Listing Your Home For Sale By Owner (FSBO): What You Need to Know
You’ve been thinking about it for a while and you’re finally ready to sell your home. You could be relocating for a new job or simply looking for a larger house for your growing family. During these major life milestones it is important that you save every dollar you can to help finance your next home. Cutting costs can be a great way to improve your financing, but you should think twice before listing your home without a Realtor.
The Siren Song of For Sale By Owner (FSBO)
We get it – real estate agents are not cheap to hire when looking to list your home, and in BC commission packages come in all shapes and sizes. There has to be a cheaper way to sell your house, right? You heard about the concept of listing your home as a For Sale By Owner, and you have a a plan to save thousands of dollars on Realtor commissions and you won’t have to go through the effort of interviewing real estate agents. This might seem like a great idea on the surface, but when you start to investigate deeper you’ll quickly realize that this approach is penny wise, pound foolish.
Three Risks of listing your home as a FSBO
FSBO listing won’t be seen by many buyers
Getting top-dollar for your home means having as large a buyer pool as possible. The more buyers you have looking at the your home, the greater chance you’ll have at a top-dollar offer or even a multiple offer situation.
The reality is that most buyers in today’s market work with a buyer’s agent. This means that they have someone who finds properties and schedules showings on their behalf, and expects a full compensation for those efforts. These buyer’s agents use an agent-only database registered through the local real estate board called the MLS to find properties for their clients. If you are listing your home FSBO, then you won’t have access to the MLS because you’re not registered with the real estate board, and therefore will miss out on a majority of the potential buyer pool who are represented by a buyer’s agent.
For any potential buyer’s that do come to view your property with a buyer’s agent, you should be expecting to pan out a full buyer’s agent commission. If the buyers are under contract with their agent, which they probably are, and you cut the buyer’s agent commission then the buyer’s will be obligated to pay the difference. In a world where buyers have 0 expectation of paying any commission to their agent because it’s supposed to be paid by the seller, you can bet that them dishing up the difference just won’t fly.
You could run into legal trouble
Real estate is fraught with legal pitfalls that can cost you precious time and money. When you work with a real estate agent you have someone to guide you through the legal maze that is selling your home. Realtors spend their entire careers researching and working through these legal edge cases so that when something occurs during your transaction they’re able to resolve the issue quickly and effectively.
“Homeowners often look at real estate transactions through rose-colored glasses. You learn quickly that every transaction has a non-trivial quirk that could leave the sellers liable.“ Says Jeff Miller who works with a team of Maryland real estate agents. “When you make the decision whether or not to work with an agent, consider the worst case scenarios first.”
When you choose to sell your home FSBO you no longer have an experienced real estate whom you can lean on when legal questions come up. As a direct seller, you are fully liable for how the transaction is executed. You’re responsible for creating and navigating contracts, understanding how to ratify the contract, and staying in compliance with disclosure law.
Many For Sale By Owner sellers chose to work with a real estate lawyer, but when you factor in their hourly fee it becomes much more cost effective to hire a real estate agent instead. If you’re concerned with keeping as much money as possible without having to navigate the legal perils that is real estate, then hiring a real estate agent could be your most cost effective option.
You might end up with a buyer who doesn’t pan out
Reading buyers is just as much an art as it is a science. It takes years of working with buyers and sellers before you learn what behavior is typical or atypical. A good real estate agent can help you vet buyers to make sure that they have a serious intention to close on your home. They look for things like deposit terms, buyer agent responsiveness, lender reputation, and reading between the lines to give you an educated analysis on the strength of an offer.
How Can I Find a Quality Real Estate Agent?
So you’ve weighed the pros and cons and have decided that a real estate agent brings enough value to the table. Now that you’re no longer listing your home For Sale By Owner, the next step is finding one that worth the commission.
Smart consumers interview potential real estate agents before deciding which agent to hire. Nowadays, we find that too many people are interviewing only one realtor. However, it’s important to get a feel for how different realtors do business to determine who would be the best fit for you. We recommend that you interview between 2 and 4 agents and make a decision based on those interviews. To ensure you find the right agent, you need to ask the right questions. For a comprehensive list of questions, check out our post here: Questions to Ask a Realtor.
A note on real estate commissions: The negotiation process during offers is a huge player when it comes to getting more money in your pocket. Real estate is 100% commission based, and if as a realtor we can’t even negotiate on our own behalf to feed ourselves and our family, then how do you expect us to stand strong and be a shark when it comes to negotiating on your behalf? It’s not going to happen. Discount realtors just don’t have the skills, which is exactly why they discount. That’s the only value proposition they have. The realtors that are out there, hustling for you, grinding for you, and ultimately that are going to get you the highest profit are often times going to be the most expensive. Don’t make the mistake of saving money on the front end (commission) only to lose money in the backend. (sales price)
If you’re interested in a free market evaluation, then give us a call at 604-765-0376. Prefer text? 604-319-0200 or email firstname.lastname@example.org to start a conversation. We’re here to help, and we can provide you with a comprehensive pricing strategy and an estimate on the amount that you can get for your home in today’s market.
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