RISMEDIA, April 4, 2009-Pronounced “fizzbo,” an FSBO (for sale by owner) is a Realtor acronym for a property that an individual is looking to sell on their own.
To a certain extent, the notion may be driven by tough economic times. With equity evaporating in many markets, it might be a necessity for some sellers to go the DIY route. It is a question brought about by the perception of high cost for very little real work and a nagging sense that, hey, maybe I could do that.
Maybe you can. Maybe you shouldn’t.
The market, motivation, familiarity with the process, knowledge of real estate law, disposition, time, and resources should all be considered before you begin the process of selling your own home.
They don’t call them buyers and sellers markets for nothing, and, to a large extent, market conditions are often mostly local. A gripping nationwide recession, industry-wide job losses, and lenders’ unwillingness to lend, tend to have nationwide implications. But, even at the darkest of times, there are pockets of prosperity where demand for housing is high. In most cases, even if you over or under estimate the price, the market will eventually catch up to you.
Not so in a declining market. If you don’t get the price right, you will be chasing the market down. Before listing your own home, you need access to good current data about sales prices, market times, and activity. Assuming a modest sixty day market time, you still need to analyze past sales to determine what the value will be in 60 days or more, before a buyer commits.
If you are unrealistic about price, you have no chance. The notion that a prospective home buyer is going to stroll down your street and fall in love with your house is a fantasy. The objective is to price the home for a quick sale but not leave money on the table. It’s a fine line that only an experienced professional, armed with facts, can determine.
If at all possible, you should avoid selling into a buyer’s market. If you do not have to sell, don’t, unless you are doing so to buy something else. You also have to be willing to take the hit on your opinion of value and make it up on the bargain you are buying. If you must sell, be realistic about your situation and take your markdown sooner rather than later.
Familiarity with the process
There are two types of FSBOs; the ones who know it all and the ones who don’t know anything, and it isn’t uncommon for FSBOs to be engaged in the industry because they aren’t intimidated by the process.
The process appears daunting because it is, but it isn’t unmanageable. The basic issues are either contractual or regulatory, and there seems to be a tendency among novices to assume that selling real estate to someone is just like selling a used dishwasher.
As the seller, you will need to fulfill numerous legal and regulatory conditions applicable to the state in which the property is located. The consequences for failing to be in compliance are rather harsh. Before listing your home on your own, be familiar with the process and know the requirements for your state.
Knowledge of real estate law
Some sellers believe that because they are not licensed, laws and regulations do not apply to them. Ignorance of the law is a major hurdle. Unless they specialize, most attorneys don’t know much about real estate law. On the other hand, responsible real estate brokerages make a practice of avoiding litigation by knowing and complying with the law. Today’s real estate transaction files are an inch and a half thick and weigh three pounds, and it is all driven by caution. Know the law, or hire someone who does.
Most people, even practitioners, haven’t the proper disposition for selling real estate, let alone their own property. The job of real estate requires a lot of patience while you deal with prospective homebuyers, until one transforms into a paying client. People who are buying or selling real estate are under a lot of stress. There is the stress of uncertainty and the underlying events driving their decisions.
There is also a lot of raw emotion throughout the home buying and selling process. Well trained professionals do not surrender control of their emotions to events or the actions of others.
Time is of the essence. It isn’t just a legal phrase, you will need to invest time to market the property and be available to show your home and respond to any inquiries. Your time does have value which can be earned through the investment of the time in something profitable or the value of time for leisure and enjoyment. If the home doesn’t sell quickly, you aren’t likely to recoup the value of your time in savings.
Being on the market longer won’t get you a higher offer either; it will just eat away at your equity.
How will potential buyers know about your property? A homemade sign in the front yard is effective only if the potential buyer happens to drive down your street.
The best kept secret in real estate is that if the property is priced to reflect true market value and it is placed in the multiple listing service, nothing will stop it from selling. Sooner or later, every buyer turns to the MLS, if for no other reason than to prove to themselves that there is no better home out there. The challenge for a FSBO is to find a method as cost effective as the MLS.
Looking at the bigger picture, it is hard to imagine that someone would want to take the risks and the responsibility of selling for sale by owner unless they were certain they would net significantly more money upon closing. But, that rarely happens. Most, ultimately wind up engaging the services of a professional after wasting time and money. In a declining market, every month you don’t sell means a lower market value. And, if you are making mortgage payments, each payment is lowering your net equity. A fast sale is the most profitable sale.
One thing you are likely to discover is that real estate practitioners produce more potential buyers then you will. In fact, those FSBOs who do succeed often wind up paying at least half of the brokerage fee to the broker who produces a buyer. So, at best, you won’t be able to influence a higher than market value, you will likely pay a partial fee and, if that isn’t bad enough, the buyer of a FSBO also intends to pocket the brokerage fee. Like so many things, it really is harder than it looks.
Before selling your own home, interview a few brokers and get their opinions of value and overview of the market. If one is particularly helpful, you might want to consider listing with them if the home doesn’t sell quickly. And, remember what lawyers say, “Any attorney who would represent himself has a fool for a client.”