FSBO (For Sale By Owner) Mistakes
1. Not understanding discrimination, fair housing, lead paint and other disclosure laws
This has got to be #1 on my list. The reason Real Estate Agents are required to be licensed is to assure that they understand these laws properly. Not only do MA Real estate agents have to take 40hrs of training class but they have to take a test to make sure they were paying attention. They also have to keep their license valid by continuing their education 12hrs of CEUS every 2 years. The Real estate lawsuits should be the first thing that FSBO research before putting their home on the market. There are professionals who seek out the uneducated specifically to trap them into a situation.
2. Not listing the house on the MLS properly or at all
I see many FSBO who list with a brokerage as an “entry only”. OK for a few hundred bucks you can get your listing on the MLS with all of the other agent’s listings. But there are good listing and bad listings on the MLS. You need to understand how buyers think when they are looking at the listings online. If there is very little info or few photos buyer tend to think something is wrong with the interior. If the photos are poor quality the buyers cringe and move on.
If you don’t get your property on the MLS then it’s not going to sync to all the other websites that buyers go to search property. The listing will be invisible.
3. Not marketing the property on the right websites
Yes Websites! If your FSBO property is not on the internet you may as well pretend you’re not moving anywhere. 95% of all buyers (and I think that is low) start their home search on the internet. Almost no buyers use the newspaper- well maybe the online newspaper. And that FSBO yard sign is usually impossible to read your phone number. Most buyers will grab your address and google search it for more info. If you are not out there- you are not on the market.
4. Not being readily available to handle buyer or agent inquires
If I have a buyer that I need to set showings for in 24 hrs, I spend about an hour or two setting up and confirming appointments for the next day or two. If I don’t hear back from a FSBO I left a voicemail for quickly, I have no choice but to remove it from the itinerary and fill it is with another. If my buyer doesn’t find a house that day maybe I’ll call again. If a buyer calls and you don’t get back to them within an hour they have already moved on to calling an agent or another listing.
5. Not being readily available to show the property
FSBO listings seem to be the hardest to show. The owner always wants to be present when we show the house. This is a bad idea for a few reasons. First reason- now we have to coordinate 3 different schedules to make one appointment happen. Most likely we are coordinating with the sellers work schedule. If my buyers work an opposing schedule it’s almost impossible. Second Reason- Accompanied showings (yes even with listing agents) are counter-productive to selling the house. I know a FSBO thinks they are going to give my buyer all this fabulous information that will make my buyer want to buy the house. But the presence of a listing agent or home owner only causes the buyer discomfort and the desire to run away. A buyer does not want to be “sold” a house. They want to find the right match. They want to come to this decision of their own accord. If security is the concern, pack up all your valuables and put them in a safe or move them out of the house. That way there are no security concerns for showings. When you work with a real estate agent, only qualified buyers enter the property and all data is recorded about the agent who has the qualified buyer.
6. Not watching the market data (competition and flux)
Without regular access to the MLS data it is more difficult to see what properties have sold for, which homes recent went under contract, and which new properties came on the market that other buyers will be looking at. Quite honestly, unless you do this for a living who has time to pull all this data.
When you work with a real estate professional they should be keeping their eye on this information daily. They should understand absorption rates, appreciation values (or depreciation), they should also have basic knowledge of area happenings. If you live in an area with a high level of new construction they should understand how values with existing homes compare.
7. Pricing too high (neglecting to deduct commission cost off Market Value)
When an agent does a comparative market analysis on a home this value typically includes the commission rate of the agent listing and selling the house. Buyers know this- especially buyers who have their home listed with a Realtor. When that buyer comes to make an offer on your house be sure they will deduct that percentage form the market value of the home. FSBOs are usually seen as a deal waiting to happen in the eye of the buyer. In most cases this is true because a good real estate professional is highly skilled in the art of negotiation. Most FSBOs are not. Remember Real estate agents negotiate for a living. Our team negotiated 65 closed transactions last year- so if we add in the deals that fell through or could not be negotiated to an end we probably negotiated over 100 transaction contracts. That’s 2 a week and in most transactions we find ourselves negotiating throughout the transaction, at home inspection, on dates, for amenities, for hold back and rent backs. The list goes on and on. I would put at least 12-20 hrs a week toward negotiations for an agent with 65 transaction sides. How can a one-time FSBO compete with a professional negotiator? This alone should net you more of a return in hiring an agent than not hiring one.
8. Not Staging
First you must understand the point of staging before you can utilize it. See my article on staging to learn more
9. Letting the listing become stale
Yes a stale listing is one that sits on the market with no changes for a long period of time. Buyers will see it more than 3 times and now they just pass over it .Keeping the listing fresh with updated photos, price adjustments, and new remarks keeps the property in front of buyers for the entire listing period. The home should have 12 showings in the first 10 days and at least one offer. If you haven’t had any showings, it’s over priced or very poorly marketed. If you find you are getting showings and no offers you are probably overpriced but marketed well. If you are getting offers but they are all lower than you anticipated but roughly around the same price point, that is the price in which your home will sell. If you cannot sell for that price you may want to consider plan B.
10. Utilizing the buyer’s agent representation to get things handled
As an agent I have worked with FSBO sellers while representing my buyer. I negotiate my fair commission which pays me to handle one side of the transaction, my buyers side. I have found that FSBO tend to lean on the buyer agent for assistance when they realize how helpful having an agent actually is. But make no mistake my loyalty and fiduciary duties lie with the buyer. SO if there is ever anything that comes up that will sweeten the deal for my client that is my sole purpose and contractual duty. Be wary. I have heard the sellers admit bottom lines, negotiating price using terms like “We are willing to come down to x but if that doesn’t work for your buyer please let us know so we can discuss this” My response to my buyer is, “ I spoke with the seller, they are counter offering but they just told me there is more room to negotiate.”
11. Not offering compensation to a buyer’s agent
This is another huge mistake. Now you can FSBO and maybe if you follow the info above you can do it successfully with getting caught up in a lawsuit, or taken advantage of by a lowballing investor. But if you refuse to compensate a buyer you will drastically reduce your buyer pool and therefore greatly reduce the value of your home. Most buyers are represented by an agent because they don’t know where to start or what to do and even when they do they don’t have the time to handle a transaction on their own. Besides it cost no upfront money to work with an agent and they feel safe and informed they are making a solid decision and not overpaying for a home. You may come across a few agent who are not afraid to negotiate the sales price for their buyer to incorporate their compensation into the deal so their buyers can pay the commission at closing, but more than half the time the agent will just pass over your house not wanting to bother with the discussion or negotiation with the buyer and FSBO. You may miss showing your home to the perfect buyer who may have been willing to give you the price you wanted.
Being a Real Estate agent is a career like all careers. We train, practice, educate, grow and build on our skills, build small businesses, family run business. We work nights, weekends, while away on vacation. We know things about this industry you only learn by doing. Most of us have College degrees, families, bills and mortgages to pay. We offer a valuable service that seems to gain a reputation as something that is easy to DIY. Most new agents quit in the first year. Did you know only 5% are able to turn real estate into a full time career?
Did you know that per the National Association of Realtors (NAR) 89% of FSBO fail at getting their home sold on their own and have to hire an agent and of the 11% who do sell half of those sold for 16% below fair market value? How do I know this? I researched it, because that is part of my job.
I can empathize with the sellers in today’s market. Many people bought in or around the peak of 2005 and with the market just beginning to recover, people are beginning to come out from underwater with breakeven mortgages or even some equity and some are just shy of that. They say to themselves, if I could just save on the real estate commission I could sell my home. The cost of the real estate commission and the seller closing costs- which most sellers forget or didn’t know exist- are part of the cost of sale. You can’t remove them. It would be like going out to dinner with $50 and buying $50 worth of food and forgetting about the waiters tip. How would that dinner out look like if you told the waiter up front “I have no tip for you”. You should have just eaten at home, because you would be serving yourself.
Now you can do anything you set your mind to. You can sell your own home, or your car, you can build a deck or renovate your kitchen, you ca even yank out that aching tooth, or sew up a deep wound, self-diagnose an illness, or dry clean your own expensive suit in a bag in your dryer. But the question is- do you really want to? What is the cost of not working with a professional and is it worth it?
If you choose to sell your home on your own- hopefully the above article will get you there more smoothly. If you try it and realize how many problems can actually arise that you just don’t have time, patience or knowledge to handle, than Just Call The Pros- if not to list your home for sale, than at least to thank me for my free information! Good Luck!
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