In a seller's market, it's easy for a lot of sellers to reach the conclusion that they don't actually need a real estate agent to sell their homes. After all, there are buyers everywhere, and home prices are skyrocketing; how hard can it really be to just do it yourself and save some money on agent commission?
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Unfortunately for many of these for-sale-by-owner (FSBO) opportunists, the answer is almost always "much, much harder than you think." Research shows that FSBO listings take longer to sell, sell for less than market value, and require a lot more work from the seller than those anticipated. Plus, seller's markets don't last forever -- this one appears to be tapering off -- so counting on the market to save you could cost you a lot of money while you adjust your expectations.
Why do FSBO listings fail so frequently? Here are 15 reasons they usually don't work as well as the seller hopes they will.
FSBO owners don't do the work BEFORE listing
Most of us love the home where we've lived for years, and it's hard to understand why someone doesn't snatch it up as soon as it hits the market. However, buyers are comparing your house to every listing they're seeing online and in-person, so if you don't do the bare minimum to make your house look excellent, it's going to look -- average, mediocre, less than fabulous. And that's going to mean lower offers than you could be getting.
When working with an agent, most sellers spend a lot of time decluttering their house, removing furniture and storing anything causing overflow. Walls get a fresh coat of paint (and sometimes the exterior of the house), and floors get professionally cleaned, especially carpets. The honey do list must be tackled. Most sellers spend a lot of time making sure that the outside of their house looks as good as or better than the inside, including polishing up the deck, maintaining the lawn, planting new trees -- you name it.
Smart sellers sometimes also get a full inspection before it goes on the market. This is an extra step, but it's smart to know what an inspector might find and tackle it before any buyers step inside; so neither of you will encounter any nasty surprises.
FSBO sellers simply don't know that all of these steps are highly recommended before you list the house, so it's not their fault for skipping them -- but the fact that they do skip these steps results in fewer offers for less money, which is not usually the outcome an FSBO seller is seeking.
What makes a good home listing photo? A picture is worth a thousand words, so its worth your time to make the photos perfect. Pictures get buyers to see the house in person, so it's the seller's way to put their best foot forward. Agents know this and make sure toilet seats are down, the scene is decluttered and get multiple angles of EVERY room.
High-quality listings photos get buyers excited to see the house because they can already imagine themselves living there. If the pictures are full of your stuff and your pets, then it's difficult for buyers who are browsing to picture themselves in the home. Most buyers start their home search online, you're going to put yourself at a disadvantage if your listing photos are out of focus, full of clutter, and generally don't make your house look amazing.
What's the MLS and why do sellers need it? Marketing a house goes well above and beyond simply putting your house on the MLS (multiple listing service). It's how real estate agents and brokers in your area let each other know a home is for sale. This service pushes your listing to about a dozen different websites, including realtor.com. Zillow and our own personal website.
There are some FSBO who simply put their home on Zillow and wonder why they're not generating any interest. Not every serious buyers are using that one website to find their home. It doesn't always have updated homes for sale or immediate information available. Most serious buyers are using the local MLS for their home search and a REALTOR® to protect their interests.
It costs money to list your home on the MLS and you'll need to take the time to fill out a description of your house and make sure you're including some important information, like roof type and age and covered parking available.
Real estate agents also use social media to target potential buyers; house-specific website, print advertising, brochures, sign in the front yard, radio and video of the home and area. Most FSBO sellers pick just one or two of these marketing techniques and miss out on a ton of potential buyers as a result.
Don't screen buyers
Despite what television ads might have made you to believe, getting a mortgage is truly not as simple as pulling up an app on your phone and answering a few questions. This may get you a pre-qualification, but a pre-qualification and a pre-approval are two very different things. Lenders might loan a buyer a certain amount of money for a home with pre-qualification, but pre-approval give the buyer the go ahead as soon as they can find a house meeting all the lenders' criteria. The lender will loan them the money they need to purchase the property.
If you've been through the mortgage loan process yourself in the past decade, then you know how tedious and time-consuming it is. Buyers who are looking at FSBO homes might not be represented by an agent, who can help the buyer get pre-approved for a mortgage, so it's possible buyers who are walking through your house and asking questions may not be able to afford to buy it at all. One of the many things that a listing agent does for clients is make sure buyers are pre-approved. If you aren't asking some tough questions of the buyers, then it's possible you're wasting time.
Are NOT Available
Buying a house is a big deal. Buyers will want time to walk through the home and see it for themselves and may have plenty of questions before they take the time to see it. Some FSBO sellers feel homes "just sell themselves" and do not make themselves available to answer questions or to set up a convenient time for viewings.
If FSBO sellers don't make answering these questions and setting up showings a priority, they're going to miss out on a big pool of qualified buyers. This is probably not the outcome they were dreaming of when they decided to FSBO, but it's the reality when buyers don't have someone available to help them make a decision.
Slow to Respond
Life happens and it's also understandable some FSBO sellers might make a true effort to get back to buyers when they have questions or want to set up a showing. Buyers reach out at all times of day and night. If it takes days or even weeks to respond to inquiries, it's very likely the most qualified buyers will have moved on by the time you get around to replying.
Buyers are almost always on some kind of timeline around when they need to be in their new house. They may not have a lot of flexibility with that timeline, and "if you snooze, you lose" is absolutely the case for many FSBO sellers who simply don't have the ability to respond promptly to buyers.
Attending Any Showings
Think about the last time you went to buy something... Did a salesperson follow you around while you were looking? Did they make your buying experience more pleasant ... or less?
Generally, no one appreciates the "hard sell," and that is especially true when it comes to buying a house. A lot of FSBO sellers want to make sure they're on hand to attend any showings, and they don't see what's wrong with this. Buyers aren't going to enjoy the showing if the seller is breathing down their neck the whole time, pointing out features that don't matter to them and urging them to make a decision quickly.
The art of negotiation can take years to master, and this is why it's important to use a real estate agent who has had years of experience. It can really hurt FSBO sellers who may not understand that an offer is just that -- an offer -- and they can respond with a counter-offer to negotiate the price, contingencies, or other details which might matter to both sides. It's important to allow yourself to review the offer completely and not make snap decisions.
On the flip side, FSBO sellers might over-negotiate, insisting on details that really don't matter to feel like they got in a "win". This can be apparent to buyers, who may decide they like the house less than originally thought, and they'd rather not deal with someone who appears to be unreasonable or unrealistic.
Don't know how to work with buyer's agents
A lot of FSBO sellers get hung up on the agent commission. They feel like paying a percentage of their home sale is a waste of money, which is why they are selling FSBO. The commission pays two sides though -- listing and selling agent; typically, half of it is used to pay the buyer's agent.
Buyers tend to work with a buyer's agent, especially in a hot market when finding a home can be tough. A buyer's agent will make sure a buyer is pre-qualified, help them find a house they love, and negotiate the offer, and all the steps in between. The buyer's agent rightfully wants to be paid for their work, and when an FSBO seller states they won't offer any commission at all, then either the buyer has to pay out of their own pockets (when they're already spending thousands of dollars on a down payment, inspection, and appraisal costs), or find another house.
When an FSBO seller won't work with a buyer's agent, the seller is also eliminating a whole range of qualified buyers who really want or need their agents' help to seal the deal. Reducing your pool of buyers might seem smart to avoid commission, but it virtually guarantees you'll get fewer offers, and those offers will be lower than others would be. The buyer knows you're not paying any agent commission -- so why would any buyer offer you "full price" for a home if you're just going to pocket the difference?
Inspection Finds Flaws?
A lot of FSBO sellers aren't sure what to do or what their responsibility might be if the inspection uncovers a minor or major issue. Who's going to pay for the repairs? If the FSBO seller wasn't a great negotiator, then the seller could be on the hook for all of the repairs, or the buyer will be able to walk away with no repercussions and start their home search again. A FSBO seller might not think that's fair, but these are details agreed to during the contract stage, and if the sellers were intent on just getting the contract signed, there's a lot they might have missed.
Don't Understand Contingencies or Legal Issues
Every state has different rules and regulations around home sales. Many FSBO sellers have a job outside of real estate or real estate law, so they can be forgiven for not understanding. The lack of understanding can become a huge pain later on if the buyer uncovers something that should have been addressed.
Maybe you made an addition or improvement to the house and forgot to secure a permit -- or maybe the appraiser finds that the price you've asked for the house is above market value, to name just a couple of potential problems. A listing agent can handle those problems for sellers, but FSBO sellers are on their own and might have a failed deal on their hands as a result.
The Price is Wrong!
Pricing a home might seem easy; after all, there are internet tools available now where you can look up your address and have an algorithm tell you how much the house is worth. Although a Zestimate may be a good starting point, it does not take a lot of things into consideration.
Those algorithms are relatively new, and they don't take the condition of your home into account -- whether you've made significant upgrades or whether your house is not in the same condition as other homes in your neighborhood. These online estimates don't take into consideration smells in the home, damage not in pictures, or nearby developments (landfill or shopping mall). Even if your price is right on the nose for the market, most buyers are going to submit offers under asking price because they know you aren't paying an agent commission.
Don't Know How to Close
There are a lot of things that need to be done in between accepting an offer and handing over the keys to the buyers, including the appraisal and inspection, plus any required repairs, and not to mention packing up and moving all your stuff so the buyer can move in. The buyer will likely need a title review, too, and make sure there are not any easements or where the property lines are. The seller is going to have to answer these quickly in order to stay on schedule. Any changes or delays might enable the buyer to walk away entirely since this all agreed to initially.
Most sellers don't have the time or patience to handle all the details on their own, and it's easy to start feeling overwhelmed. However, pretending it will take care of itself can mean the house goes back on the market and that the seller just lost the biggest, best offer they were going to get.
Investors know FSBO is an opportunity to get a house on the cheap side
All-cash investor buyers are active in every market, and many of them know FSBO sellers aren't as experienced as a listing agent ... so they see an FSBO sale as a great opportunity to negotiate a sale. FSBO sellers might not even realize they're getting a lowball offer, especially if the home has been on the market for a while and didn't get any professional help with pricing. All-cash usually means the buyer can inspection and close asap, which many sellers could see as a big advantage.
The longer it's on the market...
All these factors together add up to FSBO homes staying on the market longer. The pool of qualified buyers is smaller; deals may have fallen through; and little marketing means FSBO homes aren't getting the same attention in early days of listing. The longer a home is on the market, the more likely the seller will have to reduce the price or make concessions. The longer it's on the market, the more buyers will ask themselves "what's wrong with this place?" and may insist on more inspections, simply because the market time makes them nervous.
Selling a home FSBO is every seller's prerogative -- but many of them don't realize just how much a listing agent (and a buyer's agent) does in order to earn their commission. It's about value, not cost! By the time they figure out a percentage of the total sale is well worth what they get in return -- and will probably net them a higher sales price, it's too late. So if you're ready to sell your home check out this video 11 things your real estate agent should be doing! thanks for watching and have a blessed day