Occasionally, sellers decide to represent themselves in the sale of their home. They typically point to cost savings as the motivating factor. They think that by selling their property on their own, they will save thousands of dollars in commission payments owed to a real estate agent.
But what a For Sale By Owner, or FSBO, might not know is that they are more likely to lose money (and time) navigating the transaction themselves. In fact, according to Collateral Analytics, National Association of Realtors and Clever Real Estate, FSBO homes sold for an average of 5.5-26% less than comparable homes listed on the MLS. And 73% of buyers think either themselves or their agent could out-negotiate a FSBO seller. This means that often, FSBO will make less on the home than they would with a licensed real estate agent even with an average commission payout. Why? FSBOs create an opportunity for buyers to low-ball and get a house for much less than the seller could have netted by listing a real estate broker.
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For a FSBO to succeed and not fall prey to low-ball offers, they must know the market and get their pricing just right. This is a difficult endeavor. Online valuation sites, like Zillow, offer an estimated home value based on a range. But these sites cannot take important factors into account, like location, views, road noise, renovations, etc. Whereas a real estate broker looks to the relevant key data points for the local market and considers positive and negative factors of a specific home, keeping in mind what buyers in the market are looking for and what the average buyer is willing to accept at a certain price point.
In today's market, selling a home requires more than a "For Sale" sign. A successful transaction netting the highest profit possible requires a smart marketing plan that reaches the right buyers. FSBOs may not have the time or resources to invest in the type of tactics a licensed real estate agent would put to work on day one. According to a recent study by NAR, 34% of FSBOs said they did not actively market their home.
Beyond pricing right and marketing the home, there is a great deal of legal liability in the real estate transaction. Even the slightest unintentional error or omission can put a seller in legal peril. A licensed real estate broker is insured against such errors and omissions, and has the knowledge, training and office support to avoid such mistakes. We have access to well-written, legal contracts and forms that offer the most protection to all parties in the transaction. For example, not disclosing a known issue, even if it has been repaired and the seller doesn't even think it could be pertinent information at the time of sale, could put the FSBO seller in legal jeopardy down the line.
Bottom line? Most FSBO sellers think they're saving 2-6% in commission by not listing with an agent. In reality, historical data shows that listing with an agent will net you 10% to 30% more on your sale price. Not to mention, time savings and the peace of mind that you are not putting yourself in a vulnerable legal situation.