For Sale By Owner: Pros and Cons
Your hopes are highest when you first put your home on the market. You’re excited that it will sell very quickly and for over the asking price. However, your profits can be drastically reduced by commissions paid to the real estate agent and other closing costs. Home selling by owner saves you the money you would otherwise have paid to the real estate agent. As much as it is not an easy process it’s not impossible. The best time for sale by owner (FSBO) is when it is a seller’s market. However, understanding the pros and cons of home selling by owner will give you insight on whether it’s right for you.
Pros of home selling by owner
1. You eliminate real estate agent fees
When selling a property through a real estate agent you’ll have to pay 5-6% of the total sale amount in commission. This may not seem like a significant figure until you do the math. However, when you handle the home selling process on your own you can keep those savings.
2. You have more freedom
You have complete control over everything. Not only do you decide on the price but also decide on the home improvements to complete beforehand. You decide if or even when to hold it open. You’ll determine the type of advertising you want to do. You handle all of the communication between the parties. Therefore, if you don’t like playing by other people’s rules then home selling by owner could be a suitable option for you.
3. You know your house best
No one will know the strengths and drawbacks of the house better than you. Also, you will have a better understanding of the neighborhood, schools, and local amenities. Knowing all of that information can help home buyers make an informed decision. Buyers will trust someone who has lived there to give first-hand information.
4. You’ll be more devoted to the process
Rarely will you be the only client a real estate agent has. Thus, you will be competing with other people for the agent’s time and attention. However, you can decide how many hours to spend marketing your home. You can also adjust your availability to make it easier for buyers to contact you. You need a flexible schedule to accommodate different buyers whenever they want to talk to you or see the property. Going the extra mile for them shows your commitment and sets you apart. A real estate agent may not be able to do that because of other commitments.
5. You may benefit from professional advertisements of nearby properties
If other properties in the neighborhood are also on the market you benefit from the traffic they attract. When buyers come to view the properties they may also be interested in yours. This will be even more effective if the property is next to a busy road or in a busy neighborhood. You will be benefiting from the real estate companies’ advertisements without having to pay for it.
6. Not dealing with a real estate agent
Not every real estate agent has great negotiating skills or a good personality. Others will even have a difference of opinion when it comes to aesthetic preferences. Once you have signed up to get their help with the sale you’ll have to compromise and even deal with conflicting ideas at times. Every day the deal hasn’t closed will feel like torture and you will be in a hurry to sell to avoid dealing with the real state agent. This is something you never have to worry about if your house is for sale by owner.
7. You may enlist professional help whenever needed
Not having the full representation of a real estate agent doesn’t mean you have to do everything alone. You can ask for help from other professionals as you see necessary. Even other people in the neighborhood who have done FSBO before can give you valuable advice. And most won’t even charge for that. FSBO.com, craigslist and social media are great marketing platforms as well. If push comes to shove you can hire a flat-fee broker to assist with the sale. You’ll pay less for brokerage services than you would have using a full-service real estate agent.
Cons of home selling by owner
1. Inadequate information on home pricing
Setting the price for your home requires consideration of various aspects. There’s past and recent sales. The current houses for sale. Trends, data and statistics. Market and interest rate changes. Determining the right price is the key to your success. It will be a gruesome process for inexperienced home sellers. Overpricing the home will drive the buyers away and underpricing it may leave you regretting your decision. The stress can be unbearable when you are on your own with no idea how to set the price of your home. You could consider home estimation resources to get a rough idea of how to price the property.
2. Your bias
You are going to have sentimental attachment to your property. If you have lived there for a long time you’ll have many memories. Therefore, your opinion about the property is likely to be biased. Even if you think the interior decor, garden or landscaping make the home stunning they may not be what today’s buyers are looking for. You may pay dearly for your mistakes without a third party to give you an unbiased opinions on quick improvements or changes to make for the home to attract more buyers.
3. Limited marketing resources
You should be marketing to buyers who are looking to buy a property immediately or in the near future. However, without prior experience in selling a property, it will be hard to reach this audience. Social media is a good starting point when marketing your home but it isn’t always effective. Real estate agents have access to professional resources and a large network of buyers and sellers. It takes more than posting on social media and a yard sign to expose the property to serious buyers. You need to devise a targeted and robust marketing strategy as well as set a competitive price to attract more buyers.
4. You may not save as much as you had hoped
While avoiding realtor commissions might seem like a cost-saving advantage in selling your home, the absence of professional guidance could potentially impact the final sale price. Realtors bring market expertise and negotiation skills that often lead to higher offers, emphasizing the value they bring beyond commission considerations. Therefore, carefully weighing the potential financial benefits against the expertise a realtor provides is crucial when deciding to sell a home without professional representation.
5. Knowing what to say and when
Revealing sensitive details to the wrong person can significantly affect your home sale. Mentioning that you’ve recently acquired or are close to buying another property may inadvertently weaken your negotiating position. Additionally, discussing personal financial difficulties or urgent timelines could potentially be used against you during negotiations. It’s essential to navigate these conversations with caution to maintain a strong position in the selling process.
In real estate sales, adept negotiation is a skill that realtors hone continuously. They navigate through negotiations with a keen awareness of the competitive landscape, always seeking an edge. The ability to stand resilient against a barrage of inquiries is crucial. Successful realtors possess the finesse to negotiate without revealing too much, maintaining a strategic balance between transparency and guardedness. It’s a delicate dance where information is shared strategically, ensuring that negotiations remain favorable without compromising their position.
What You Should Know About Selling by Owner
Investing in real estate, be it for homes or businesses, involves anticipating the property’s value increase over time. This could translate to substantial profits when you eventually sell. Naturally, you’d aim for the best returns when selling. However, if you opted for a real estate agent to facilitate the sale, you’d have to settle for splitting the profits. On the flip side, selling the property independently allows you to bypass the middleman. Home selling by the owner isn’t a groundbreaking concept, and with proper considerations, you can successfully navigate this path. They are:
1. Benefits vs drawbacks
Selling a home on your own, like any venture, has its upsides and downsides. With significant financial implications, there’s little room for mistakes. It’s crucial to thoughtfully weigh your choices, considering not only financial aspects but also factors like time, resources, and the need to secure a new home while your current one is for sale.
2. Set a reasonable price
You ought to get data on the current prices of similar homes in the neighborhood before setting the price. A comparative market analysis is a good way to approach this. You won’t have the help of a real estate agent who has access to trends and data. You will have to do all that work. Hiring a home appraiser is not helpful since appraisals and home sale prices have vastly different purposes. Also, keep your emotions at bay when setting the price. Sentimental value doesn’t equate to any dollar value. Remember there will be other homes on the market. Incorrect pricing can make potential buyers go for other options.
3. Prepare the house
This means making sure the house is in a good condition for your target buyer. If your buyer wants a house they can move into immediately it needs to be in stellar condition. This calls for upgrades on the exterior and interior spaces before putting the home on the market. All essential repairs or replacements have to be done prior as well. It won’t do you any favors if you are advertising a house that is still under repair.
Home staging is part of the preparation process because it’s at this point you take professional photos to use in marketing the property. Home selling by owner isn’t an excuse for shoddy staging. Tap into the resources you have to get a perfect outcome.
5. Find buyers
Once the house is ready to hit the market you should use everything you have to find a buyer. Social media, yard signs, and real estate websites are good starting points. Marketing costs can add up pretty quickly. Be sure to create a budget for advertising. You need to be patient. It can take less than a week to find a buyer or it may take months. However, the longer a house is on the market the harder it gets to find a buyer. Drop the price if you have to or up your marketing efforts if nothing is forthcoming.
6. Schedule showing times
You’ll have to be available to show the property whenever potential buyers call. Flexibility is key. If you are still living on the property you may have to get pets or children out of the way during showing time. Potential buyers need to get a good picture of how their lives will be should they pick your property. This requires minimal distractions and disturbances. You can also offer online and live tours.
7. Review offers and send counter-offers
You should be ready to review and act on all offers received. Since it is a legal process with binding terms and conditions, it is advisable to hire a real estate attorney at this point. You should expect prospective buyers to have some contingencies, likely based on the home inspections or mortgage. Since the contingencies can have you at a disadvantage you should rely on the help of a real estate attorney to prepare for such possibilities. Also, be aware of the mandatory disclosures required by the state laws. Failure to disclose essential information that could affect the buyer’s decision can end up in a lawsuit. You won’t be excused just because it was a home selling by owner.
8. Working with title and escrow
The title company and escrow officer will provide legally required documentation for the sale of your property. They’ll prepare the title to transfer into the new owners’ names, insure that you receive your funds, and pay any debt that has been taken out against the house.
9. Close the deal
Closing the transaction is a time to celebrate because it means you have gone through the process on your own and succeeded. That’s why you should have all the essential paperwork ready to avoid delays.
Home selling by owner doesn’t mean you won’t require professional help from other people. You will have to work closely with your lawyer, title and escrow, notary, and bank for the process to be a success.If you have never tried home selling by owner before it may seem an impossible task. However, like any other task, taking the first step is the most difficult part. Once that is done the rest falls into place. Be patient with the process and remain optimistic even when challenges come up. Keeping the goal in mind will keep you motivated.