How Successful Are ‘For Sale By Owner’ Sellers?
If you’re thinking about selling your house, you may ask yourself: “How successful are ‘For Sale By Owner’ Sellers? Could I sell my house myself and save the commission?” If that’s you, here’s some information you may find interesting:
According to The National Association of Realtors’ annual reports, typically 8-10% of sellers sell their home For Sale By Owner (FSBO) each year. About 40% of those FSBOs (40% of the 8-10%), already knew the buyer who would purchase their home (friend, family member, coworker, etc). Doing the math on that: 40% of 8-10% means only 3-4% of home sellers successfully sell their home to a stranger without the help of a real estate agent.
Keep in mind, you’re dealing with the sale of a very high-dollar asset (your home). The difference between success and failure in real estate usually equates to a lot of money.
Fun Fact: The founder of ForSaleByOwner.com, Colby Sambrotto, tried selling his home FSBO, but gave up and hired a Realtor after 6 months. The Realtor actually did sell Sambrotto’s home, and for $150k more than the original, FSBO asking price.
#HeadlinesOfTheDay #TrueStory
Let’s say you’re determined to be one of the 3-4% of sellers who successfully sell their home FSBO. I get it. I’m a natural a Do-It-Yourselfer, so I can relate. I love doing house projects. I always think “I can do that myself, the way I want it done, and save money”. But, most of the time, after tackling the learning curve, investing in the tools and resources, re-doing things a couple times, I end up either breaking even or losing time and money. By the 2nd or 3rd time I do a particular type of house project, I’m usually pretty good at it. But, those projects never involve hundreds of thousands of dollars like selling your house does. And you usually don’t get to practice selling your house a couple times to get it right.
You Want To Wait And Try To Sell It Yourself
A lot of sellers think there is no harm in trying to sell their home themselves before hiring an agent. If you’re serious about selling your house for top dollar, in a time frame that works with the other things you have happening in your life, consider this: 91% of FSBO sellers eventually hire an agent, but usually not without first spending considerable time and energy. And, if your timeline is important, like most people, it might make sense to work on finding the right agent to begin with. Here are a just a few reasons waiting can cost you money in real estate:
- Maintaining multiple residences and/or letting property sit vacant is expensive.
- Real estate bubbles are rare, but market cycles aren’t. The market will eventually cool off. The Kansas City Metro doesn’t see the wild up-and-down price swings found in bigger markets, but we still have market cycles.
- Things break over time: would you rather replace the AC or roof at your old house or your new house?
- Acts of God: see previous bullet point.
- Upsizing in an appreciating market means your next home could be increasing in value faster than your old one.
- Historically-low interest rates can go up. What’s 1/2 a percent on $100k for 30 years? Try $15k.
Your Buyer Most Likely Has An Agent
What are the chances the world’s best buyer doesn’t even know your house is for sale? What could that cost you? Almost 90% of home buyers use a real estate agent to help them purchase a home. In order to get top dollar for your home, you’ll want to include them in your pool of potential buyers. Without them, you’re left with just 10% of the market. At that point, the law of supply and demand will be working against you.
Also, finding a buyer is just the first step. Getting the buyer to actually complete the deal is the important part. Buyers working with an agent are generally better qualified and better counseled. That means they’re much less likely to get cold feet and back out of a deal. An experienced agent also knows how to work through all the potential hiccups that can occur in a real estate transaction.
Attracting Bargain Hunters and Unqualified Buyers
When people see a For Sale By Owner sign, they automatically think “That seller is saving money on the commission, so we can offer them less”. So, the money you hope to save on commission becomes the discount the buyer expects from the get go.
When you get a call from a persistent “buyer”, how will you know they’re financially qualified to purchase your home? Have they been pre-qualified by a trusted lender? If you have multiple buyers, with similar offers, how do you know who’s the strongest buyer?
If this is a first-time home buyer, have they properly evaluated their options? Without the help of a professional, it’s possible they might not really know what they’re looking for in a home. It’s very likely they could get excited about your house at first, then have second thoughts and end up backing out of the deal.
There is a whole population of non-qualified time-wasters and dishonorable characters willing to traipse through your house if you’ll let them. Dealing with them alone can be a full time job!
Selling Your House and Buying Another: Timing & Skill
Do you have to sell your current home to purchase your next one? Coordinating the sale of your house with the purchase of a new home is a very complicated process. It means hitting the market strong with the right price, right marketing, and right strategy to be sure the timing works.
In a low inventory market, there’s almost no chance the seller of your next home is going to even consider your offer if it’s contingent upon you selling your home first, especially if it’s not even on the market with a professional. Ideally, you need to have a your home on the market, or better, have a buyer lined up before shopping for a new home. The last thing you want to do is rush into accepting a less-than-desirable offer, or overpaying for a new home because you did things in the wrong order.
In real estate, things only seem to move fast when you’re not ready. When you’re not ready, you have to RUSH to keep up. When you rush things in real estate, it almost always means you’re losing money. The better path is to have a proven plan, and work it properly.
Pricing
When trying to determine the value of your home, please don’t use Zillow’s Zestimate®. Let me repeat, please don’t use Zillow. The information is so inaccurate, it’s dangerous. If you weren’t already aware, please check out How Accurate is Zestimate in KC.
Using the county property tax assessment isn’t a great way to determine value either. It’s simply a way for the county to assess how much property tax you will pay. There’s no way they can accurately determine the value of all the homes in the county, and that’s not the purpose of their “appraisal” anyway.
Hiring our own appraiser will provide you with one professional’s opinion of value, but 10 different appraisers will likely give you 10 different opinions of value. And, the appraiser isn’t likely to buy your house…unfortunately. Wouldn’t be easier if they did? 🙂
You need good data to price your home accurately. But, regardless of how accurate your data is, picking a price is only part of the equation. You need a comprehensive pricing strategy that will assure you that you’re not leaving money on the table.
Remember, you have to sell the value of your home in 2 ways:
- To the buyer who is comparing your house to all of the other homes available to them.
- To the appraiser who is protecting the bank from lending more than the house is worth. They are looking at comparable homes that have already sold.
Paperwork Part 1: Disclosures & Liability
The Latin term caveat emptor means “Let the buyer beware”. In real estate, it’s the buyer’s job to do proper due diligence before purchasing a property. However, any “material facts” known by the seller must be disclosed. A material fact is information about the property that, if known, would likely influence a buyer’s decisions related to purchasing the property. But, it’s not the same as personal information such as how much you paid for the house, or how much you owe.
Sellers are required to disclose known material facts regardless of whether or not they hire an agent to sell their house. Some people think they don’t have the same obligation as real estate professionals to disclose what they know. That is a very sure way to end up in court.
So now that you know about disclosing all the material facts about your home…did you leave anything out?
- Was your home built before 1978?
- What about a leaky basement, asbestos, mold, or radon?
- What about that DIY electrical repair you aren’t too sure about?
- Have there even been illegal narcotics produced on your property (i.e. methamphetamine)?
- Does the shed in your backyard sit 1/2 way onto your neighbor’s property?
Prevent future disputes by properly disclosing, in writing, what you know to be true about your home.
Paperwork Part 2: Purchase Contracts
Think selling your home is simple? On the surface it can seem that way. 2 parties agree on a price, and voilà!, it’s sold…right? Not always….or, hardly ever. Real estate deals fall apart for many reasons. Every deal is different and has it’s own complexities. Chances are you’ll encounter complications while selling your home. What if X happens? What if Y happens? Who pays for Z?
Having detailed contracts that address the common aspects seen in most real estate transactions can keep a deal together. Most real estate agents in the KC Metro are members of the Kansas City Regional Association of Realtors, and have access to a library of outstanding contracts. Those contracts are written by lawyers with the help of Realtors, and are designed to be fair and thorough. They’re also continuously updated and perfected to address changes to laws or other problems that can occur.
Further, having an agent with an excellent understanding of these contracts is very important. A good agent knows them very well, what they mean, and how they work, etc. Sure, you can find blank contracts online, or at the office supply store, but I would highly recommend you don’t risk using them. They’re generic at best, and often don’t take into account local and state-specific laws. Remember, you’re dealing with the sale of a very high-dollar asset (your home).
In Closing
If you knew that by hiring a qualified real estate agent to sell your house, you could walk away with more money than if you tried to sell your house yourself, wouldn’t you at least want to hear more about it? Let’s talk!
Justin Rollheiser – REALTOR®
Keller Williams Realty | Diamond Partners Inc
13671 S Mur-Len Rd | Olathe, KS 66062
Direct 913-548-5972
Office 913-322-5878
Comments or Questions?