The High Stakes Gamble of FSBO
In layman’s terms, “For Sale By Owner”. For those in real estate, “Fizzbo”. However you say it, the concept is simple: the homeowner forgoes hiring an agent and attempts to sell their house on their own.
The allure, of course, is the money saved from not paying a commission to a listing agent. Instead of paying commission to BOTH the listing agent and the buyer’s agent, a FSBO transaction eliminates the commission for the listing agent. It’s a 50% off sale!
There is a price to pay, however: the owner now has to assume the burden of selling the house. Tasks that are typically the listing agent’s responsibility have fallen on the shoulders of the owner. These include, but are not limited to: performing a competitive market analysis, researching and understanding the market positioning of the subject home within it’s neighborhood and surrounding areas, pricing the home to solicit the most attractive offers, implementing cleaning and staging techniques to present the property in it’s best light, executing a focused advertising campaign, hosting open houses and private showings, negotiating with the buyer’s agent, following guidelines on disclosures to minimize legal liability, arranging for home inspections, and completing all the required documents and processes for escrow.
Can you see why most people opt to hire an agent? Now, this is not to slander sellers who do not hire agents. It is simply meant to bring clarity to the home selling process and ensure sellers are making an informed decision. Take inventory of your skills and qualities before making the decision to sell you own home. If the above list of tasks sends you running in the other direction and hiding under the covers, hire an agent. If that list sounds like an enjoyable experience that is within your capabilities, don’t hire an agent.
Here are some of the main risks associated with selling your home without an agent:
How many houses have you sold in your lifetime? Unless you’re a flipper, the number is probably lower than three, and more likely zero. In contrast, real estate agents sell anywhere from a handful to dozens of houses EACH YEAR. Who do you think is more prepared and better trained for the job of selling your house? Agents will have a better feel for the current market, significant expertise in completing a transaction, and more resources at their disposal. All of which translates into a more profitable deal for the seller.
The entire preparation process culminates with one number: the asking price for your home. This number dictates the selling experience, whether it be a one-week multiple-offer bidding war, or a one-year limited-interest slog. FSBO sellers are more likely to price their houses using Zillow estimates, while agents will price a house based on constant market analysis and comparisons. Portal sites like Zillow, Trulia, and Redfin can feature unreliable pricing data. The Los Angeles Times reported on the potential inaccuracies of Zillow. Owners who use these sites to determine the listing price of their house need to be cautious. Money can be left on the table if an estimate is too low and a high estimate could lead to a lengthy stay on the market and a string of price reductions or lowball offers.
An agent will post your listing in the MLS. This allows every agent in that area’s MLS to see your house. Each of those agents is trying to match their clients with the perfect house. This means each agent in the MLS will work ON YOUR BEHALF to sell your house for you. Without an agent, you cannot post your listing in the MLS. This severely limits the exposure of your house and decreases the pool of potential buyers.
It is often said that the three rules of real estate are “location, location, location.” But when it comes to limiting legal liability, the rules change to “disclosure, disclosure, disclosure.” Sellers are obligated to notify buyers of any issue that materially affects the value of the house. Water damaged floors? Faulty electrical wiring? Foundation cracks? All of these things need to be disclosed. Furthermore, in California, you are required to provide information about Megan’s Law, lead-based paint, earthquake safety, water heater safety, and natural hazards, among other things. Are you aware of all the requirements?
To summarize, you do not need an agent to sell your home. Plenty of folks have done it themselves. What you DO need, however, is a strong will, relentless attention to detail, and the patience of a saint. You are assuming all of the tasks that an agent would otherwise handle for you. Research the process and if you are comfortable with it, sell the house yourself. If you find that you’d prefer some help, get in touch with an agent. After all, we are in the business of making your life easier!