05 Jan The Data Is In: Less Than 10% Of For Sale By Owners Actually Sell. Here’s Why
For sale by owners (FSBOs) motive is simple. To save money by not paying a commission. The problem is selling real estate takes expertise, databases, marketing savvy and technological know how, for starters. Not to mention, time. Recent data from a National Association of Realtors survey shows that less than 10 percent of FSBOs actually sell, which shows that most homeowners just don’t have what they need to sell their home.
1. Too many people to negotiate with
Those deciding to take the FSBO route often have to negotiate with many people. Some of them are likely to be:
- The buyer, seeking the best possible deal.
- The buyer’s agent, who represents the buyer’s best interest.
- The buyer’s attorney (in some regions of the nation).
- Home inspection companies, working for the buyer, which are likely to find some problem or the other with the house.
- Your bank, in case it’s a short sale.
- The appraiser, if the home’s value needs to be assessed.
Without the help of experienced real estate agents, dealing with so many different parties alone is often a tough task for homeowners.
2. Homeowners do not know how to prepare the home for sale
A majority of homeowners don’t know about the prelisting tasks that FSBOs should do before they list their home for sale. These usually include:
- Painting the rooms with a fresh coat of paint.
- Getting necessary repairs done.
- Getting the home floors and carpets cleaned by professions.
- Ensuring curb appeal of the home.
- Replacing outdated light fixtures.
Because homes for sale by owners just have one chance to impress potential buyers, neglecting these home sale preparation tips often reduces the homeowners’ chances of selling the house.
3. Owners do not know how to screen potential buyers
FSBOs often have no idea about the difference between prequalification and preapproval, and they don’t know that buyers should ideally be preapproved or at least prequalified.
No wonder they let unqualified buyers inspect the house and waste their precious time. Not knowing if a buyer has the ability to purchase the home acts as a big deterrent for homes for sale by owners.
4. Owners fail to solve buyer’s queries
Handling inquiries from buyers on their listings and coordinating showings for their homes are prerequisites for making a sale. However, many homeowners either aren’t able to handle such inquiries on their homes or don’t have the time for them.
Even organizing showings might become an uphill task at times. Because these days potential buyers and their agents want quick responses to their inquiries, they don’t think twice before moving on to the next potential property if their inquiries and requests are unanswered.
5. Owners don’t understand the concept of golden time
According to this concept, homeowners get the most money for their homes in the first week of putting the property on the market. The longer homes for sale by owners stay on the market, the less money people will be willing to offer for them.
If a buyer tries FSBO first and then hires an agent, the buyer would have already lost the “golden time” window. This will eliminate the buyers who have already viewed the home, might have offered unrealistically low prices and have already moved on.
6. Owners fail to understand the contract procedures
The contract to buy a home involves much more than just the price offered by the buyer. Also, real estate contracts have lots of timelines and clauses and involve several common contract contingencies, such as inspections and mortgages.
Many FSBOs don’t have a firm understanding of such contracts and might not know what they are agreeing to or how to negotiate particular parts of the contract.
7. FSBOs don’t know how to handle the home inspection findings
Home inspections almost always find some issues with houses even when they are relatively newer structures. In such cases, the buyer requests problems be fixed or corrected before moving forward with the transaction.
However, many FSBOs believe that there is nothing wrong with their home, which is why they refuse to address the issues brought forward by home inspections. As a result, the offer falls through.
8. FSBOs incorrectly price their homes
FSBOs often price their homes incorrectly due to lack of experience. They set the price too high, which hinders their chances of closing the deal.
9. FSBO homes lack exposure
Homes for sale by owners are often listed on a few websites, but there are many that don’t allow FSBOs to list their property. Thus, FSBOs are unable to give their homes adequate exposure in the market.
However, when buyers hire a real estate agent, the professional can give a property online exposure as well as exposure in the local real estate segment of the newspaper. The agent even has tools to extend the exposure further, which FSBOs don’t have.
10. FSBOs fail in the closing process
Even after an offer is accepted, many things still need to be done prior to the closing. For instance:
- Get the inspections completed within the allotted time.
- Ensure the attorney(s) approve contracts.
- Ensure that instrument survey is ordered.
- Check if the buyer has obtained written mortgage commitment.
- Find out if title work is reviewed.
- Learn whether abstract is redated.