Let’s take a moment to understand the reason why a homeowner should not try to sell their home themselves, what’s the motivation? Most likely it is because the homeowner wants to “save” paying the commission. This can certainly be a lot of money.
If we look back to 1981, homes that sold FSBO (For Sale By Owner) were about 15 percent of the homes closed and 85 percent were agent-assisted. This percentage of homeowners selling their own homes FSBO has declined over the decades since then to only 8 percent of homes sold in 2020. In fact, half of the sellers knew their buyers and the other half did not.
The homeowners who sold FSBO and knew their buyers sold to a friend, a relative, or a neighbor, the home was on the market less than a week and they got 100 percent of their asking price, less their expenses.
According to the NAR 2020 Profile of Home Buyers and Sellers, 50 percent of FSBO sellers determined the asking price of their home by recent home sales in the area while slightly more than 1/3 used an appraisal. Forty-one percent of sellers stated they did not want to pay a fee or commission as the reason they sold it FSBO. Another 30 percent did so because they had a relative, friend, or neighbor who wanted to buy their home.
A major problem that FSBOers encountered was being able to expose their home to the marketplace. They usually end up selling their home for a lower price because it is not marketed to the largest pool of available buyers.
Doing their negotiations is another FSBO concern. There are so many different facets and people to negotiate with and about. For instance, not only the sales price in the contracts, but other negotiable terms include financing concessions, closing and possession dates, inspections, and earnest money. However, the negotiations could continue well up to the moment of closing with repairs, appraisals, and other unforeseen things.
While the seller might feel uncomfortable negotiating directly with a buyer, there could also be negotiations with the appraiser, inspectors, mortgage company, or escrow company. The layer of separation that exists between the seller and other parties is the real estate professional. They are trained to de-escalate sensitive areas so that feelings are not hurt as well as acting as a go-between so the way something is said can be minimized.
Difficulties experienced by FSBOs include negotiations with a buyer, not familiar with the process and standards that are involved in 92 percent of the agent-assisted transactions. Eighty-nine percent of Sellers say they were satisfied with the service their agents gave and would use them again and recommend them to others.
An often-mistaken motivation of a buyer wanting to deal directly with a seller and not use an agent is to “save” the commission. But both parties cannot “save” the commission. The more knowledgeable party and a better negotiator will usually benefit the most.
Thirteen percent of the sellers were contacted directly by the buyer. It is conceivable that these buyers may have been trying to take advantage of an unknowledgeable seller to eliminate competition and purchase a home at a lower than market value.
In a seller’s market, an FSBO can sell their home. The question will be whether they received the highest price with the best terms and the fewest problems. Protecting a large financial asset is important and sellers deserve the peace of mind that a REALTOR® provides along with the fiduciary duties that accompany them.
The median price achieved by FSBO is considerably less than the median price sold by REALTORS®. While there may be other factors involved, it certainly introduces the question “is the FSBO selling below fair market value?”
Before embarking on the sale of your home by yourself, talk to me, a REALTOR® or possibly another, to get as much information as possible to make an informed decision. Your objective should be to maximize the proceeds from the sale. Fun Fact: homes sold by agents sell for more money than FSBOs.
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