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For Sale By Owner — To FSBO or Not To FSBO?

Nef Cortez

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Each year many homeowners decide to maximize the profit on their home sales by selling it “For Sale By Owner”. At first glance, this is the most tempting option to most homeowners especially in the current real estate market with its rapid appreciation rate. Why pay substantial broker fees when they can pocket several thousand dollars themselves? While this attitude is completely understandable it doesn’t realistically reflect the services a professional realtor truly does offer.

Last year, according to the National Association of Realtors “Profile of Home Buyers and Sellers”, 13 percent of all home sellers chose the FSBO route. More telling than these numbers, is the fact that one third of all FSBOs sold their homes to someone they knew prior to the transaction which means that the actual figure of FSBO transactions to strangers is realistically at eight percent. This is a significant downward trend from 18 percent eight years ago.

Even more telling was that only half of last year’s FSBOs, according to the article, plan to go it alone again. Why? Many FSBOs are not aware of the increasing complexities of the transaction process, especially in California, with more complex disclosures and legal requirements required than ever before. In addition, they were often unprepared for the required time to market and show their property, the competitiveness of the real estate industry, and awareness of the various fees required for outside consultants, inspectors, appraisers, title companies, escrow and loan officers.

Of course, this does not mean that selling your home via FSBO is not a good option for some home sellers, in some cases it may be. However what it does mean is that you need a clear idea of what responsibilities you will be assuming in contrast to hiring a professional realtor and calculating whether the costs and time invested will be worth it to you.

Some questions to consider if you intend to FSBO:

1) Do I have the time, energy, skill-set and ability to devote in selling my home?

2) Am I prepared to deal with an onslaught of buyers, including savvy investors and realtors, who perceive FSBO’s as targets for low balling?

3) Do I know how to market my property properly?

4) Am I familiar with the trends in the national real estate industry as well as my local real estate market?

5) Am I prepared to offer financing options to the buyer?

6) Will I be dealing with only pre-qualified buyers?

7) Am I prepared to answer questions about financing?

8) Do I fully understand the disclosure process and legal ramifications for my state?

9) Do I have the skill-set to successfully negotiate the handling of legal contracts, agreements, and any disputes with buyers before or after the offer is presented?

10) Am I familiar with competent professionals that will be involved in the transaction such as title, home inspectors, appraisers, escrow company and their fees?

11) Am I able to project and account for all the hidden costs, time factored in, marketing costs, and fees paid?

The above items are a few of the factors that the home seller should consider before selling his home on his own. Also, one important item to keep in mind is that very much like the title of Harvey Mackay’s famous book, “Swim With The Sharks”, real estate is very competitive and the buyer is just as equally motivated to get the lowest sales price, with the most concessions as the seller is to get the highest sales price the market will bear.

Most importantly, the facts are, sellers make more money when they use a real estate professional. According to the National Realtor’s Association survey, “Homes sold with the assistance of a real estate professional in 2005 sold on average for 16 percent more than FSBO sales. ” As in many other industries, realtors vary in experience and skill level. Real estate is as populated with mediocre realtors as well as with excellent ones. However, hiring a skilled, full-time professional realtor, who is in the top twenty percent of his industry, to handle your sales transaction will be worth every penny of his or her’s broker fee.

Nef Cortez has been a licensed real estate broker and has held various positions in the real estate industry for over 25+ years. Visit his website at Diamond Bar Homes for information on foreclosures.


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