The Truth About FSBOs and Why They Fail
FSBO stands for “for sale by owner,” and is a trendy choice for people who want to sell their own home or property in lieu of hiring a real estate agent. With the immense versatility of online sales, user-friendly property listing sites such as Redfin, Trulia, and Zillow, and social media advertising readily available, many homeowners are deciding to take on the responsibility of being their own selling agent, and avoid paying commission to a licensed professional. Although the access to several listing methods may be available for advertising a home for sale, it doesn’t necessarily mean interested buyers will see these listings. In fact, based on a report from the National Association of Realtors, only 7% of the FSBO listed homes sell.
FSBOs fail for a variety of reasons from incorrect pricing and lack of visibility, to interested buyers wasting the homeowner’s time viewing the property, only to discover they don’t financially qualify. If you’ve decided to sell your own home, before moving forward, take advantage of the information we’re sharing below on the top reasons for sale by owner properties routinely fail.
#1 Homeowners Fail to Properly Prepare Property
Preparing your home in advance is crucial to finding a buyer and getting it sold. Whether you’re counting on buyers viewing your property online or in person, you want to make it look its best.
When a real estate agent is enlisted, he or she will make recommendations on how to prepare a property to make it sell as quickly as possible. Failure to do this is one of the top reasons why FSBOs don’t sell.
Here are some important tasks to complete prior to listing your FSBO:
Add a fresh coat of paint
Ensure all lights are working, inside and out
Update light fixtures
Have carpets and upholstery professionally cleaned
Finish partial repairs
Add curb appeal
Remove personal items
These details will help your house appear well taken care of and show it in the best possible light. By removing personal items such as family photographs, and decluttering the garage and counter tops, interested buyers will focus on the layout of the home and any unique qualities, rather than being distracted by your personal paraphernalia. Plus, a fresh coat of neutral colored paint on the walls, clean carpet, and updated light fixtures will enable interested viewers to visualize living in the house as they browse the online photographs. Keep in mind that your posted listing will ultimately be the first impression.
In addition to real estate agents offering expert tips on the presentation of your home, they recognize the importance of first impressions and know that a viewer will form a personal opinion based on photos and details within the first ten seconds of browsing. For this reason, many realtors use professional photographers to make a house look as great as possible.
#2 FSBOs Lack the Know-how for Screening Potential Buyers
Because the services of real estate agents involve so much more than merely showing a property to interested buyers, they understand the importance of screening potential buyers to prevent unqualified shoppers from wasting valuable time. Through working with people on a regular basis, agents ask important questions that distinguish interested, wishful buyers from financially qualified buyers.
Another major failure among FSBOs is in spending precious hours allowing strangers to tour their home in hopes of a sale only to discover those individuals don’t have access to the necessary funding. Prior to scheduling a showing, it is highly recommended that you request proof of mortgage pre-approval. Also worth noting is that a pre-approval and pre-qualification are not interchangeable terms. The pre-qualification is a quick prediction of what the buyer should be eligible for, whereas a pre-approval is a written guarantee that a mortgage loan will be backed.
Real estate agents not only refuse to show a property without this financial verification, their connections with other professionals will help a home-buyer find a mortgage lender and acquire the necessary paperwork, thus finding a buyer for your property much faster than attempting it on your own.
#3 Prompt Response and Being Available for Showings is Fundamental
Most FSBOs work full time and have family responsibilities, leaving little time to handle property inquiries or being available for last minute showings. Home buyers and buyers agents can be quite impatient when it comes to getting property details, and if FSBOs aren’t able to accommodate them, it leads to a lost sale.
There is a common misconception that real estate agents do very little to earn their commission, when in actuality, they devote many hours towards being responsive to inquiries, via phone, email, or otherwise, and scheduling appointments for showings during all hours of the day and evening. A real estate agent will work multiple hours for you, just to get your property sold.
#4 FSBOs Don’t Provide a Relaxed Viewing
Buying a home is a major investment, so buyers want to have time to meander around the property, peer into closets and cupboards, and visualize the property as their own. They also like the option of making comments or asking an unbiased party, i.e. a real estate agent questions about the property. However, quite likely, a FSBO will be very protective of the home they’re selling so when they do have an interested buyer, they fail to respond to questions or observations without emotion, as well as step away and give the buyer space to look around at leisure.
#5 Negotiations and Contract Details are Difficult
Without a strong understanding of contracts and terminology as well as the confidence to handle negotiations, FSBOs often lack the knowledge required to protect themselves and get as much money as possible in the agreement.
A major part of what a real estate agent trains for involves the ins and outs of negotiations and contracts. From having familiarity with contingencies, following through with inspections, appraisals and so forth, the contractual component is the most difficult and also the most important. These legal documents include several clauses, stipulations, and processes that are time sensitive. With a real estate agent, you can have peace of mind knowing your home will be sold for as much as possible and your agent will handle the details for you.
#6 FSBOs Fail to Handle the Home Inspection Process Appropriately
Home inspections are a routine request among homebuyers and it is actually in their best interest. The home inspector’s job is to focus on identifying problems, major and minor that may affect the integrity of a home or safety issues. Most often during a home inspection some issues will arise, even in new builds.
FSBOs are sometimes offended when prospects order a home inspection, and then if repairs are required, sellers have been known to refuse follow through. This will cause a buyer to back out very quickly and in turn result in the seller losing a sale.
As a homeowner, if you plan to take on the responsibility of selling your own home, it may be worth considering having your own home inspected by a professional prior to listing it for sale. This will make you aware of any issues in advance so you can make repairs without the buyer’s request; and in being proactive, it might prevent buyers from requesting another inspection of their own.
#7 FSBOs Are Responsible for Paying the Buyer’s Agent Commission
As mentioned earlier, one common motive that prompts a homeowner to take the FSBO route is to avoid paying realtor commissions. However, if a real estate agent represents the buyer, which is standard, there is still a commission to contend with. Some FSBOs realize this upfront and are willing to pay the buyer’s agent commission, but frequently the FSBOs are unaware of this fee and unprepared or unable to pay it, which causes the sale to fall through.
#8 Marketing Must Happen after the Property is Listed
FSBO listings receive considerably less traffic as compared to agent-listed properties. Getting a property noticed requires skillful marketing strategies, and realtors are experts at it. Not only do they have readily available tools, real estate agents also network with people from all walks of life on a regular basis. They have connections with lawyers, rental property managers, family, friends, homebuyers, and other agents, and they keep one another informed of available properties. So, a top selling real estate agent will use an array of marketing tactics and have access to the proprietary MLS services, and advanced technology that will get the details of your home in front of thousands of interested, qualified buyers.
#9 FSBOs Incorrectly Price the Home
Knowing how to price a home correctly is essential and many FSBOs choose a price that is too high, lowering their chances of success. Sometimes the seller prices higher with the intent being to leave a little wiggle room for negotiations, while other sellers are simply inexperienced. Either way, pricing too high often results in buyers passing it by or quickly losing interest.
Agents are familiar with the market, they are aware of area and neighborhood specifics, they’ve had a lot of practice, and perhaps most important they have easy access to past and present house sales, in which to compare when pricing yours. Pricing a home correctly involves several factors and real estate agents have experience in pricing homes in the best range possible to ensure your home moves quickly for the highest price possible.
When opting to represent yourself in the sale of your home, at the very least, consult an appraiser on the value of your home and a suggested list price.
#10 Missing Final Details that Help Close the Deal
Another common reason that FSBOs fail is due to the fact that the homeowner is unaware of all the details that help seal the final deal. There is much more involved even after an offer is accepted, many of which are time sensitive. Due to lack of knowledge, the homeowner drops the ball, which hinders closing.
Having an understanding of all the final pieces is essential if you plan to sell your own home. Here are some of the most important details necessary in the final stages:
You need a written mortgage commitment from the buyer
Inspections are ordered and completed within the time specifications agreed on
Contracts are accepted by the attorney
All dates are in order
Details of title are reviewed and approved
Prior to deciding to sell your own home, carefully consider the level of details involved, the number of hours required, along with the fact that less than 10% of FSBOs succeed for thousands less as compared to agent sold properties.
The Author Adam Clark is the owner and operator of Shield Guard Home Inspections. Adam Clark is a local Home Inspector located in Albany NY that has performed over 6000 Inspections Book online Phone: (518) 720-7152