Greg Bennett - The Home Expert

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For Sale By Owner - Good Money-Saving Decision or Pure Madness?

If you are a little bit of a Real Estate geek, you may find a lot of discussions on the For Sale By Owner topic. FSBO has to do with owners selling their own homes without the assistance of an agent. So if you haven’t sold a home for some time, you may be blissfully unaware of this debate.
In a nutshell, there are groups of people out there who have a DIY (do it yourself) model that will assist you in selling your own home. Kind of a no-frills version of a typical real estate agent’s function, but the seller does all the work and shoulders all the risk. This service provides the Seller with the ability to list on MLS and, in theory, get out of having to pay the real estate commission.
People want to save money wherever they can. People are always suspicious of people charging money for things that 'seem' simple. And in this day & age, there is no shortage of businesses who will tell people they are paying too much for one service, and offer an alternative, cheaper service. Nothing wrong with that I suppose. But if you don’t know what you are giving up with this new, ‘scaled-down’ service, you may find yourself signing up for more than you bargained for. Maybe. Maybe not. ‘Buyer Beware’ as they say.
Now I have not sold a home using the ‘For Sale By Owner’ model (being a Real Estate Sales Rep myself), and I don’t know anyone who has gone this route. I have bought and sold a number of my own homes before becoming an agent. As I’ve said, there appears to be lots of material online about it. But oddly, there doesn’t seem to be much when it comes to people talking about their actual experiences with FSBO. Good or bad.
So I thought I would try to look at this with my unbiased goggles firmly in place. No talking up the Real Estate Agent value or all the things they do. Just a simple speculation on what I assume the process would look like based on an average homeowner’s point of view. So here we go.
I am going to sell my home, and I am considering the ‘For Sale By Owner’ strategy. Where is my head at?
OK, my wife & I have worked hard to accumulate equity in our home, and we want to protect that equity from the cost of a real estate commission. That’s what this is all about anyway, right? So what do we have to do?
We investigate and find out that there are a variety of FSBO packages you can buy that include a basic sales kit (lawn signs, etc), and with some of the packages, we could also list on MLS for an additional fee. It seems reasonable that if we’re ‘in the online mix’ with all the other homes available in our area, we stand as good a chance as the next guy of selling. Seems reasonable enough. Then what?
We have looked at the market and come up with what we feel is a competitive price. We may choose to lower the price to make it more attractive, factoring in the savings we may make from avoiding commission payments. Probably not the entire amount, but we’d probably put a little bit of the anticipated proceeds in there for good measure. Now, just for the sake of argument, lets say that our home is in perfect selling condition, and staged in such a way that prospective buyers will see the value immediately.
We’re all right, ready to go. Bring on the Buyers!
Now with this DIY approach, I’m selling my house in pretty much the same way I’d resell a car. I would think that For Sale By Owner would be viewed as the equivalent of not buying from a dealer. To me, that means I’m going to discount the price immediately. No dealer overhead means I should be able to get it cheaper. So from a Real Estate perspective, anyone with a little negotiation savvy is going to know you are taking the FSBO approach to save the commission. So what are they going to do? Immediately discount your asking price by the commission you are trying to save. That may seem unfair, but lets face it. Its clear that you are taking this approach to save money. Why would you expect someone who knows you are saving money on a deal they are doing with you, and not want a piece (or all) of that saving?
OK, so moving on, I am also going to assume that the Buyers I’m going to be meeting are going to demonstrate a variety of negotiating strategies. Some may be logical (if I’m lucky). Some may leave me more than a bit agitated. I would expect the ‘Reality TV Effect’, which means the Buyer is going to spend all their time pointing out all the things they see wrong with my home. Real or imagined, they’ll be throwing them out there. Seriously, I’ve sold a couple of things on Kijiji, and most of the time, I felt like I was dealing with a Picker or a Pawn Star. Why would I expect anything different here?
Now if I’m not very good at defending the value of my home (or worse, I start to think that maybe I priced my place too high, based on all the negative feedback I’m hearing), then my commission saving is going to take another hit. Of course, I can go into this process with a firm position on my home’s value and what I’m prepared to accept, so I can just tell people who are just trying to cut the price beyond where I’m prepare to go to hit the road.
But again, if I’m selling my home like I’d sell a used laptop, I have no control over who shows interest, when they choose to show interest, how they behave when they show up, or even if they’re sincerely interested in buying my home (or any home for that matter). That means, we should expect to have a number of people tromping through our home, who may or may not be serious Buyers, and who may or may not leave us wanting to scream into a pillow for 15 minutes afterward.
But you’re still getting some interested Buyers, right? Theoretically yes. It is worth pointing out that the vast majority of Buyers are represented by Buyer Agents. Buyer Agents have an expectation on how their deals are done, so you should be prepared to have all your ducks in a row in terms of the agreement, because they will have requirements and specific clauses they will want included in the deal. Keep in mind, an Agent is obligated to serve & protect their clients interests. One way they do this is by making sure the paperwork includes those protections. So if you have an agent who is insisting on specific language included in the contract to sell, you can just ‘go with it’ (which means you are theoretically putting yourself at risk) or you can have a lawyer look every deal you are considering. Lawyers are not cheap.
And finally, from what I can see online, the FSBO timeline from listed to sold is much longer than a sale by agent. Because I’m trying to be unbiased, I’m not going to speculate as to why that is. It just seems to be a general point of view out there. So it seems to me that by going the FSBO route, you may be subjecting yourself to living in your house that is setup to satisfy someone else’s needs (remember, staged to appeal to prospective buyers), dealing with all manner of ‘interesting personalities’, who may not be on the level, and may think that because you’re doing this yourself, you can be taken advantage of.
Now some people may enjoy the whole social interaction that would seem to come along with this approach. Me? If there is someone out there who is willing to help me prepare, give advice not only on how much to ask, but on how to get my home ready for sale, and then someone who will act as a buffer between myself and the rest of the world (that includes both legitimate Buyers and…. well ….. weirdos), and then finally make sure the deal is pretty much bullet-proof and I’m protected, well I’m prepared to pay for that.
Maybe I’m reading this entirely wrong. And again, I haven’t been able to find many confessions of actual sellers who have been through the FSBO process. I may be projecting things on this that just don’t happen. I’d love to hear of some experiences, start to finish. I’ll keep looking. But I’ll leave you with this, and this is strictly my perspective as a homeowner.
Everyone has heard numerous and seemingly endless news items about people who are finding more & more creative ways to rip people off. Some of them wear really nice suits & ties and look completely legit. Two words. Bernie Madoff. You have to be really careful when putting your investments in play.
Also, if I don’t have the skills to ‘deal with’ something important to me, I am willing to pay someone a fair wage to do it for me. I don’t know how to change the brakes in my truck. I could probably find a video on YouTube that’ll show me how, but what do I do if the video skipped an important step, and I end up in a river somewhere? Send a strongly worded letter to the guy who made the video?
On all of the FSBO services I’ve seen advertised online, none seem to indicate that if your deal goes sideways, they will stand behind you until everything is sorted out. That is scary to me. But leaving the sale of your biggest investment in the hands of a rookie just seems…. well…. Like a rookie move. As they say 'I may be paranoid, but that doesn't mean everyone isn't out to get me'...  
Greg Bennett - The Home Expert
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