When you list your property as For Sale By Owner (FSBO), you actually end up losing more money than you would pay an agent in commission. The National Association of Realtors says that FSBO properties sell for 8% less than homes listed with a professional agent.
There are four main reasons why FSBO properties lose money:
1. Marketing. Marketing and presentation are key to getting top dollar for your home. A professional real estate agent will have the people, the expertise, and the resources to present your home in the best light to the widest audience of qualified buyers, which ultimately yields a higher sales price.
2. Conflict. There are buyers in the market looking for a home without an agent. These buyers and FSBO sellers both expect to save money on the agent’s commission but, unfortunately, both parties cannot save money. Ultimately, the seller ends up taking less money for their house because buyers without agents make up a small percentage of buyers on the market. Plus, unrepresented buyers target FSBO properties because they think they will get a better deal.
A serious, educated buyer will have an agent because they know working with an agent is the best way to get access to the most homes on the market. Those buyers will know whether a FSBO property is overpriced or not.
3. People pay more when a salesperson is involved. For example, when you go on Craigslist, you expect to pay less for an item than you would in a store. Most of us wouldn’t buy a diamond ring from someone off the street. We’ll go into a store and pay retail value for the quality and integrity of the product.
When a salesperson is involved, buyers trust that the item they are purchasing is of good quality, so they are more willing to pay a higher price than they would if they were buying something directly from its owner.
The same holds true for buying homes. When an agent is involved, buyers are okay with paying more because they trust that the transaction is in good hands.
4. Negotiations. FSBO owners may be able to obtain an offer, especially in a seller’s market. However, FSBO sellers are not marketing to the widest audience, so you are not going to get the highest offer or the best sales price that you can.
Plus, once you get an offer, you have to actually make it to the closing table. I’ve seen a number of FSBO deals go under contract for $25,000 or even $30,000 less than market value only for the deal to fall apart. Most of these deals dissolve over repair items. Neither party knows what to look for and no one is being coached to negotiate towards the middle, so both sides dig their heels in and the deal falls apart.
It doesn’t matter what the contract says your sales price is if you can’t close.
These four factors produce that 8% sales deficit between FSBO properties and properties represented by a professional real estate agent. If you think you should skip the agent to save 3% or 4% on commission, keep in mind that you will end up losing twice that amount.
From a numbers standpoint, it simply makes more sense to hire a professional agent.
If you have any questions about selling your home in today’s market, just give me a call or send me an email. I would be happy to help you!