In every economic cycle that I have faced in the last 37 years, whether it is an up one or a down one, there are always Sellers who seek to sell their property as a “For Sale By Owner”, also known as a FSBO. The attraction is obvious; without a real estate professional involved, a Seller saves on the payment of commission to this realtor, and whether the property is sold at a high value or not, the savings are not to be sneezed at.
So, should we or shouldn’t we?
First, let me qualify that everything I say here comes from an Escrow Officer’s point of view, which, of course, may differ from the client’s or the real estate professional’s. But being as we are in the center of the transaction, we see, not one, but a whole panoramic view.
The only real advantage for a FSBO is, as mentioned above, the savings in commission dollars. The disadvantages can be many, so the real question is: Will the dollar savings be worth your while?
Here is a list of questions I would like to put forth to you as a FSBO Seller to consider before the decision is made:
- Do you really know the value of your property? Here are some websites that can give you a general idea: www.zillow.com andhttp://homes.yahoo.com/home-worth. Or Google! You may find that your preconceived notion of your property worth does not match the surrounding market value.
- Have you taken a good look at the physical appearance of the property? What areas can be updated, upgraded or repairs made to obtain top dollar? Never underestimate the value of the “curb appeal”!
- How will you market the property so that you can get the best price? Family and friends are a source, though limited, and you won’t have the real estate professional’s Multiple Listing Service (MLS) to broadcast out to all its members. Some professionals also use the Internet and Social Media to effectively sell properties. Can you do that?
- Are you prepared to negotiate with a potential Buyer? Negotiation is the key, every step of the way. Buyers are looking to get everything they want at the lowest price possible. Sellers are looking to get the highest price possible without expending any additional funds. The parties have to meet somewhere in the middle. Without the real estate professional you won’t have a buffer anymore to stand between you and the Buyer. Are you a good negotiator?
- Negotiating requires time. Do you have the time to devote to this? And mind you, the negotiation does not stop once the sales price is agreed upon. It continues every step of the way until the very end, on items big and small. For instance, a lot of re-negotiating is done after the Buyer’s physical inspection is done.
- Talking about time, make sure you have blocked out the time needed to show your house, again and again. You will also need time to do the other work during the transaction like ordering termite repair work and fixing repairs. You will need to be there when the physical inspector comes and frowns at the condition of your pipes. You will need the time to let the City Inspector in to check if there are any non-compliant issues. Please note that an Escrow Officer will not order a termite inspection or city inspection for a Seller.
Yes, as a FSBO Seller you will have to be dedicated to this project every step of the way. Without a real estate professional to help you, your next best partner will be a good Escrow Officer.
As an Escrow Officer who has seen many and done much, I have to admit to a deep, dark secret: I really don’t like to handle FSBOs, not unless the Seller AND the Buyer knows what they are doing. The reason is simple:
On any given day my staff and I may have over 30 files that we are working through on our desk. With such a volume we do rely on our partners in real estate to follow up on paperwork and issues in each file. Once we alert them to it, they will, most of the time, run around and get it done with minimum questions or fuss. When it comes to a FSBO, however, we have to take into consideration that our clients are not that well versed in our escrow process (or even the escrow/real estate language!) so we do have to make sure that we explain what we need, why we need it, and how to go about getting it. Then we need to do extra follow-through to make sure it is done in a timely manner. So doing a FSBO does require extra time and effort devoted to that particular file.
The biggest problem though is that without that real estate professional as a buffer between the Buyer and Seller, the Escrow Officer becomes this all-important buffer and we are often given the responsibility of conveying and negotiating demands and requests between the parties. In fact, we end up taking some of the responsibilities of the real estate professional into our hands. All this and keeping the all-important third party neutrality can be very difficult.
So my gut reaction for a Seller thinking about a FSBO is as follows:
If you already have a Buyer who is ready to go and has offered a price you feel is reasonable for your asset, go for it! Find a great Escrow Officer and follow his/her direction every step of the way. Keep in close communication with him/her! Communication is always the key to a smooth transaction.
If you do not have a readily available Buyer, or you have a property that might be more of a challenge to sell, do look for a real estate professional who knows your area. He/she will be able to recommend how to market your home, at what value, and once your property is put on that all important MLS, even people out of the area will have an opportunity to put in their bid. In these days of growing property values (January 2013), there is a lack of inventory in certain areas and therefore offers have been coming in higher than listed price. You do not want to miss out on this opportunity! You may pay 5%, but gain 10%. Now, isn’t that all worth your while?
So, under certain conditions, yes, you should do it! Under others, hmmm, maybe it would not be to your best financial interest.