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Why FSBO Homes End Up Failing for Sellers

Posted By Mclain

“For sale by owner” (FSBO) homes are homes that are sold directly from the property owner. However, there are many ways and reasons that this type of selling strategy might not work out for the seller. As a general disclaimer, it’s important to note that some FSBO sales end up working great for buyers and/or sellers, but these cases are often the exception and not the rule.


If you have experience in real estate and are confident about your expertise, an FSBO transaction might work for you. However, if you’re buying or selling and don’t understand legal jargon, the real estate market, and other important areas in the industry, you’re much better off with an agent. With that in mind, here are a few reasons why FSBO sales don’t always work well for homeowners:


Pricing the Property Wrong

Pricing your home is one of the first and most important steps. Unfortunately, many sellers don’t realize that pricing a home is something of an art; it’s possible to price your home too high, or even too low. If you’re selling on your own, it’s very possible for you to make a make-or-break pricing mistake.


Perhaps you’re checking out what homes in the neighborhood have sold for analyzing the average property values in the area. And while these are great initial steps, the truth is, pricing a home involves so much more work than simply looking at what other homes are going for. You’ve got to know how to price competitively and accurately, and there are certainly cases where your home will be worth more than comparable properties.


One of the biggest mistakes sellers make is overpricing their home to make more or take negotiations into account. If you do so, your home could end up on the market far longer than you want it to. According to the National Association of Realtors’, 22% of people who listed their homes in 2017 reduced their price at least once. The longer your home stays on the market, the less desirable it may appear to potential buyers; don’t wait to find out that the market isn’t in favor of your price.


No Marketing Skills

There’s so much that goes into selling property, and real estate agents understanding the marketing prowess that goes into making any property more desirable to buyers. You wouldn’t just want to list your home for sale on Craigslist or Facebook, particularly when you’re trying to attract the type of buyer that’s taking their purchase seriously and working with an agent as well. Agents are accustomed to using the Multiple Listing Service (the MLS used to siphon listings onto popular sites like Zillow and Trulia) and know how to create a listing that sells.


Experienced agents know how to put your property in front of your target market—the people that are most likely to purchase your home. They know how to stage your home so that it appeals to different styles, how to advertise your property in the best light across social channels, and have access to a pool of potential buyers.


Losing Money

One of the biggest reasons sellers choose to work without an agent is because they want to retain the agent’s commission fee, but the truth is, not working with an agent can end up being even more costly than the agent commission fee in the long-run. Furthermore, in some cases, you can bake the commission fee into the price of the home.


More importantly, contrary to popular belief, working with an agent to sell your home can often save you money. Studies have shown that, on average, homes sold with the help of an agent close with a price of $230,000, compared to the $170,000 average price for an FSBO home. Rather than put too much mental stock into the 3% commission you might save, think about the bigger picture—with an agent, you could see a net profit in the 10% to 30% more.


Lack of Legal Protection

When you decide to sell your home alone, you open yourself up to some legal liabilities. For starters, chances are you don’t understand real estate jargon or how to navigate complex real estate contracts. Any mistakes you make in the contract could cost you big time in the long-run. While agents have clauses that protect them from errors or mistakes in their contracts, FSBO sellers are much more vulnerable in the transaction.


Too Much Up Front Money

Selling a home costs money. And of course, it takes a lot of time—and time is more money. Real estate agents earn their commission by handling all the time and money-consuming tasks associated with selling your property, allowing you to focus on the actual move. If an agent loses the money they’ve put into marketing your home, it’s their loss.


In short, inexperience could really cost you—and it’s not worth the time and effort. If you don’t have extensive personal or professional experience selling properties, leave it to the experts.

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