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For Sale by Owner (FSBO)

Some home owners believe that they can sell their home themselves and save money. This newsletter will explain why a seller should NOT sell their home without using a professional real estate agent.

When most people hear the term 'For Sale By Owner' (FSBO) they understand that it is a home owner attempting to sell their home without the assistance of an agent. This is partially correct. There are 2 ways a 'For Sale by Owner' home can sell.

  1. Home owner sells home to buyer directly,
  2. Home owner sells home to a buyer who is using a buyers agent.

In a large majority of cases the For Sale By Owner does interact with, and pay for, the services of an agent, the buyers agent.

So, should you consider selling your home without the services of a real estate agent?? The answer is, categorically, NO.

Listing your home on your own may seem, at first, like a good idea. In the end though, the actual costs will outweigh the benefits.

According to the National Association of Realtors (NAR) the majority of homeowners who attempted to sell on their own later found that using a real estate agent was the way to go. 93% of sellers ultimately work with a listing agent after a few weeks of "testing the market" on their own, according to NAR.

Additionally, NAR found that homeowners who have sold their homes without the use of a real estate agent sold for an average of 16%, yes, 16% less than sellers who utilized a real estate professional.

In those cases, a lower sales price is often the result of the lower level of marketing exposure, and lack of experience with the process, negotiations and marketing techniques that professionals use. When a home owner advertises their home as a FSBO (For Sale By Owner) they generally get it listed into MLS (Multiple Listing Service) with a flat-fee listing service. When the FSBO is in MLS, buyers agents can see the home is available as a potential choice for their clients. The mistake FSBO sellers often make is with the amount they offer as cooperating compensation to the buyers agent. Most professionally listed homes offer a buyers agent compensation of 2.5-3%. Often we see FSBO's in MLS that offer far less than the 'commonly' listed compensation because of the focus on saving money and not understanding the ramifications of their decisions. Truth be told, there are agents who are concerned with the commission paid on a sale, and don't consider their clients a long term relationship. These agents will not show a home that offers less than the 'normal' compensation to a buyers agent. If this agent has 11 homes in the area to show their client, and they only have time for 9-10 homes to see, and one of them offers a lower compensation than everyone else, well, that's the one that is dropped from the home tour to show their client. Thus, reducing the exposure of the home to serious buyers.

Another factor why FSBO's are shown far less than a home listed by a professional real estate agent is that most FSBO sellers do not really understand the steps needed once a buyer is found, and an offer accepted. The buyers agent has to guide the process step-by-step to reach a successful conclusion and in effect, does the work of the listing agent also, and is only compensated as a buyers agent - twice the work, for half the pay. Most buyers agents will avoid showing FSBO's purely for this reason alone. Again, reducing the exposure of the home to serious buyers.

Another reason that the sales price is generally 16% less than a professional real estate agent can obtain for the seller is the price the home comes onto the market at. Most sellers don't understand the market, the nuances of the market, and the market in today's conditions. This is also true of real estate agents who are not busy agents - it's very important to find out how many transactions your agent, listing or buying, has in the last 12 months. If an agent has only 1 transaction that they have done in the last 12 months then they understand the market far less than an agent who has done 20+ transactions in the last 12 months. An agent who is busy knows how quickly homes are selling, has seen the homes that are on the market, and understands how the market is changing on a weekly basis.

Most sellers think their home is worth more than the market value of the home. A professional real estate agent takes the emotion out when recommending a price, and will be more accurate at targeting the range the home will sell for. When a home comes onto the market priced too high, the serious buyers see it, and then dismiss it. It takes a lot of price adjustments down, to attract those serious buyers back again. A home eventually sells for less than its market value if it comes onto the market too high. This is what we see time and time again. Overpricing at the initial listing of the home on the market misses out on the peak interest period and may result in the home languishing on the market, eventually leading to a below market value sales price or, even worse, no sale at all. Current market conditions determine value and it is important to know the "realistic" market value of the property. This helps a seller price the property at a competitive level. Buyers compare prices and will pay most attention to those properties they feel are "realistically priced". Pricing a property at a higher price than the current market value will make it more difficult and time-consuming to sell and can potentially cost the seller money. Pricing a property competitively will help the property sell in a time frame that works for the seller with the best proceeds possible.

In addition to getting a lower average sales price, FSBO's who attempt to sell their home on their own, often do not understand the added fees they will incur throughout the process. Even when using a flat-fee MLS listing company, the seller will typically incur additional fees for:

  1. For Sale signs,
  2. Advertising,
  3. Property Flyers,
  4. Mailings,
  5. Legal Forms and,
  6. Commission for the agent representing the buyer who buys your home.

FSBO's who try to sell their home do not realize that by not hiring a real estate agent to represent them, they are decreasing their ability to maximize the value of their home, while still having to pay a fee for the buyer's agent.

The buyer's agent will negotiate in the best interest of the buyer, not the seller, help the buyer avoid liabilities and represent the buyer throughout the process, while the seller is left to fend for themselves without representation from a professional who understands not only the legal liabilities but also the market and how to optimize the profit for the seller.

The commission for the listing agent does not hurt the sellers ability to net the most amount of money from their home sale, it actually helps it. In fact, a professional real estate agent and expert negotiator that knows how to get results in any market will more than cover the cost of their commission in the net proceeds from the sale.

If you would like an estimate of what your home would sell for in today's market I would be more than happy to come by, have a look at your home, and then provide a CMA (comparative market analysis) which will provide you with an estimate of what your home should sell for, along with a marketing plan to get maximum exposure for your home.

If you'd like to chat more about the topic presented here, or the Real Estate market in general, then please call me on (617) 997 9145, or email me at Dani.Fleming@MAPropertiesOnline.com.

Lexington Statistics







MLS data is provided by MLSPIN. While MLS data is believed to be accurate, it cannot be guaranteed. MLS data is constantly being updated, making any analysis a snapshot at a particular time. All raw data remains the intellectual property of MLSPIN.
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