Pros And Cons Of For Sale By Owner
As a home seller, you naturally want to make as much money as you can from the sale of your home. You may be thinking about selling a home yourself to avoid paying a real estate commission, which is understandable. You "may" wind up making more money overall by doing this. However, there are some cons to selling for sale by owner without the help of an agent. Make sure you know the drawbacks as well as the benefits to the for sale by owner process before you take the leap.
I would never blame an owner for trying to save money by selling their own home. Just be sure you realize selling a home is a lot harder than you think!
Pros to Selling a Home For Sale By Owner
1. You may make more money from the sale.
When you sell the home yourself, you don’t have to pay for the help of a REALTOR. Since most real estate agents charge a percentage fee based on the sale price, you could save thousands of dollars by doing it yourself – maybe even tens of thousands, depending on the value of your home. Saving a commission is in fact, the biggest reason why homeowners attempt to sell for sale by owner.
2. You have complete control over the sale.
When you do it yourself, you are in complete control of the sales process. You do not have to listen to anyone’s opinions about how you will market the home, how you will price it, how you negotiate, how you prepare the home for sale or any other decisions. It’s all up to you.
3. You can devote your full attention to the sale of your home.
When you sell your own home, you can devote all your available time and energy to the sale. Ideally, if you should have lots of free time to market the home extensively, show at any time of the day and well into the evening, and be available to talk to buyers any time they might call, this could work.
4. Additional thoughts on selling for sale by owner.
The one instance where you can dramatically increase the odds of selling a home for sale by owner is when you are either located on a busy road or are located in a popular neighborhood. These type of locations offer the benefit of lots of exposure as long as you have prominent signage.
Cons to Selling a Home For Sale By Owner
1. There may not be as much financial benefit as you imagine.
One of the biggest reasons why for sale by owners fail is an incorrect asking price for the home. Without the guidance of a competent real estate agent or appraiser, pricing the home correctly can be extremely difficult. Too many sellers rely on online pricing evaluators such as Zillow's Zestimate. These online tools use algorithms that are way too broad in scope and are not specific to your homes locale. By their own admission in the fine print, these online tools admit the error rates are relatively high.
In fact, many FSBO's price homes incorrectly every day. Nationwide statistics have shown that the average sale of a home listed by a real estate company sells for 13% more than comparable homes sold as FSBOs. This far more than compensates you than the cost of the commission fee. Homes being overpriced is the #1 reason homes do not sell! (Being underpriced also is a problem as this becomes a financial loss to you)
Without having both of these down, a for sale by owner loses any potential for multiple offers.
This speaks to the laws of supply and demand. When selling a home, your goal is to get multiple offers from different parties. When doing so, a seller is in the drivers seat. The price often gets bid up over the asking price in such circumstances. This is unlikely to happen when selling for sale by owner. There just isn’t going to be enough people that find out your home is for sale.
2. You will be a target for bargain shoppers.
For sale by owner attracts certain buyers, those looking for a great deal. They assume you are willing to sell for less because you do not have to pay a real estate agent, so you will need to be prepared for dealing with such buyers.
One of the biggest misconceptions of a for sale by owner is the fact they think they are going to pocket ALL of the commission savings. This is RARELY ever the case. In fact, most buyers want to share in your savings.
3. Marketing a home is not easy – especially without an established network.
As a “For Sale By Owner”, your exposure to potential buyers is very limited. Your choices for advertising are generally confined to: yard signs, newspaper ads, a few for sale by owner and classified websites, open houses, and word of mouth. This is often not enough to attract buyers, most of whom are working with agents. The vast majority of buyers will enlist the services of a REALTOR® to assist them with their home search and eventual purchase. This is primarily because having a professional “Buyers agent” to guide and represent them doesn’t cost them a dime. The primary home search tool used by any REALTOR® is their local Multiple Listing System. The greatest exposure for any home to be seen by potential buyers is to be listed on the MLS which can only be done by listing your home with an active agent.
The net of this is that there just isn't anyway to get more exposure for your home than to have it listed by a professional REALTOR.
4. Selling a home is hard work.
If you want to do a decent job of selling your home, you are going to need to devote a considerable amount of time to the sale. This especially means being available on weekends when the heaviest home searching activities occur. When buyers see your home advertised for sale, many want to see it within an hour or two. Are you willing to give up your free time and possibly even work time to show your home? This is especially difficult if the home you are selling is a second home and you live several hours away.
When you do get interested buyers, you will need to be available to answer their phone calls, to show the home when they are available and you will need to negotiate a good price. Plenty of people sell their own homes. Few of them do it well, so you need to be prepared to put in the work.
Once you place your home under contract , your time is still not yours. There are home inspections, pest inspections, appraisers who all will require access to the home.
5. For sale by owner websites aren’t that effective.
94% of Home Buyers begin their home search on the internet.
Out of the hundreds of websites dedicated to home sales, only a handful make their sites available to FSBO’s while any home placed on the MLS automatically flows to all sites. Since the majority of buyers are working with a buyers agent, they aren't even looking at FSBO's. Many of the FSBO's that have come to me to list their home have admitted they received more communications from REALTORS looking to list their home than potential buyers and many of those "buyers" were investors looking for deals. Most REALTORs also have their own personal website that they promote on a daily basis and will feature your home.
6. Even with your full attention, you will struggle to replace a good real estate agent.
You may have all the free time in the world and you may be ready to devote yourself fully to selling your home. Unfortunately, you will still not be able to do many things at the same skill level as a REALTOR.
An good real estate agent does not need to spend every hour of the day on selling your home because he or she is efficient, practiced and able to choose what to do and when with accuracy. You will be new at selling a home, which means every step will have a learning curve, and you will not have the opportunity to practice – to fail and improve – to reach the level of a professional. Realtors are held to a very strict Code of Ethics and are well versed on the laws pertaining to the sale of property; the very same laws by which the state you live in also holds you accountable for when selling on your own.
7. You need to qualify the buyer.
If you are lucky enough to find a buyer on your own, it’s going to be imperative to make sure they are actually qualified to buy. Most likely you won't know for sure until after you have already allowed them into your home. Simply bringing you a letter stating so doesn't prove anything unless you have confirmed with the lender beforehand. 99% of the time before showing a home, REALTORs have had their buyer's pre-qualified and even pre-approved for a mortgage with a lender they know and trust. We also know the price range they qualify for before even taking them out to view homes.
8. Your safety and that of your home!
Listing your home as a "For Sale By Owner" is an open invitation to invite total strangers into your home. People will arrive at your home, eager for their own reasons, not all of which are honorable. Unless you personally know the people in your home, you need to remain acutely aware of their actions, questions and where you are physically in relationship to them. ALWAYS LEAVE YOURSELF A WAY OUT!
Real estate agents have a process for ensuring both their own safety and the safety of their clients, but you will be on your own when working with the public. You need to be extra diligent about what you put in your listing, and especially about how you show your home. Don’t show alone, ask visitors to sign a guest book and present id, and remove all your valuables from sight before showing. Never allow more than one showing at a time and if a couple walks in, never allow them to split up. Always remove all prescription drugs from bathrooms and hide them in a safe place.
Be especially careful as well if you plan on doing an “Open House”. Open Houses can be a magnet for crime. The big question is... "Do open houses even work?" Statistically speaking – NO, they do not. Real Estate agents hold open houses not to only have your home shown but more to prospect for future business. In today's world, open houses for resale homes held by Realtors are becoming less common.
10.) The Odds are against you!
According to the year end NAR Profile Report of Home Buyers and Sellers:
- The share of sellers who sold their home without the assistance of a REALTOR was 8%; down from 9% the year before.
- 44% of the above already knew the buyer PRIOR to the home purchase, whether family or friend
What most people looking at the success stats for FSBO don't realize is that FSBO sales also include non-sale items including:
- Transfers in title due to a death in the family.
- Transfers in title to a bank due to foreclosure.
- Any transfer or change in title non-sale related. These just get all lumped in with FSBO stats as there is no place else to categorize them.
11.) At the very least, advertise to offer to pay a buyer’s agent who procures a buyer.
You can still save money by selling as a for sale by owner. Instead of paying a full commission which can typically run anywhere from 5-7%, offer to pay just the buyers agent for procuring a buyer. This will save you half a commission and could end up getting your home sold much quicker!
If you are thinking of selling your home on your own, I'd love to hear your reasoning. If you give me another Pro, I'll add it on to this page as such. Simply use the contact form below and let me know your thoughts.
Additional Home Selling Refer
- Steps to take when selling FSBO via Paul Sian.
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