4 FSBO Myths: What You Need to Know
4 FSBO Myths: What You Need to Know
A combination of the economy’s troubles and the rise of the Internet have caused a dramatic increase in the popularity of For Sale By Owner, popularly known as FSBO. The general thinking is that with the right information and tools, both of which are readily available now, anyone can sell their own home – and save money on their agent’s commission. But while the tools to do so are available, it’s the information that is the problem.
My point is, there are a lot of misconceptions about For Sale By Owner: what it entails and how likely (or unlikely) you are to succeed. Don’t be fooled – read this first!
Myth #1: For Sale By Owner is free.
The single biggest myth concerning FSBO is that you can sell your home yourself for free. This is usually the biggest lure for thrifty sellers, but in fact the truth is exactly the opposite. Believe me when I tell you that a real estate agent earns his commission in a dozen different ways, even before you ever get an offer on the house.
Besides the cost of the MLS listing, there are a multitude of costs if you want your home to get the proper exposure. For instance, there are the expenses of running ads online and in local print publications, putting up signs, printing flyers, and even a professional photographer if you really want your listing to shine. A good real estate agent also has a high-traffic website, which costs money – and in this case, even if you spring for a domain name and web hosting, you won’t get the same bang for your buck because your brand-new website will have little to no traffic.
I promote my clients’ houses every day, and believe me, nothing about properly listing a house is free. At least not if you want it to sell! You get what you pay for, and if you aren’t going to pay for promotion, why bother listing your house at all?
Myth #2: You’ll save money by selling your home For Sale By Owner.
I’ve already demonstrated that there is nothing free about selling your home yourself. It takes money to properly market a home. Before you are tempted to point out that marketing it yourself costs less than an agent’s cut, however, let me point out the additional, hidden costs of For Sale By Owner.
The vast majority of For Sale By Owner homes don’t sell, and are eventually listed with an agent anyway. Those that do sell, typically sell for less than comparable homes listed by an agent. Experience is worth something here: A real estate agent knows how much to ask, which offers are worth considering, and how to negotiate the highest possible sales price. Although you can research prices, too, an agent with experience in your neighborhood has a better understanding of current pricing trends, not to mention the skills needed to get the best possible price.
In other words, you may be literally selling yourself short by not having an agent to guide you through all the ins and outs of selling your home – and I’m not talking a few thousand dollars short. Inexperience and lack of marketing can cost FSBO sellers tens of thousands of dollars – far more than you are "saving" by listing your home without an agent’s help.
Myth #3: Sellers pass any savings on to the buyer.
Buyers, don’t be tempted to think, "The drawbacks to FSBO don’t apply to me because I’m buying." Besides the fact that we’ve just debunked the theory that FSBO saves the seller any money at all, even if it did, why would the seller want to pay it forward? Think about it! Most FSBO sellers try to sell their own homes for one reason and one reason only: more money in their pockets (they think).
In addition, most FSBO sellers are unwilling to ask a competitive price or negotiate with a potential buyer. The reason why agents are so successful at this is because they are impartial: They can look at the comparative market analysis (CMA) and make pricing and negotiating decisions without any emotional attachment to the house. The seller, on the other hand, typically has an inflated view of their home’s worth due to their emotional attachment. Without an agent to counteract those impulses, FSBO sellers typically price their homes too high and refuse to negotiate downward, eliminating any chance that the buyer will benefit from the seller’s supposed savings.
Myth #4: For Sale By Owner means fewer hassles.
If you think you’ll have an easier time selling your own home (or buying a FSBO home) than hiring an agent, think again! Finding a good agent may take some work, but it’s nothing compared to the work of doing everything yourself. Without an agent, you will need to do your own staging, take your own photographs, market your home yourself (which, as we’ve already discussed, takes a lot of money and effort). In addition, you will have to show the house yourself, do your own open houses, and write your own contracts, offers, and counteroffers.
Throughout all of this, you’ll be on your own, without the guidance of someone who has the experience you lack. As I’ve already said, experience is worth something: When you hire a real estate agent, you are paying a commission in order to relax and let him or her take care of everything. Ultimately, that means fewer hassles, not because there aren’t many in selling a home, but because you have an agent to act as a buffer.
Remember, what sounds too good to be true, usually is. If sellers could truly save themselves money and hassle with For Sale By Owner, I’d be out of a job! The truth is, though, agents are just as needed as ever – don’t be one of those sellers (or buyers) who has to take a spin on the FSBO merry-go-round in order to remember why.
As a selling agent, I believe it is important to make full use of the tools at my disposal, such as a state-of-the-art website, an impressive newsletter mailing list, and more. To discuss these and other advantages an experienced agent brings to the table, please don’t hesitate to call me!
Contributed by D. Michael Burke, P.A. Keller Williams Elite Realty
I have seen it myself many times now. Selling a house is more than sticking a 'for sale' sign in the ground, folks, I tell you!
Most FSBO's will lose 12% to 15% more than if they would have listed with an agent and paid the 6% or 7% marketing fee.
I saw one FSBO in Virginia Beach for sale for $179,000.00, last year. This guy then paid $400 or so to a FSBO Website and then paid another $500 or so to a limited service rep to have it listed in the Multiple Listing Service for 6 months.
Last I checked, he had dropped he price to $159,000.00 and his listing had exired in the MLS.
So he has paid an estimated $1000.00 out of pocket already now, not in the MLS anymore, dropped his price $20Grand and still hasn't sold yet.
"Penny wise, pound foolish" ring a bell?
"Nothing is more unjust, however common, than to charge with hypocrisy him that expresses zeal for those virtues which he neglects to practice; since he may be sincerely convinced of the advantages of conquering his passions, without havin...g yet obtained the victory, as a man may be confident of the advantages of a voyage, or a journey, without having courage or industry to undertake it, and may honestly recommend to others, those attempts which he neglects himself"- Samuel Johnson
This guy has made millions off people trying to sell their homes the DIY way. Most fail and his website in my opinion is deceptive in ways that make people believe it is more successful than it is.
Just an example. My former neighbor had a home on a FSBO site for over a year. Listed for $275K. He finally sold it for $259K, paid 3% to buyers agent and some closing costs! But the FSBO site bragged that he sold it for $275K and saved over $16k in commissions! Not TRUE at all!
I have found most lisitngs on the FSBO sites to be off the market (sold by an agent, foreclosed, auctioned or withdrawn). A very few percentage have actually been sold by the owners themselves and almost NEVER at a price they had it listed for!
- Bart Folta August Update 2011