By Chad Taylor
“For Sale By Owner.” The name says it all. The homeowners intend to sell their home themselves, and hopefully find buyer who is not working with a Realtor as well, with the intention of saving thousands in listing and buyer agent commissions.
Sounds like a good plan, right? The short answer is no. Let me share with you how selling FSBO could cost you thousands instead of saving you money.
Just this week I spoke with a potential seller who lives in a highly sought-after subdivision here in NEJC. The lots alone in her area are selling between $300,000 and $425,000. After meeting with her to discuss the sale of her home, she brought up that she might reach out to a few builders directly to see if she can sell her home herself, without a Realtor. I appreciated her directness and told her that she could probably put a FSBO sign in her yard today and have it sold by tomorrow. But the line of reasoning that she will save money that way is simply not true. And for a couple of reasons.
Here are the two best reasons I would strongly discourage any seller from trying to sell their home on their own.
When you buy something directly from the owner, you always want it for less. For example, if I were to drive to Nordstrom today to purchase a watch, I would go to the men’s watch counter and engage a salesperson. I would tell him what I am looking for and he would show me their inventory. After choosing my watch, the salesperson would then tell me the price. Let’s pretend the price is $750. Would I then try to negotiate with the salesperson to get a better price? Of course not. I would pay the $750 because that is the price of the watch and a professional salesperson at Nordstrom is involved.
Now let’s pretend that I take that same watch to my estate sale. It is still in the box with the receipt showing that I just purchased it for $750. I then place it on the table with the other jewelry. A man comes along and says that he would like to buy my watch. Does he expect to pay $750? No he does not. He expects to get it for less because he is buying directly from the seller and there is no professional involved. The same applies to real estate. In most cases, the commission dollars that the seller is trying to save is the same money that a buyer is trying to save by purchasing directly from the owner. So in essence, they are fighting over the same dollars.
You might sell your home FSBO to a buyer. But what did you miss? In a low inventory market, like today, it is possible to sell your home on your own. And if just selling is your goal, then you have accomplished it. But if your goal is to net the highest amount possible from the sale, then you probably just left big money on the table. And for a multitude of reasons.
In a low inventory market, a seller has incredible power when leveraged by his or her Realtor. By exposing a home to the open market via hundreds of websites, the MLS, their own database of past and current clients, their Realtor associates within their own company and others, your Realtor is casting a huge net to find you as many potential buyers as possible. When you have more than one interested party, the result is usually multiple offers. In a multiple offer situation, the seller usually exceeds their financial goal and gets to have more say when it comes to the closing date and other terms. Of all of the FSBOs I have encountered over the years, I cannot remember one that received multiple offers creating a bidding war.
In addition, highly motivated buyers in a low inventory market have hired a Realtor like myself to find them a home. They don’t have time to drive up and down the streets looking for a FSBO or even to search the web for their future home. They need someone like me hunting for them daily. And when I do find a FSBO that fits their needs I will most certainly show it to them. In this scenario, however, the seller will pay my commission. This is because it is customary in our market for the seller to do so. So really the FSBO is only saving a portion of the listing commission when a buyer’s agent is involved.
On top of that, I am going to negotiate the best deal possible for my clients. I negotiate real estate every day of the week and odds are that the seller does not. Does this put them at a disadvantage. You betcha! I liken it to paying the lawyer and court fees for someone who is suing you. It doesn’t make much sense does it?