By John Stemlar, Sage Real Estate Advisors
F.S.B.O. = For Sale By Owner
Selling a home by-owner is easy, right? A little on-line pricing research, a yard sign, post a few pics on Zillow and social media and just wait for the offers (figure out the “paperwork” later). Count the commission savings! A recent study actually shows that, of the 36% of sellers that start out as FSBOs, more than 2/3 end up listing with an agent. Those that are “successful,” on average, will net slightly less in sale proceeds than if they would have listed with an agent. There are no reliable statistics on the time lost in a failed FSBO effort, but it can be substantial.
Marketing and selling a home is like any business; if you are not immersed in it day-to-day, you won’t have the knowledge, experience or resources to do it well. You simply don’t know what you don’t know and this can cost you dearly in terms of both time and money. Here are the top six reasons why FSBOs fail:
1. Flawed Pricing Strategy – Home pricing is based on recent comparable home sales and on competing homes on the market. FSBOs typically haven’t been inside these homes (on-line photos don’t count) and, therefore, are missing critical information for differentiating among homes and setting an asking price. FSBOs often, to their detriment, fail to understand such things as buyer psychology, market momentum and the art of pricing a home in the electronic marketplace.
2. Owner Bias – Selling a home is all business. Most sellers simply can’t see their home objectively and unemotionally. This bias will adversely effect how FSBOs stage and present their home in the market, how they price the home and how they negotiate with buyers.
3. Poorly Marketing the Home – A professional marketing strategy exposes the home to all qualified buyers, entices them to tour the home and positions the home to sell itself. An Understanding of the competition and the likely buyer profile, matched with sound pricing, staging and photo strategies, gets the quickest sale at the highest price. Listing on the MLS is the key to market exposure, as virtually all real estate sites pull MLS photos and data. FSBOs simply lack the experience and resources to devise and execute an effective marketing campaign.
4. Showing Issues – Because FSBOs typically have limited time frames during which they are available show the home, opportunities can be lost. In addition, most buyers are uncomfortable being walked through a home by its owner; this can negatively influence how a prospective buyer perceives the home.
5. Legal / Negotiating Challenges – The “paperwork” consists of a sales contract, addenda and disclosures. Unfamiliarity with real estate contracts, terms, negotiation and processes can be an impediment to a deal, cause a deal to fall apart before closing and/or result in unintended legal consequences.
6. Buyer Agent Bias – The overwhelming majority of homebuyers have (and are influenced by) an agent. Even if the FSBO offers a buyer agent commission, experienced agents know the potential challenges of dealing with an inexperienced seller and are known to nudge their clients toward agent-listed properties.
Not surprisingly, most FSBOs sales occur in neighborhoods where home demand is very high, inventory is very low and the home is THE perfect home. Obviously, the more knowledgeable the seller and the greater the effort he/she is willing and able to invest, the better the chance of success.
John Stemlar is a Principal and the Managing Broker at Sage Real Estate Advisors, a boutique Atlanta residential brokerage.