Why Being a For Sale by Owner May Not be in Your Best Interest
Saving the Commission. Often times the principal reason homeowners make is that they can save the commission by selling their own home by themselves. Experience proves this is not usually the case. Buyers today are very savvy. They feel, whether it is true in particular instances or not, that owners overprice their homes and what the owner expects to get for their home is inflated by the amount of the commission in order to cover the cost of advertising and other expenses required in the sale of their home.
2. Qualifying Inexperience. The owner, unless a former REALTOR, has had neither the training nor experience in qualifying buyers from all aspects, including knowing the financial ability of the purchaser to buy a home. Thus, prospects are lost through poor qualifying, or as in many cases, is not only lost but a great amount of valuable time and often expense associated with the necessity of starting over with a new buyer.
3. Get Lookers. Homeowner ads bring a great many lookers who are not really qualified to buy, wasting homeowner's time and perhaps losing a real prospect. Brokers bring people to inspect homes who are qualified financially to buy and who are interested in a specific home and location.
4. Difficulty in Purchaser Negotiations. Owners inexperienced in real estate transactions can and frequently do encounter difficulties in negotiating concessions, price, repairs, and other matters, which may lose a qualified prospect. The broker, as the professional go-between, is in far better position to handle negotiations that will lead to a sale.
5. Prospects Hidden Objections. Prospects often find it reluctant to bring out and discuss objections with the owner because of the personal element involved. They do not want to put the seller in the position of defending their own home. Thus, and owner can't represent themself properly with many prospects because the owner does not know the prospect has unrevealed objections.
6. Inexperience in Handling Objections. Techniques for handling objections professionally and effectively are the most difficult of all techniques to master in selling. Almost never does a homeowner have any such training or experience. Thus, when major objections are raised, which the professional REALTOR can handle, the inexperienced owner does not know how to properly proceed. The possible sale is lost. In addition to objections on price, buyers are certain to raise as many objections as they can on other points, putting the owner at a serious disadvantage in trying to sell their own home.
7. The Urgency of the Situation. When the time in which a home must be sold is limited, it is very unwise for an owner to take any of that time to try and sell their home themselves. When they fail, which is often the case, a broker finally selected often times does not have enough time to market the home properly to get it sold (depending on the market) before the owner moves out to leave the home vacant. A vacant home, even when redecorated, usually is more difficult to sell than one being lived in.
8. Problems with Financing. Even though a buyer secures their own financing for the purchase of a home, many homeowners when presented with an offer, do not know what a good loan to value ratio is, nor do they recognize poor earnest money offers, or unacceptably low down payments. Often a home sale is lost due to poor financing in which the seller has unwittingly accepted.
9. Lack of Prospect Sources. It is a truism in real estate selling that the more exposure a home has to qualified buyers, the more likely there will be a quicker and more favorable sale. Most sellers are limited in their sources for prospects, friends and neighbors, organization bulletin boards, and some owner advertising. On the other hand, the professional broker has a large and constantly renewing flow of prospects from which to pre-select qualified buyers for the owner's home.
10. Lack of Advertising Exposure. The owner is advertising one home; their own. The broker on the other hand is advertising many homes by comparison. It is frequent that a buyer will call a broker about one ad, only to buy a home other than the one they originally called about. Thus, through successful advertising, the broker provides many possibilities for qualified prospects.
11. Lack of Follow-up System. Homes are frequently sold on the second or subsequent visits which have been brought about by a REALTOR. The broker has a follow-up system on all prospects that haven't yet purchased a home. Usually the broker's representative accompanies prospects on inspections of other homes and when the situation is logical, brings the prospect back to homes they have previously toured for comparison. The owner can take none of these steps with only one home (their own) to sell. Often, visitors to a For Sale by Owner open house, will not provide their contact information, not even their true name, so the owner is unable to follow up with them. Again, the owner is at a distinctive disadvantage.
12. If Purchaser Has a Home of Their Own to Sell. A prospect may desire to purchase a home, but must sell their own home before they can buy. In this situation, unless the seller is a seasoned REALTOR themselves, is virtually helpless. Most homeowners would not know how to handle an offer with a must-sell contingency. A REALTOR knows how to handle these types of transactions.
13. Owner Expense. The owner may incur considerable expense in succeeding in selling their home at a somewhat reduced price. Such expenses can include newspaper advertising, cost of internet advertising, staging costs, home advertisement such as signs and brochures, legal fees, etc. When the amount of the price reduction and the expenses are added up, the owner has netted little if anything over what they would have received from a broker sale. When the seller fails to make a sale, these costs are pure costs and do not get recouped. The broker on the other hand, as part of their services, assumes all expenses for advertisement.
14. Lack of Home Selling Experience. Home buyers today are usually very tenacious shoppers, which means they want to see several homes for comparison in making a decision. Here, the owner is again at a great disadvantage. Home selling has become a profession requiring a high degree of skill and experience. The owner, without previous experience, does not know how to show a home professionally, does not know how to present benefits, and does not know how to use closing techniques that bring results. Thus visitors, whom the professional Realtor could turn into a buyer, are lost by the owner. And more time passes without the home being sold making it less attractive.
15. Buyer's Reluctance on Inspection Details. Related to the home showing are several details which may not seem at first to be of great importance, but often are. Many buyers when they are going through a home with an owner, are reluctant, or will not, open cupboards, closets, medicine cabinets, etc., because they feel this would be an intrusion on the owner's privacy. This feeling does not exist with the Realtor. Additionally, buyers are most likely not going to make comments about the home or question the seller out of fear of putting the home owner on the defensive. A Realtor is an unattached party with no emotional stake in the home.
16. Don't Know How to Justify the Asking Price. Most prospects do not make home buying decisions until they feel the selling price is right and well justified. Rarely does an owner have a record of sales of closed comparable homes in the general area as partial justification for their price. Nor does the homeowner know how to build a fact portfolio to include features, the area, or possible future developments that will result in good appreciation value, which has significant impact on the asking price.
17. Underpricing Danger. Owners are not familiar with the often rapidly changing market conditions, and the characteristics of supply and demand for a particular type of home, in specific locations, as is the experienced Realtor. As a result of lack of knowledge, owners often under-price their home, and by the time all "cost saving" expenses are paid, considerably less is netted than if the sale were handled through a broker.
18. Not a Home Problem. Rarely can the homeowner be at home virtually all of the time to receive visitors. When the prospective buyer finds nobody home they often go on to look at other homes and do not return. A Realtor, with secured access, is available to show your home virtually anytime, except during the hours the seller might exclude for personal reasons. When a prospect drives by and see a property they like, they simply take the address and make the call to their Realtor to arrange for a showing.
19. Any Strangers have Access to Your Home. The For Sale by Owner sign in the yard is an invitation to anyone to ask to see your home. While such occurrences may be infrequent, it has happened, and can happen, that undesirable strangers gain access to your home. There also have been instances when thieves have posed as prospective buyers to learn what might be of value in your home which they can steal when no one is home. If the sign is posted only when you are home and then removed in your absence, this means prospects may drive past your home and not realize your home is for sale. On the other hand, a Realtor pre-selects those who will be shown the home, making as certain as possible that only legitimate buyers tour your home.
20. Problem of 'Outside (window shopper) Lookers'. Some potentially good prospects for a home will drive by, see the For Sale by Owner sign, but for some reason not be impressed with the exterior appearance or nature of the property. Yet the interior of the home and its features may be exactly what the prospective buyer was looking for. The interior benefits of your home may considerably outweigh the exterior first impressions. So, the prospect drives on and the sale is lost. With a broker's sign in the yard, there is a significant increased odds the drive-bys would call the broker about the home, thus learning that the entire home package is just what they are looking for.
21. Lack of Future Interest. Many buyers often feel the owner has no future interest in them once the sale is complete, whereas the Realtor does. The owner sells, moves away, and no local or personal contact information is provided in the event a future problem arises that was not evident at the time of the purchase. The buyer knows the Realtor has future interest in them as a satisfied client, as a source of referrals, and in the event the buyer then needs to sell themselves and has to move in the future. The prospective buyer accepts far more readily the representations of the Realtor than a homeowner who has personal stake in selling the home. With some buyers, this knowledge or supposition of a lack of future interest deters the buyer from negotiating directly with an owner.
22. "Grain of Salt" Problem". Many buyers feel sellers are not objective about the sale of their home and are emotionally attached, whereas Realtors are not. Emotional involvement means the owner sees everything about the home in a more favorable light than what might be objectively justified. As the old adage goes, "Take what they say with a grain of salt." Sellers tend to see the home in the light of what the home meant to them and not from the perspective of the buyer. The sellers have gotten used to things that a buyer would not like. They are emotionally involved and cannot see their own home from the buyer's point of view.
23. The Settlement Problem. Once a contract is signed by the seller and buyer, a complicated and highly detailed process starts which leads to the settlement when the owner gets his payment for his home and the new owner takes possession of the home. The process involves loan processing, in which 'snags' or more serious complications arise; the legal aspects of title and deeds, overcoming possible easement situations, rights of way, and dozen of other factors involved in the final transfer of the property. These and other matters must be coordinated on a time schedule that will ensure completion of various steps in time for the established settlement date. The purchaser must be advised on everything they must do and it must be assured they do everything required in the established time frames. When concessions are involved and the owner must fulfill certain conditions before settlement, there is no one to guide the sellers about these matters. Rarely, by experience or competence can a seller make sure everything is accomplished, in the time schedule, including preparation for escrow with an attorney.
24. Market Age Problem. When the owner fails to sell their home themself as a consequence of many of the factors listed in this series, and the home is on the market for a fairly long period of time, it acquires market age. Market age is a deterrent to later selling at the proper market price. Buyers often inquire "How long has this home been on the market?" If for any length of time, after the exposure it may have had when advertised, buyers tend to think there must be something wrong with the home or it would have sold. Thus, they become more objective and skeptical, and less likely to make an offer.
25. FSBO’s are likely to stumble into legal trouble. Real estate transactions are fraught with potential liability for unwary sellers, particularly in states that have extensive disclosure requirements such as Hawaii. A FSBO who overlooks even one required form or legally mandated disclosure could face a protracted and expensive buyer lawsuit after the transaction closes.