Best home sale?

best home sale
Best way to sell a home? (infographic from keepingcurrentmatters.com)

As the housing market strengthens, consumer confidence in real estate increases.  Along with a stronger home sale market comes the increase of for-sale-by-owners (FSBO).  The obvious upside to selling a home on your own is to increase your net.  And a study conducted in 2009 may support your FSBO yearnings. But is FSBO the best home sale?

Research conducted by Hendel, Nevo, and Ortalo-Magné (2009; The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com; American Economic Review; 99:1878-98) found that homes that sold on a FSBO website sold for as much as homes that were listed in the MLS.  However, homes that sold on the MLS did so with significantly fewer days on market.  The authors also found that a significantly higher proportion of home buyers bought homes listed on the MLS.  The research concluded that “FSBO attracts a particular type of seller…” A FSBO seller is very patient to wait for someone to pay for their higher priced home.

The research conclusion about sale price is contrary to annual surveys reported by the National Association of Realtors.  For example, the National Association of Realtor’s 2015 Profile of Home Buyers and Sellers reported that the average home sale price for a FSBO was $185,000, while the average home sale price for an agent assisted home sale was $240,000.  Of course, the 2009 research indicated that homes that did not sell on the FSBO website were promptly sold on the MLS.  Besides being limited to a specific market, excluding “failed” FSBO sales from their data set could have skewed results and could explain 2009 study’s conclusion about sale prices. From NAR’s Field Guide to Quick Real Estate Statistics:

For Sale By Owner (FSBO) Statistics

  • FSBOs accounted for 8% of home sales in 2015. The typical FSBO home sold for $185,000 compared to $240,000 for agent-assisted home sales.
  • Most difficult tasks for FSBO sellers:
    • Getting the right price: 18%
    • Preparing/fixing up home for sale: 13%
    • Understanding and performing paperwork: 12%
    • Selling within the planned length of time: 3%
    • Having enough time to devote to all aspects of the sale: 3%

Going FSBO sounds simple and maybe the best home sale; but going it alone is not for everyone.  Selling a home is much more than putting a sign in the yard – especially if you are demanding top dollar.  Take your efforts up a notch to increase the probability of realizing your sales goal.  Among the many tasks that are essential for a successful home sale, consider a basic marketing plan.  Attract more buyers with professional high quality photos.  Prepare for buyers to visit your home by decluttering and making minor repairs.  You should also have a contract ready in case there is no buyer agent.  Even though you are selling FSBO, you still have to comply with federal, state, and local disclosure laws.  Be prepared for the details of the transaction, which include: negotiating home inspection repairs; providing sale comps to appraiser; dealing with the buyer’s lender and title company.

If going FSBO is intimidating, consider hiring a real estate agent that offers à-la-carte services.  The agent can assist you in many areas of your sale, only charging you for the pieces you need.  You can even pay a flat fee for a MLS placement of your sale.

If you’re like many FSBO’s, you’ll realize the value of a Realtor.  Real estate agents are housing and marketing experts that can assist you in setting a realistic sale price.  Besides freeing up your time, experienced agents can facilitate offers and are expert negotiators.  They know of latest home sale trends and are aware of any new legislation that can affect your sale.

The best home sale

You may find selling FSBO attractive.  But selling a home is in the details that are executed throughout the transaction.  The best home sale may actually be through a Realtor.  The research supports the notion that hiring a Realtor can provide a more successful and satisfying home sale than doing it FSBO.

As I wrote about FSBO’s in 2005:

How much money can you realistically save? …there as been a trend of negotiated commissions, so actual savings for a FSBO have been reduced….Additionally, FSBO’s are contracting and paying commission with more Realtors and their homebuyers in this environment of limited home inventory. In the end, the FSBO’s savings from Realtor commissions may be marginal.

… there are some real negative aspects of selling your home FSBO, such as time, expense, and contractual obligations.

How much is your time worth? Selling a home requires the application of time to tasks. Among the many tasks of selling a home, the top things that a FSBO may do include (and is not limited to) preparing the home for the open house, contacting the paper to advertise, putting up signs, meeting potential homebuyers, and negotiating contracts. The time quickly adds up.

Selling your home FSBO is supposed to save you money right? Well, there is a bit of expense that is necessary. A FSBO must have signs in the yard, as well as directionals (the small arrow signs) to point homebuyers in your direction. Additionally, you might consider paying the local paper for advertising, as well as paying for an internet advertisement (although there are many websites that will allow you to post for free). Another expense may be to have your attorney to prepare and review the contract…. It seems that the expenses also quickly add up.

…even FSBO’s are responsible to adhere to certain federal and local laws pertaining to the sale of real estate (i.e., equal housing, lead paint, Maryland disclaimer-disclosure, etc). This is the one area that FSBO’s get themselves in trouble because of the lack of knowledge and expertise. There is an increased liability potential.

Copyright © Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

FSBO is changing along with the housing market

by Dan Krell © 2010
www.DanKrell.com
home for sale

It is often said that “if you want it done right, do it yourself.” Like most idioms, this saying probably originated in a simpler time when most people could actually do it all by themselves. In a society where most people don’t cook for themselves anymore, no one really expects that they would or could do everything on their own- except when it comes to real estate.

“Doing it right” does not usually top the home owner’s list for selling their home by owner. Even though half of “for sale by owner” (FSBO) sellers knew the home buyer, the National Association of Realtors® Profile of Homebuyers and Sellers 2010 (NAR; 2010) indicates that the top reason for selling by owner is not having to pay a broker commission.

The NAR has claimed that as the housing market declined the number of FSBOs have also declined, which might be due to market conditions. As market conditions changed, selling a home required more than just a sign in the yard; this can be observed by the many agents who have resorted to wide ranging and comprehensive sales tactics (do you remember when you could sell a home with just a sign in the yard?).

Characteristics of home owners who sell on their own have also changed dramatically from just a few years ago. Besides increasingly occurring in suburban areas, NAR’s 2010 edition of Profile of Homebuyers and Sellers describes the FSBO to be more likely single and have a below median income. This has changed from the 2008 edition where FSBOs were older and had a high income. One reason for the change may be due to changing financial conditions; home owners who are facing financial challenges may be looking to increase their net by cutting out real estate agent commissions. This could be supported by the data indicating that many FSBOs have had a high sense of urgency in their sale.

home for saleIt’s not surprising that a majority of FSBO sellers claimed that the most difficult task in selling their home was getting the price right. Pricing the home correctly is important because it can not only affect your bottom line, but can determine if your home languishes on the market or sells. Even though real estate agents are typically better at pricing a home (which is supported by the 2003 National Association of Realtors® Profile of Buyers and Sellers statistic that FSBO sales net less for sellers compared to agent assisted home sales), FSBO sellers have caught up with the times and are now seeking assistance from flat fee brokers.

Another change is seen in how the internet is used. Slightly over one-quarter of FSBOs used the internet several years ago, while recent surveys indicate about 41% of FSBOs now advertise on the internet. This may be due to more FSBO sellers seeking flat fee broker services; consequently, the number of flat fee MLS brokers has dramatically increased in recent years too. Some of these flat fee brokers also offer a-la-carte services, which assist sellers in many aspects of the home sale.

As the housing market has changed, it appears the FSBO has changed too. In addition to changing characteristics, the average FSBO seller behavior has changed to include professional assistance they need to sell their home “on their own.”

Comments are welcome. This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of November 22, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

What do FSBOs know that we don’t?

Is selling FSBO better?


by Dan Krell © 2009
www.DanKrell.com

What do FSBOs know that we don’t?

Whether I drive by a “for sale by owner” sign or I come across an ad while perusing the Sunday real estate section, I often think that FSBOs (For Sale By Owner) are brave for going it alone. Is there something FSBOs know that others don’t?

Being a successful FSBO means taking your home sale seriously. Would you hire a part time real estate agent who is not genuine in marketing and showing your home? Probably not. Then why go half-way when doing it yourself? Having a serious attitude means doing the research, making a plan, and following through.

Research will help you avoid one of the biggest mistakes FSBOs make – pricing the home. If your home is not priced correctly, you’ll not only price yourself out of the market; but you’ll also waste valuable time. Therefore, using accurate and up to date neighborhood information is critical.

Online home sale resources, such as Zillow, Trulia, and tax records are helpful, however you may find that the information is not always accurate and does not tell the whole story. You can get valuable and up to date neighborhood sales information from local Realtors. Although not all Realtors may be open to helping you sell FSBO, some will! Don’t be afraid to explain that you are planning to sell FSBO and you would like a CMA for your home. Also, ask for their opinion and rationale for a list price.

Selling a home is much more than putting a sign in the yard. Having a marketing plan, even a basic one, can make a big difference in attracting home buyers. Write down the classified ads you plan to use, as well as where and when you will place them. Online ads should also be planned in advance; you will find that articulating an honest and exciting description of your home isn’t always easy.

Having an open house depends on your comfort level of having strangers traipsing through your home. When you consult a Realtor for a CMA, you might ask about open house information. You might want to consult with local police about open house safety.

Don’t forget the benefits of selling FSBO; well, there’s one major benefit- not paying a Realtor commission. But according to the 2003 National Association of Realtors Profile of Buyers and Sellers, FSBO sales net less for sellers compared to homes sold by agents. The profile reported that FSBO sales averaged $145,000 while real estate agent sales averaged $175,000 – giving the seller an average net of $19,500 more on the agent sale after a 6% commission (realtor.org).

Selling your home FSBO can have successful results; a FSBO sale can be a rewarding experience if well planned and handled properly. But before you decide to take on the sale on your own, do yourself a favor and visit a few FSBOs to get feedback about their experiences. You might find out that listing and selling real estate is not as easy as it seems; “they” will not come just because there is an ad in the paper or an internet listing; “they” will not buy at any price; “they” will not buy in any condition; “they” are not all qualified; and “they” will not always show up to settlement.

This column is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of July 13, 2009. Copyright © 2009 Dan Krell.

Selling your home FSBO

When the real estate market is good, many people try to sell their home without a Realtor. These For Sale By Owner (FSBO) sell their homes on their own for one reason-to save money on Realtor commissions. However, before embarking on such an endeavor, one should take an inventory of the pros and cons of becoming a FSBO, as well as the tools necessary to sell FSBO.

The obvious reason to sell your home FSBO, as stated above, is to save on Realtor commissions. Seasoned real estate investors may find it natural to sell a home FSBO because they control the communication as well as being able to communicate directly with potential homebuyers. First time FSBO’s may find it a bit awkward at first, but can find the rhythm necessary to complete the transaction.

How much money can you realistically save? Traditional Realtor commissions have always been around 6%, which pays the listing (homeowner) agent and the selling agent (homebuyer). However, in the last few years, there as been a trend of reduced commissions, so actual savings for a FSBO have been reduced. I have seen Realtors list a home for 4% (if you don’t believe it, send me an e-mail)! Additionally, FSBO’s are contracting and paying commission with more Realtors and their homebuyers in this environment of limited home inventory. In the end, the FSBO’s savings from Realtor commissions may be marginal.

You might think that saving money outweighs all negative aspects of selling your home FSBO. However, there are some real negative aspects of selling your home FSBO, such as time, expense, and contractual obligations.

How much is your time worth? Selling a home requires the application of time to tasks. Among the many tasks of selling a home, the top things that a FSBO may do include (and is not limited to) preparing the home for the open house, contacting the paper to advertise, putting up signs, meeting potential homebuyers, and negotiating contracts. The time quickly adds up.

Selling your home FSBO is supposed to save you money right? Well, there is a bit of expense that is necessary. A FSBO must have signs in the yard, as well as directionals (the small arrow signs) to point homebuyers in your direction. Additionally, you might consider paying the local paper for advertising, as well as paying for an internet advertisement (although there are many websites that will allow you to post for free). Another expense may be to have your attorney to review the contract to make sure it is legal and enforceable. It seems that the expenses also quickly add up.

Selling your home FSBO relieves you of certain responsibilities under the law right? Wrong. The most important thing a FSBO forgets to check is the law. That’s correct, even FSBO’s are responsible to adhere to certain federal and local laws pertaining to the sale of real estate (i.e., equal housing, lead paint, Maryland disclaimer-disclosure). This is the one area that FSBO’s get themselves in trouble because of the lack of knowledge and expertise. There is an increased liability potential.

FSBO sales are steadily increasing in the community. However, if a home owner actually does a cost analysis they may find that selling FSBO may actually not be saving them money, and actually may put them at a higher liability risk because of the lack of information and knowledge of the law. So, before you sell your home FSBO, do your homework and consult a professional.

by Dan Krell
Copyright Dan Krell 2005.