You have seen them, those signs you can buy at the local store that say “For Sale By Owner”. You may have even seen them at a nice home and wondered if you should go check out the house. It would be like a bartender trying to sell you a lawnmower. It just doesn’t fit. Most of the time FSBO homes are the result of the seller trying to save themselves money. There are a lot of laws and items that you must disclose when you sell a home and most of the people don’t know what those are. Realtors are professionals at selling homes and more often than not, laws change so frequently that even they have a hard time keeping up. That is where brokers and E&O insurance come into play. Buying or selling through a Realtor is the best way to make sure you are not going to be sued or buy a property that wasn’t properly disclosed.
In a FSBO, there are simply too many people to negotiate with. Those deciding to take the FSBO route often have to negotiate with many people like the buyer, seeking the best possible deal. The buyer’s agent, who represents the buyer’s best interest. The buyer’s attorney if they don’t have an agent. Home inspection companies, working for the buyer, which are likely to find some problems with the house. The bank, especially if it’s a short sale. The appraiser if the buyer is getting a loan, because the value must match the market and most of the time the FSBO is someone trying to get more money than the house is actually worth. Without the help of experienced real estate agents, dealing with so many different parties alone is often a tough task for homeowners.
Another big issue is that homeowners don’t know how to prepare the home for sale. Decluttering the house is a big deal and most of the time, a Realtor can help you with the process. When getting a loan, the property has to have certain items repaired or added. Getting necessary repairs done is a big deal for financing. Ensuring curb appeal of the home is a tricky task that will need the expert advice of a Realtor. Smoke detectors, Carbon monoxide detectors, fire door on the garage, pest inspection, bracing a water heater etc. are just some of the tasks that will get called out by an appraiser or home inspector. These things are laws that most FSBOs won’t even know about. How can you fix a problem you don’t know is there?
Owners do not know how to screen potential buyers. This is an issue if your buyers aren’t capable of securing a loan for the amount being asked. FSBOs often have no idea about the difference between prequalification and preapproval, and they don’t know that buyers should ideally be preapproved or at least prequalified. No wonder they let unqualified buyers inspect the house and waste their precious time. Not knowing if a buyer has the ability to purchase the home acts as a big deterrent for homes for sale by owners. Part of the reason is also that owners fail to solve buyer’s queries Handling inquiries from buyers on their listings and coordinating showings for their homes are prerequisites for making a sale. However, many homeowners either aren’t able to handle such inquiries on their homes or don’t have the time for them. Even organizing showings might become an uphill task at times. Because these days potential buyers and their agents want quick responses to their inquiries, they don’t think twice before moving on to the next potential property if their inquiries and requests are unanswered.
Owners fail to understand the contract procedure. The contract to buy a home involves much more than just the price offered by the buyer. Also, real estate contracts have lots of timelines and clauses and involve several common contract contingencies, such as inspections and mortgages. Many FSBOs don’t have a firm understanding of such contracts and might not know what they are agreeing to or how to negotiate particular parts of the contract. When issues are called out, FSBOs don’t know how to handle the home inspection finding. Home inspections almost always find some issues with houses even when they are relatively newer structures. In such cases, the buyer requests problems be fixed or corrected before moving forward with the transaction. However, many FSBOs believe that there is nothing wrong with their home, which is why they refuse to address the issues brought forward by home inspections. As a result, the offer falls through.
A big one is that FSBOs incorrectly price their homes. FSBOs often price their homes incorrectly due to lack of experience. They set the price too high, which hinders their chances of closing the deal. This will cause FSBO homes to lack exposure and when they have exposure, buyers don’t like the price. Homes for sale by owners are often listed on a few websites, but there are many that don’t allow FSBOs to list their property. Thus, FSBOs are unable to give their homes adequate exposure in the market. However, when sellers hire a real estate agent, the professional can give a property comprehensive online exposure as well as exposure in the local real estate segment of the newspaper. The agent even has tools to extend the exposure further, which FSBOs don’t have.
Finally, FSBOs fail in the closing process. Even after an offer is accepted, many things still need to be done prior to the closing. They don’t know to get the inspections completed within the allotted time. Find out if title work is reviewed. Not knowing the laws can cause serious lawsuits that will not go the way of the FSBO because they don’t know which disclosures are mandatory. With so many things acting against FSBOs, it’s natural to find very few homes for sale by owners in the market. Even if you find one, it is a big risk.