Let
me give you a common scenario:
Dave,
a smart and tech-savvy Denver homeowner, thought he’d skip the agent commission
and sell his house himself.
He researched his home’s
property value, found a buyer and got the house under contract. It seemed like
a done deal, right?
Until he realized in a
panic that he had seriously undervalued the property — by more than $100,000.
Dave had misunderstood the report he’d pulled and incorrectly valued his house.
The error cost him
$30,000 to get out of the contract…
So before you go For Sale
By Owner (FSBO) carefully consider the items listed below; and remember that a
Real Estate agent is there to save you time, money, liability and downright
hassle!
1. Scams happen
Let us say Jon in
Raleigh, North Carolina, fell in love with a FSBO home. He agreed not to use
an agent and paid the homeowner $3,000 in earnest money.
Then the homeowner
changed his mind. With no contract signed and no receipt, Dave lost all his
earnest money. He trusted the homeowner when he should have trusted an agent.
FSBO scams happen to
both buyers and sellers with little recourse besides hiring an attorney. Common
scams include fraudulent papers (appraisals, loan documentation), foreign buyer
deposits (scammer sends too much in a bad check and then requests a refund),
purchases through a third-party (a fake attorney, etc.) and asking for personal
information.
2. Liability
is all on the seller
Everyone makes mistakes.
A seller (or buyer) who doesn’t have the representation of a licensed agent
pays for those mistakes. Attorneys can close a real estate transaction, but
they don’t carry errors and omissions (E&O) insurance.
So if homeowner Dave lists “hardwood floors” as a feature and
the buyer discovers it’s just a wood veneer, chances are Dave is going to pay
for that mistake. An agent would have either caught the mistake or covered it
with E&O insurance. Let’s face it: this is a litigious society, so what
homeowner wants to be a target for lawsuits?
3. Paperwork
is daunting
The 2015 National
Association of Realtors’ Profile of Home Buyers and Sellers showed that understanding paperwork was
one of the most difficult tasks for FSBOs. Depending on the state, there
are a variety of legal forms that are needed, including but not limited to a
sales contract, property disclosures, occupancy agreements and lead paint records.
Sure, ready-made contracts can be downloaded easily enough. But
does an untrained seller understand what all that means? Would the seller know
how to customize? Instead of trying to use that one-size-fits-all contract?
4. Sellers
can get stuck in a bad deal
Like Dave, FSBOs who sign on the dotted line and then realize an
error are stuck. They either have to pay the buyer (if they’re willing) to get
out of the deal, or just accept the deal.
5. FSBOs
sell for less
In 2015, FSBOs lost about 16
percent of the sales price with a median selling price of $210,000 (agent-assisted homes sold for
$249,000). Homeowners selling by themselves simply don’t have the time
to devote to the process, don’t know the market value, don’t understand market
reports and don’t properly market the property. If the FSBO seller sold to someone
he or she knew, the median dropped to $151,900 (because apparently cousin Dan
is doing them a favor and expects an amazing deal).
6. FSBOs
spend more time on the market
Unless the seller knows someone who wants to buy the home, FSBOs
take longer to sell than homes listed with an agent. For the same reasons, they
can’t get the right selling price. No one is “behind the curtain” running the
marketing show. On average, 18 percent of FSBOs were unable
to sell within their chosen time frame last year.
7. FSBOs
lack representation
There’s no one looking out for the homeowners who sell on their
own. They have no one to call if they have a problem or a question.
Dave found this out when he sold his Morrison, Colorado, home
himself. Studying for his real estate license, Dave felt confident he could
handle the contracts. Then the unexpected happened. When his house was under
contract, a state patrol car pursuing a speeding motorist crashed into a
downstairs bedroom. Repairs threatened to push back closing, and suddenly, the
buyer was asking for a storage unit, the cost of temporary housing and more.
He was lucky enough to have an agent friend who could step in,
but a homeowner with no representation could have been out thousands of dollars
unnecessarily.
8. Inspections
are problematic
Sellers who don’t know
the rules can get stuck with unnecessary and costly repairs. When Sarah sold
her 10-year-old Highlands Ranch, Colorado, home, after the inspection, the inspector said she needed to
change the stairs from the garage to the house because the code had changed. He listed other code changes, and the buyer began to demand
these be done. Surprisingly, the inspector didn’t know that because these items
were to code when the house was built, the seller wasn’t responsible for these
changes.
9. Marketing
is limited
FSBOs have limited
resources to market their home. The 2015 NAR Profile of Home Buyers and Sellers showed
42 percent rely on a yard sign, 32 percent rely on friends and family, and
about 15 percent use social media. Relying on the neighbors and second cousins
is good, but it does have its limitations.
10. Hidden
costs add up
The mindset for most FSBOs is saving money. Chances are, these
sellers are being nickeled and dimed into a pretty big chunk of change. They’re
paying for a lot of extras: signage, flyers, photography, MLS listing, attorney
(required in multiple states for FSBOs), home warranty (optional but hard to
sell without one), home inspection, a wood destroying pest inspection, credit
report for buyers (if applicable), contracts and the list goes on….
11. Time
costs the seller money
The biggest cost to a homeowner is their time. You might hear
the argument that it doesn’t take an agent that much time to sell a house. And
honestly, given the technology at their disposal, that’s true — to an extent.
But it will take a homeowner a whole lot longer. They don’t
have the expertise or the access to the resources that agents have. What is
their own time worth to them? How much time will the seller spend researching
the market and contracts? Is the seller going to leave work to unlock the house
each time there’s a showing? All of these take up more and more time, so having
an agent for that can be a huge load off, and bring piece of mind.
So when you go to sell your house don’t you want it to be taken
care of? As one of, if not the most, expensive assets you will ever have don’t risk
anything going wrong in the process. When you’re ready to sell (or buy), or have
any other Real Estate needs contact a professional. Our agents here at the
Springs Summit Group are always ready and willing to make your transactions as
smooth and efficient as possible. Please Contact us today we’d be happy to get
the process started!
Article Content: http://www.inman.com/2016/06/10/11-resasons-for-sale-by-owner-is-a-terrible-idea/
Edited by: Seth Worthey
