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For Sale by Owner (FSBO)

 

For Sale By Owner (FSBO) is not for everyone (what FSBO companies don't want you to know), but it sometimes works when done properly. FSBO may actually work satisfactorily for you if

  • you have plenty of time to devote to the task (arranging appointments, seeing people through your property, handling paperwork and sales procedures)
  • you have cash available to pay for good quality advertising (remembering that even the best advertising does not guarantee results, but cheap advertising almost guarantees poor results)
  • you are willing to accept some risk (not just the legal liabilities of a complex high value transaction - the people you let into your home may not be who they seem, since your "for sale" sign is an open invitation to anyone passing to enter your home, for their purposes which may not be the same as yours)
  • you are not under any pressure to move (a FSBO sale usually takes longer, especially if your pricing is wrong)
  • you are a good negotiator (you are likely to end up facing professionals at this)
As a broad generalisation, FSBO will work best in very active markets when homes of your type are selling quickly (keeps the advertising costs down). Unfortunately these are usually homes at the lower end of the price scale, where commission costs are lowest and the benefit to the seller is least. If you are an ardent "do it yourself" enthusiast, under no pressure to move, and an agressive negotiator, then FSBO can also work to save you commission at the high end of the price range where significant commission savings may justify the high costs of advertising. In a slow market or for mid-range property (usually more commonly available in the market) it is least likely to be successful. If you are in a hurry to sell, don't waste your time: get an agent.

Jennifer and her husband sold their first home in Winnipeg using a FSBO agency believing they'd save a lot of money. Jennifer was a marketer at the time and thought it would be a breeze. "We were well over our heads. We had no idea how to price our house and just guessed, then panicked when it didn't sell the first week. We dropped the price $20,000. The showings and open houses were monotonous and it was awful always having to be on call. Finally our house sold, for I'm sure thousands less than it could have."

Since then they have sold one more home in Winnipeg and bought one more in Ontario, using Realtors both times. They consider the commissions paid to be an investment, not an expense, and regard the Realtor experience as much more positive. This is fairly typical. According to a U.S. National Association of Realtors survey, in hindsight 70 per cent of people who sell their home themselves say they would never do it again, and most sellers net far less than they would have had a Realtor been selling their home.

Lets examine the key issues from the viewpoints of FSBO and using an agent (Agency). Consider the matter carefully and make up your own mind whether FSBO is right for you and your circumstances.

IssueFSBOAgency
Best PriceAn accurate price with good advertising exposure can quickly attract high quality offers. If multiple offers come in the final selling price can often be higher than the original asking price. This is a sign of superior marketing, not an indication you could have asked more.
  - setting the price
  • highly subjective
  • usually lacks accuracy
  • often asking too much
  • occasionally set to low
  • often done improperly[1]
  • accurate market assessment
  • sometimes too high [2]
  • hardly ever too low
Least CostReal estate agents have a vested interest in convincing you to use their services. So do FSBO proponents. FSBO franchisees and organisations, advertising publishers, website and book authors all stand to profit from your experience and will encourage you to sell your own property.
  - advertising
  • fixed fee MLS listing is probably not what you think - see our 28 reasons page
  • usually unprofessional small ads
  • you pay directly for advertising
  • results are not guaranteed
  • limited coverage
  • if the internet is used it is generally on low traffic sites
  • seriously inferior, whatever you may have been told
  • top quality professional presentation
  • included in the commission
  • no payment without results
  • immediate exposure through the MLS to all agents in the area, and their buyers, and through high traffic internet pages.
  - other costs
  • fees for an accurate CMA if you have good sense and are ethical
  • commission for a buyers agent is very probable, so don't count on saving more than about 2% on commission
  • fees to professionals for help on the contractual side [4]
  • typicaly 4-5% commission (plus HST on that)
Time has valueThe most important factor in a real estate deal is time. The less time it takes to sell, the less you will be inconvenienced, and the stronger will be your negotiating position, with a greater likelihood of getting your best deal. Most FSBO sales are compromised on this point from the start because of poor advertising exposure and less availability to show.
  - allow time to
  • research, read up and plan
  • design your advertising
  • answer the phone
  • keep your home tidy and ready to show
  • show your home
  • show your home to time wasters
  • do all the paperwork
  • attend inspections
  • interview agents
  • keep your home tidy and ready to show
  • go shopping when the agent wants to show (there will be fewer showings [3])

In short, there are many advantages to engaging a Realtor to act on your behalf, and few real disadvantages. Consider the matter carefully and make up your own mind about the right way for you to proceed. Bear in mind that imagined savings are often not realised, and when they are it is often at a high cost in time and stress. Also remember that many FSBO sellers find themselves in a weakened negotiating position and obtain less than the market price for their homes as a result. If your time is valuable then we do not hesitate to advise that you get professional assistance. If that is your choice then consider our advice on choosing a Realtor.



[1] Many FSBO owners will set their price by soliciting a CMA (Current Market Assessment) from a variety of Realtors. Some Realtors offer these for free, so it may seem fair to take advantage of these offers from several agents and compare them to help set your asking price. However, the "free offer" is obviously not made as a community service, but with a view to obtaining your business, which you had no intention of giving. Using others in this way is scarcely fair, and indirectly drives up costs for other sellers. If you are "up front" about your intentions to go FSBO, Dot will do a proper CMA for a set fee, refundable if you eventually end up listing with her. You can show interested buyers that you have gone about the process in an honest and "above board" manner, and still show evidence that your property is realistically priced. Money is not everything: your conscience and reputation are also valuable.

[2] Despite professional advice, many properties on the market are still overpriced. It is natural that most sellers have an inflated view of the value of their property. After all, we chose to live in it for presumably good reasons, have cared for it and invested in it, and will hopefully be leaving it with some reluctance and mixed feelings. Professional advice on pricing is therefore often modified or overridden by the strong subjective opinions of the seller(s). Sometimes a Realtor may even leave your expectations unchallenged for fear that contradicting your opinions may lead to losing a listing opportunity. So, beware of a Realtor who seems too compliant, because a higher than reasonable price is not in your best interest. An unrealistic asking price will reduce advertising response, extend the time taken to sell, and lead to successive reductions in price and a weakened negotiating position. Nevertheless, this happens all too often.

[3] Fewer showings do not mean the agent is failing to do a good job. Actually, it indicates the reverse. It means your agent is screening out people who are unable or unlikely to buy your home. Agents can do this by only accepting appointments from qualified buyers and from other agents (who hopefully also represent only qualified buyers). An agent is in a position to ensure a prospective buyer really is willing, ready and able to purchase a particular property. A good agent also wants to save the buyer's time by not showing houses which will not be of interest. This is a good thing, since everyone benefits by not expending time and effort to no purpose.

[4] For a fixed fee, Dot can help you properly prepare any paperwork you need in the course of dealing with an offer. So can many other Realtors, agents or lawyers.

 

Site owner: Dot Turner, Sales Representative, Team Realty K W Inc, Brokerage 519-741-1400

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