his or her client the best sales price for their new home, negotiating may be a major headache.
Top Reasons Why FSBOs Fail
- Listing price was off from the start
- Couldn’t accommodate showings
- Poor staging and photography
- Insufficient internet exposure
- Not knowing how to negotiate
- Refusing to pay buyer’s agent commission
According to Zillow research, 36% of sellers attempt to sell their homes themselves, but challenges along the way lead many of them to eventually hire an agent. In the end, only 11% of sellers end up selling their home without a real estate agent.
Choosing whether to work with a real estate agent depends on your situation and how motivated you are to take on the process yourself. Regardless of what you decide, consider a pre-listing inspection to get a better idea of the state of your home before putting it on the market. An up to date inspection report can save time and headaches by helping you price your home more accurately from the start and making any necessary repairs. For more information, contact us today!
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