Blog
This blog is available in English or Spanish:

The Top 5 Reasons You Should Not For Sale By Owner

Agents, did you know you can share a personalized version of this post? Learn more!

The Top 5 Reasons You Should Not For Sale By Owner | Keeping Current Matters

In today's market, with homes selling quickly and prices rising, some homeowners might consider trying to sell their home on their own, known in the industry as a For Sale by Owner (FSBO). There are several reasons this might not be a good idea for the vast majority of sellers.

Here are five of those reasons:

1. There Are Too Many People to Negotiate With

Here is a list of some of the people with whom you must be prepared to negotiate if you decide to For Sale By Owner:

  • The buyer who wants the best deal possible
  • The buyer’s agent who solely represents the best interest of the buyer
  • The buyer’s attorney (in some parts of the country)
  • The home inspection companies, which work for the buyer and will almost always find some problems with the house
  • The appraiser if there is a question of value

2. Exposure to Prospective Purchasers

Recent studies have shown that 89% of buyers search online for a home. That is in comparison to only 20% looking at print newspaper ads. Most real estate agents have an internet strategy to promote the sale of your home. Do you?

3. Results Come from the Internet

Where do buyers find the home they actually purchased?

  • 44% on the internet
  • 33% from a Real Estate Agent
  • 9% from a yard sign
  • 1% from newspaper

The days of selling your house by just putting up a sign and putting it in the paper are long gone. Having a strong internet strategy is crucial.

4. FSBOing has Become More and More Difficult

The paperwork involved in selling and buying a home has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons that the percentage of people FSBOing has dropped from 19% to 8% over the last 20+ years.

The 8% share represents the lowest recorded figure since NAR began collecting data in 1981.

5. You Net More Money when Using an Agent

Many homeowners believe that they will save the real estate commission by selling on their own. Realize that the main reason buyers look at FSBOs is because they also believe they can save the real estate agent’s commission. The seller and buyer can’t both save the commission.

Studies have shown that the typical house sold by the homeowner sells for $210,000 while the typical house sold by an agent sells for $249,000. This doesn’t mean that an agent can get $39,000 more for your home as studies have shown that people are more likely to FSBO in markets with lower price points. However, it does show that selling on your own might not make sense.

Bottom Line

Before you decide to take on the challenges of selling your house on your own, sit with a real estate professional in your marketplace and see what they have to offer.


Members: Sign in now to set up your Personalized Posts & start sharing today!

Not a Member Yet? Click Here to learn more about KCM's newest feature, Personalized Posts.

Have You Set Up Personalized Posts Yet? | Keeping Current Matters
Share

About The KCM Crew

We at The KCM Crew believe every family should feel confident when buying & selling a home. KCM helps real estate professionals reach these families & enables the agent to simply & effectively explain a complex housing market. Take a 14-Day Free Trial of our monthly membership to see how we can help you!

15 Responses to “The Top 5 Reasons You Should Not For Sale By Owner”

  1. Jon May 11, 2016 at 11:37 pm # Reply

    My question is, why do real estate agents get a percentage of the sales price instead of a set price? In my opinion, it should be based on the amount of work done or time spent to sale the house. Hopefully an agent will work just as hard to sale a home that costs $120,000 as they do for one that costs $500,000. Both could sale within a week but based on a 6% commission, the difference is $7,200 commission versus $30,000 for essentially the same amount of work. Even if they are doing a bit more work to sale the higher priced home, that’s a huge difference and I don’t think it justified. I’m sure real estate agents will disagree with me, but if you do please explain why I’m wrong instead of just calling me out.

    • B. Logan, realtor May 12, 2016 at 10:19 pm # Reply

      I find I actually work harder on the lower priced homes. But with the higher priced peoperty you will find that your overhead is higher. They must be advertised in periodicals that cater to the buyer with the larger pocketbook.

      But getting back to why you should not buy from someone who is selling their own home, how do you know they have clear title to the property? There are many cases in the courts now where people have bought from a FSBO only to find out later that they do not have a clear title and it ends up costing them more than the property is worth.

      If you want to throw away your money there is no easier way than buying from a FSBO. Remember “Buyer Beware”.

      • Do May 26, 2016 at 12:12 pm # Reply

        I’ve bought and sold a few homes and it’s my opinion the title company is the one doing all the work seems to me. If my house is worth 600000 and the RA gets 36000 I would rather take the chance of selling it myself and putting that 36000 in my pocket.

        • Tamara June 13, 2016 at 10:55 pm # Reply

          Hi Do, I appreciate your honesty. I’m a Realtor in Georgia. I understand you thinking you would save money, in selling your own home. However per NAR. 87% of properties are sold by Realtors. I know you think you would save money by not paying the commission. We do work very hard, we research homes on MLS, comps, pull DEEDS. Write the Purchase and Sale agreement (offer). We look out for your best interest. We negotiate on your behalf. PROTECT YOUR EARNEST MONEY. We pay very close attention to time lines. Such as Due diligence, financial Contingencies, appraisal contingency. If a inspection is needing repairs, or lender has not completed all the paperwork to finance the property. We insure these time lines are extended. We insure the proper forms are filled out. Special stipulations are added in the purchase and sale agreement. We spend hours researching, previewing homes. To finally find that Dream home your looking for. Before I became an Realtor. I have bought and sold my own properties. I also thought ” I would save money by not using a Realtor. Bottom line is we protect you, your Earnest Money, and your interest in the property. .

      • Mendi September 20, 2016 at 9:28 pm # Reply

        I disagree. You k ow there a clear title. Y doing your homework, and/or hire a title agency. “Buyer Beware” is always true – with or without a realtor! But homeowners trying to sell on their own aren’t out to pull a fast one. They’re merely trying to sell their home and save on commission.

    • Lynn May 13, 2016 at 12:34 am # Reply

      Hi Jon. I am a real estate agent and I work very hard regardless of the price point. What many don’t realize is the amount of money it takes to represent both a buyer and a seller. There is continuing education that is required to maintain a license; errors and omissions insurance; costs to have access to the multiple listing service to find those properties and do comparative market analyses to determine price; computers on which to do this research and contract writing; fees in the hundreds of dollars to have access to electronic keys to get into those properties; fees to buy the lock boxes that go on the doors of the properties, (the electronic key boxes cost over $100); National Realtor Association fees in the hundreds of dollars every year, (membership is NOT optional); your annual local Realtor Association fees that also are NOT optional; advertising costs, not only to advertise a property but to advertise yourself so that a buyer or seller will pick you to represent them; lead generation costs; gasoline, tires, oil changes etc. for your vehicle. I have been driving close to 400 miles a week just for real estate. And, surely our time should be worth something! And remember, after the franchise fee comes out of my 1/2 of the commission (3%) and the amount that goes to the broker, I only get 51% of my 3% commission. And I haven’t paid Uncle Sam yet! Let’s apply what you are suggesting, to a different scenario.Suppose you go to the local electronic store to buy a TV. You buy an inexpensive TV for $200 and receive a $12 discount (6%). Or, you can buy a really nice 52″ flat screen TV for $2,000. You still receive the $12 discount because it really didn’t require a whole lot more effort to buy that one. Does it not make more sense to receive the discount of $120 (6%) on the larger purchase? And by the way, when a realtor represents a buyer in a For Sale By Owner transaction, the realtor usually ends up doing the work for the seller as well as the buyer and gets paid only 1/2 or less that she should because the seller is getting their work done for free. (I know, I just finished one last week.)

      • Lynn May 13, 2016 at 12:55 am # Reply

        Jon, lest you should think I am complaining, I love real estate. I greatly enjoy looking at properties. But the main blessing of real estate is helping people get into houses where they are happy and can make memories! I have had opportunities to get to know people I would have never met. I have opportunities to share in their joys and their heartaches. Realtors are providing a service to people and want to be compensated just like anyone else who goes to work.

        • Claire May 16, 2016 at 1:19 am # Reply

          Bravo Lynn on both your answers, I couldn’t have said it better myself. Oh, I haven’t had anytime off since March 2014. I am trying to figure out how I am going to do my 16 hours of continuous education, and we have to do a two credit flood class this year, who has time to read all the notices sent out by the Board of Realtors.

      • Tusksa May 20, 2016 at 8:55 am # Reply

        Well said! 👍

      • Carol Ann Williams June 22, 2016 at 12:31 pm # Reply

        Unless you are in the business for a few years you could never understand how hard Realtors work for you. NO 9-5 job. NO weekends off. NO holidays off. EXPENSES whether you close on a transaction or not. You must love the
        business, you must like helping people, you must handle with professional attitude every person you come in contact with. Remember you are not ALWAYS right, whether you are or not….30 yrs. in business; now PT but still enjoy all of it. Best education I have ever experienced. Carolann.

    • Daniel W. May 13, 2016 at 1:47 pm # Reply

      Jon,

      I want to start by saying that there is no set rule saying that the agent’s commission has to be based on percentage. It can absolutely be based on a fixed, set price. The commission can also be set up where the agent’s commission is anything over the price the seller wants to sell the property for. (For example, seller wants to sell at $500K. If house sells for $501k, the commission is $1k. If the house sells for $700K, the commission is $200K.) How the commission is structured is always negotiable and it is whatever the seller and the listing brokerage agrees on. Based on percentage just happens to be the most common and that percentage amount is negotiable!

      There are numerous reasons (or justifications rather) for an agent’s commission to be based on percentage, One of them, as alluded to by Reason #5 in the article, is that an agent can sell your house a percentage amount higher than FSBO, not a fixed amount. so if an agent’s effort results in your house selling at a percentage amount higher than you selling your property yourself, why should he/she get paid a fixed amount?

      Another reason is a percentage is actually the most fair. In your example, you mentioned a commission difference of $7,200 vs. $30,000. I am assuming your implying that the agent selling the $500K house should also only be paid $7,200 because the assumption is that is the amount of work it takes to sell any house, regardless of the selling price. But what if $30,000 is the amount of work it takes to sell any house? You said it yourself, an agent should work just as hard to sell a $120K house as he/she would selling a $500K house. If the agent’s effort is worth $30K regardless of the selling price, would it be fair to charge that commission on a $120k property?

    • Randall D Hunt May 16, 2016 at 4:01 pm # Reply

      First of all, there is no such thing as a set 6% commission. All commissions are negotiable. In most situations I’ve been involved with (on both seller and buyer side), the higher the price, typically the lower the percentage agents end up negotiating. It’s true the most agents will try to get 6%, but in our area, if you get into the homes listed about $400K, the percentages drop to 4%.
      Every area is different, but that is pretty standard in our area. And again, by law, every commission is negotiated. Don’t every let anyone tell you that the rate is 6%.

  2. Joe May 19, 2016 at 1:15 pm # Reply

    I’m an agent and I will say that some of the numbers in this article are arbitrary. For one, comparing the average price of FSBO to Agent sold homes. No relevance what so ever. Where’s the metadata on those numbers. Honestly, if you have a desirable home in a desirable neighborhood, you can definitely sell your own home. But don’t cut corners:
    1) Set up escrow with a title company to assure buyers you’ll have marketable title. It costs a couple hundred dollars and they handle taxes, recording, etc.
    2) Get a professional “For Sale” sign. You can rent on from a sign company and they come put it up and take it down. Maybe $100, probably less.
    3) Put in the Paper, Craigslist, etc., talk to a Real Estate Compant about the fee to list it on the MLS. This is your job until it’s sold, treat it that way.
    4) PAY a Buyers Agent Commission (BAC) and they will come. Usually 2-2.5% will do. Ask a real Estate Agent what the typical BAC is currently. If you don’t pay a BAC you are going to have a very hard time. FSBO to Agentless Buyer transactions are very rare, unless they already know each other.
    5) Be patient. Under ideal conditions, a financed buyer will take about 45-60 days to close. Cash is a different story, also very rare.
    6) Always, Always, Always answer calls. Each call is a chance to sell your house. But also be prepared for Listing Agents to be calling you every day, multiple times a day. It’s just how it’s going to be.
    7) Do the research on pricing your house, unbiased research. Because the Buyer, and their Agent, have definitely done their research.
    8) Not to be mean, but nobody except you, cares that your children were born and raised there. Separate your emotions or you won’t do a good job.

    I’m sure I left something out, but you’ll figure it once you get going. Is an Agent necessary? No. We are there to make the process impersonal, efficient, easier, way less stressful than it could be, and so that you can continue to do the job you get paid for. Which probably isn’t selling your house. But if you have the time and want to do all the research, negotiating, paperwork, etc., and take on the added stress then it’s probably monetarily worth your time.

    • ross September 7, 2016 at 11:15 pm # Reply

      I like you :) In a business kind of way.

  3. ross September 7, 2016 at 11:14 pm # Reply

    My issue with realtors is why does the seller have to pay for a realtor to hold a buyers hand through the process. The seller should have to pay for this help. Buyers will pay for the inspection, appraisal, borrowing costs, closing costs but not their “matchmaker”.
    The kicker is that if you market your house well a good buyer will buy the house they love and not the house that a realtor makes them love because it affects their pay cheque.
    Cash back deals are getting to be a big thing now. So now of you give $5000 cash back you have now paid the buyer to come to you. You are more likely to negotiate without a $20000 commission charge waiting in the shadows. That is a deal compared to your regular commission.
    Comfree in Canada is really starting to roll and people are obviously sick of listing agents.
    It pays to do your own work.
    A perfect sale takes 3 things. a house, money and a lawyer. The lawyer looks after the legal stuff, don’t be fooled that a realtor does. Now a regular sale requires a bit more diligence if you would like and I would highly recommend an inspection and/or appraisal.
    This is not much harder than buying a car. I bet most mortgage applications take as long as a car loan and require just as much documentation. You shop online, car lots ect. find the perfect car, request a “showing”, hire an inspection, get the mortgage in place and boom! you are a brand new owner and possibly the cash back richer.
    I am aware I am all over the place. It shows my frustration. But in closing, if you had to pay two salesmen to buy a car…. The prices would go up.

Leave a Reply