We all know the housing market is tight--especially in certain price ranges. The frustration for buyers is real. Does that mean private sales should become more prominent in a demanding market? It's a dangerous game, and statistics show the overwhelming majority of both buyers and sellers opt for licensed professionals to assist in their next move. Why? Here's a few points to consider:
The National Association of Realtors’ Profile of Home Buyers and Sellers shows that “paperwork” is one of the most challenging aspects of selling a home without an agent. Simple web searches of "What forms do I need to sell my house" brings approximately 118,000,000 results. Unless the seller is a lawyer, real estate agent, or is knowledgeable in state law, understanding the paperwork is tricky. It's right to be cautious about assumptions made by a legal and real estate novice, or even some title companies that just pass out forms for sellers to use. In Minnesota, our transaction forms are updated every August--many times with significant changes. Using a Realtor saves time & hassle up front on simply obtaining the right forms.
During a FSBO (for sale by owner) process, you still require the services of an attorney. This means a “for-sale-by-owner” is going to cost you far more than if you were working with a real estate agent. Attorney's fees add up the moment you make a call. Next, negotiating a sale price is tricky. Many homeowners have "biased eyes when it comes to the value of their home. Even if the homeowner has employed the services of an online discount broker or a for-sale-by-owner company, there’s no guarantee that he or she will have accurately priced the home for the market. In fact, many of these companies aren’t even run by real estate professionals, there’s a very real possibility that the homeowner received inaccurate advice and that home you’re contemplating making an offer on is overpriced. This brings up the third money issue…how will you know that you aren’t overpaying for the home? There is a common assumption that since the seller is saving money by not having to pay a real estate commission, he or she will pass some of that savings on to the buyer. In reality, the buyer’s goal is to same themselves money, not their potential buyer. Many times the discount you thought you were receiving actually costs you in the end.
Nationally, sellers are supposed to disclose the presence of lead-based paint in their home if it was built before 1978, and radon readings if the the home has been tested. Sellers are required to disclose any material defects concerning the property that would affect your use and enjoyment. However, there is a provision that the seller is only required to disclose items that are within his or her knowledge. An unscrupulous or ignorant seller may see this as an opportunity to “fudge” on the details. Sellers represented by professional real estate agents, on the other hand, are warned that anything less than complete honesty is not in their best interests, and has legal implications. Protect yourself before looking at FSBO’s by communicating with your real estate agent. He or she can approach the homeowners to determine if they are amenable to paying the agent’s commission. This way, you are represented and protected, and at no cost to you.
-Don't sign anything until you’ve run it by your agent/attorney.
-Deposit your earnest money deposit with a neutral third party (ask your lender how to set this up) – never give it to the seller.
-A home inspection contingency is a good idea, especially if you lack construction & mechanical experience.
If you're a seller, you'll need to make sure the buyer is qualified. Some loan products can be difficult, and even require the house to be in a certain condition before sale. In some cases, buyers don't understand the process, and even if they are approved, may do something that affects their credit before closing and knocks them out of approval status, leaving you back as square one. Buyers--before you even tread into the FSBO pool of home sales, make sure you qualify for a mortgage, and are comfortable with the payment which includes taxes, insurance, title work, association fees, utilities, and other aspects of maintenance/improvement.
Does the buyer have a house to sell? If so, are they working with a Realtor? Their ability to get their home sold may be affected, which potentially puts you in a holding pattern. Is there an inspection contingency on the offer? What kind of requirements for repairs are requested & are they reasonable? Buyers--maybe you’ve found a home you really want, but there's big issues still on the table. Offers with too many demands and lengthy contingency periods will most likely end up being countered or rejected. All sellers want top dollar & security this deal will happen. Contingencies and how they are written play a large role in the construct of the deal.
What have other homes sold for? Are you simply going to Zillow to dial in a Zestimate? Stats show this is not a great idea. Having a professional outline recent data puts you in line with other homes in the area of similar likeness & value. If you’re purchasing a fsbo, you may be left in the dark in terms of a correct value, which can hurt you if you overpay & have to sell the home in a shorter amount of time.
When to list your home is critical. I’ve worked with several people who tried for sale by owner, but had no sense of the market time in the area, and as a result were not ready to list at the busiest point of the year. It cost them serious money. Buyers---you may miss out on a number of homes by not being among the first to view them. An agent can give you the heads up you need when time is huge. It may be challenging to create time in a busy schedule to tour homes for sale, but it’s a must if you hope to be competitive in a multiple-offer situation.
Exposure means money. The more eyes on your home—the larger the pool of buyers that see it. The more people see it, the chances of demand giving you a higher price improves. Make sense? Buyers also need to consider how a property is marketed. A sign, a flier, & a Craig’s List or Zillow ad may not exactly be aggressive, which shows intent and desire by the seller.
In the real estate industry, nothing sells a home better than photographs. Professional photography leaves a solid first impression, and potentially leads to showings in person. Homes with bad pics indicate laziness.
Real estate sales involve many factors beyond a sign & a posted ad. Your ability to get the most for your home in the shortest amount of time is driven by knowledge, visibility, & professionalism. Let’s talk about your next steps & make sure the right plan is in place for your next move.
Aaron Jones, Coldwell Banker Burnet