To FSBO or not to FSBO
Ok, so you have decided you want to sell your home on your own. As I will clearly state, I highly recommend against doing so because of the dangers, and likeliness of being unhappy with the experience, and outcome. However, it can be a good path for some, in very limited scenarios. For some, it is a good choice, and you can save money doing so. Those whom it might make sense to do so, have a lot of real estate experience, and deal in real estate on a regular basis. More often than not, they have a relationship with an agent that helps, or were an agent themselves at one point. They have been in many real estate transactions and are very familiar with the process. Usually these people are not likely on the internet looking for tips. For everyone else that is considering doing so to save money, keep in mind the dangers are wasting your time, wasting your money, and in extreme cases, ending up in legal trouble. That being said, look out for the following missteps.
When you decide to go the For Sale By Owner route, the most important thing to get right is the value of your home. I often hear people say, “I researched comps in my area, so I know what my house is worth” or “I know what my house is worth because Bobs house down the road sold for "THIS MUCH" and my house is just like his but nicer!” Or maybe this one, “I looked at other houses for sale in the neighborhood and I am planning to ask for less”.
While it is true, the sold prices of homes are easily available online, it does not tell the whole story. In fact, there is some very important information missing. Almost every real estate transaction involves “concessions”. Basically a concession is something a seller is giving back to the buyer in exchange for a defect with the home, or as a way to make the deal more attractive to the buyer. For example, maybe after the deal was made, and the buyer had their their home inspector check out the home for them, they found out the home needs a roof, or has foundation issues. Usually the first thing that comes to mind in situations like this, is that the seller lowers the price of the home by the amount it will take to make the repairs. Or secondly, the seller agrees to repair the items that were found defective. Simple right? Not so fast. Lowering the price of the home seems simple but you cant just lower the price of the home. The bank lending the seller the money for the home, as well as everybody else involved has tons of paperwork, and a legal contract that everyone is working with that has the original price. That doesn’t mean you can’t do that, but the problem for people researching themselves is the way it is handled. The price of the home officially stays the same on paper, but a credit is given to the buyer at the time of closing. So when you see a house sold for a certain amount, and it looks similar to yours, do you really know that it is equal to yours? You don’t. You might be thinking your house is worth the same as the similar house you saw online, but maybe yours is worth more because the other house had a $10,000 concession at closing because it needed a roof. You will never know that if you sell on your own. As previously mentioned, most residential real estate sales involve concessions of some type.
Another concession that often happens and never appears online on the “sold” price is that buyers as part of their offer, request a credit from the seller at closing to help with their closing costs. Four to eight thousand dollars are fairly common.
Those are a couple of things you don’t see, and only a real estate agent can see. They use this data, in addition to other information when when recommending an asking price for your home.
Other times, you can put yourself in for a big let down because you over price your house. Let’s say you have a really, really nice house. Everyone you know loves it, and raves about it when they see it. You decide to go the FSBO route when the time comes to sell it, because it is so nice, you should not need help selling it. Based on what everyone thinks about your home, you look at what other homes have sold for in the neighborhood, and price it 50k higher. And then, just like you knew it would, you get a buyer the first week. You actually have a buyer, and another one that wants to buy it, if the first one falls through. Nice, right? Not so fast. Most homes are financed. And every lender wants to make sure that they are not lending more on a property than it is worth. So the lender is going to send in an independent real estate appraiser to do a proper appraisal of the home. This might happen two weeks into the 30 day financing period. Unless you are lucky enough to get a buyer who is paying cash, AND doesn’t care about resale value, there might be a serious problem.
You often hear the saying “something is worth what someone is willing to pay for it”. Well, not in real estate. A more correct statement is, “a home is worth what a bank is willing to lend on it”. You can have five people lined up wanting a chance to buy your home for 250k but if the bank is only willing to lend 200k on it, “aint gonna happen”, unless you are lucky enough to find one of those mystical, rare, cash buyers, who do not care about resale value. Not only do you have to find a cash buyer, you have to find one that doesn’t care that the resale value will be. I can tell you from my experience, no one loves a house THAT much, no matter how nice it is.
Other Problems, and Final Thoughts
So I described a couple of the problems a FSBO seller can have in selling their property. Keep in mind, those are probably the two most common issues people have with selling on their own. There are still many, many other problems you may experience. I am not even going into legal problems that might arise, if things are not handled in the right manner. Louisiana real estate law is as unique as Louisiana. Paperwork involved in a real estate sale is pretty complicated. The purchase agreement between the parties is 9 pages long. Nine pages filed with all kinds of spooky sounding legal words. And that is just the purchase agreement. Most home purchase agreements include other associated documents that must be included. Apart from the paperwork and legal issues, there are things that are less likely to cause you legal problems, but you might not like just as much. People selling homes as a FSBO are often taken advantage of. Often times, they are taken advantage of by other people working without a real estate agent. You think well, “I am safe because it is just two people doing business and neither of us are using agents”. Sometimes other people are not just people without an agent. Sometimes they are experienced home investors, or ex-real estate agents that are pretty savvy. If someone knows the business well, and they want to take advantage of you, they can easily do it. There are way too many possibilities for someone to be taken advantage of, if they are not familiar with real estate. Sometimes you realize it when it happens, but it’s too late to stop it. Other times, you do not realize it until months after the sale.
Why am I sharing this information with you? A couple of reasons. First of all. I hate to see anyone taken advantage of, or end up in legal trouble because they didn’t know the law. I am a God fearing person and am guided by that in everything I do.
The other reason, and most obviously is that I am a real estate agent. I am in the business of buying and selling real estate. I am in this business to make money, just like you go to your job every day to make money. I enjoy what I do because I love real estate, and I love helping people. Yes, getting paid is nice, but I cannot tell you how nice the feeling is when I feel I made a real difference to a family. I prefer to work with people that want me to help. I am not the type to pester you with calls and emails until you agree to let me help you. I hope some of this helps you if you decide to sell on your own. I also hope this helps if you decide which agent to use if you decide you want to use a real estate agent.