In this current real estate market, specifically in Northville, Novi and South Lyon, Michigan, I have discussions with some home owners considering selling by themselves and with no professional representation. Here are ten important reasons how I let home owners know how I can save them time, money, liability and downright hassle.
1. Liability is all on the seller
Everyone makes mistakes. A seller who doesn’t have the representation of a licensed agent pays for those mistakes. Attorneys can close a real estate transaction, but they don’t carry errors and omissions (E&O) insurance.
For an example, if homeowner Sandy lists “hardwood floors” as a feature and the buyer discovers it’s just a wood veneer, chances are Sandy is going to pay for that mistake.
An agent would have either caught the mistake or covered it with E&O insurance. Let’s face it: this is a litigious society, so what homeowner wants to be a target for lawsuits?
This is a litigious society, so what homeowner wants to be a target for lawsuits?
2. Paperwork is daunting
The 2016 National Association of Realtors’ Profile of Home Buyers and Sellers showed that understanding paperwork was one of the most difficult tasks for FSBO’s.
Depending on the state, there are a variety of legal forms that are needed, including but not limited to a sales contract, property disclosures, occupancy agreements and lead paint records.
Sure, ready-made contracts can be downloaded easily enough. But does an untrained seller understand what all that means? Would the seller know how to customize that one-size-fits-all contract?
Understanding paperwork is one of themes daunting tasks when selling by owner.
3. Do you really know who your inviting into your home
Unfortunately we do live in a world that there are criminals who prey on FSBO’s. Do you really know who your letting into your home? I have heard of too many situations of items being stolen or broken during a showing of a FSBO’s home. I have even heard of home owners being held at gunpoint and robbed.
For every showing we schedule for our clients, we verify that the buyers agent is licensed with the State of Michigan and in good standing with our local real estate board. Can you put a price on having piece of mind knowing your home is being shown by a professional.
4. FSBO’s sell for less
In 2016, FSBO’s lost about 16 percent of the sales price with a median selling price of $210,000 (agent-assisted homes sold for $249,000).
Homeowners selling by themselves simply don’t have the time to devote to the process, don’t know the market value, don’t understand market reports and don’t properly market the property.
If the FSBO seller sold to someone he or she knew, the median dropped to $151,900 (because cousin Sue is doing them a favor and expects a deal).
5. FSBO’s spend more time on the market
Unless the seller knows someone who wants to buy the home, FSBO’s take longer to sell than homes listed with an agent. For the same reasons, they can’t get the right selling price.
No one is “behind the curtain” running the marketing show. On average, 18 percent of FSBO’s were unable to sell within their chosen time frame last year.
6. FSBO’s lack representation
There’s no one looking out for the homeowners who sell on their own. They have no one to call if they have a problem or a question. A homeowner with no representation could be out thousands of dollars unnecessarily if not prepared for the many contingencies involved in a transaction.
7. inspections are problematic
Sellers who don’t know the rules can get stuck with unnecessary and costly repairs. Some inspectors will state items need to be repaired or replaced because the code had changed. The truth is if the home was up to code when the house was built, the seller may not be responsible for these changes.
8. Marketing is limited
FSBO’s have limited resources to market their home. The 2016 NAR Profile of Home Sellers showed 42 percent rely on a yard sign, 32 percent rely on friends and family, and about 15 percent use social media.
Relying on the neighbors and Uncle Bob’s second cousin has its limitations. Even paying for the MLS listing won’t be enough because there’s no incentive for an agent to bring a buyer to a FSBO.
9. Hidden costs add up
The mindset for most FSBO’s is saving money. Chances are, these sellers are being nickeled and dimed into a pretty big chunk of change.
They’re paying for a lot of extras: signage, flyers, photography, MLS listing, attorney, home warranty (optional but hard to sell without one), home inspection, a wood destroying pest inspection, credit report for buyers (if applicable), contracts and the list goes on.
10. Time costs the seller money
The biggest cost to a homeowner is their time. You might hear the argument that it doesn’t take an agent that much time to sell a house. And honestly, given the technology at our disposal, that’s true — to an extent.
But it will take a homeowner a whole lot longer. They don’t have the expertise or the access to the resources agents have. What is their own time worth to them? How much time will the seller spend researching the market and contracts? Is the seller going to leave work to unlock the house each time there’s a showing?
FSBO’s don’t have the expertise or the access to the resources agents have. When you add up everything, and way out the pros and cons, I would hope you agree it is worth hiring a professional.