With technology always on hand and information literally at their fingertips, the hyper-connected Millennial generation has taken a do-it-yourself approach when it comes to consumables, including everything from products and services, to purchases of every kind – including real estate. Generation Y might as well be called Generation DIY. The appeal in DIY lies in the flexibility, customization and let’s face it, the cost-effectiveness. As a consumer, job one is educating yourself, weighing your options, and making an informed decision. When it comes to real estate, an FSBO could be the right decision for those who want to save the commission fee and take the reins when it comes to all aspects of their transaction. But buyer and seller beware – an FSBO has some drawbacks as well. Here are five things to know about FSBO.
What is an FSBO, anyway?
FSBO is an acronym for “For Sale By Owner,” meaning the seller hasn’t retained the services of a professional agent to assist with the sale of their home. By doing all the legwork in selling your property yourself, the seller will save on the commission fees he or she would be required to pay to both the selling agent and the buyer’s agent.
Selling a home is a full-time job.
Now, we’re not saying you can’t sell your home yourself, because you can. There are plenty of resources out there to help you DIY. We’re just saying that a professional, experienced real estate agent can do a better job of it, and get you more money too. While saving on the agent’s commission might be tempting, consider what you get as part of the price you pay, including (but not limited to!):
• Setting the right asking price
• Preparing your home for sale
• Marketing the listing
• Showing the home
• Reviewing and negotiating offers
• ALL THAT PAPERWORK!
All this takes know-how and time. And you likely already have a full-time job, right? And remember that for avid home hunters, listings get stale fast. If you home’s been on the market for an extended period, due to delays related to home staging, marketing and showing, prospective buyers will lose interest fast. Remember: you only have one chance to make a first impression.
Some hard stats:
While Canadian statistics on FSBOs are limited, the US-based National Association of Realtors has done some research on the subject:
• FSBOs represented 7% of home sales in 2017.
• The typical FSBO home sold for $200,000, versus to $265,500 for agent-assisted transactions.
• FSBO methods used to market a listing:
Yard sign: 22%
Friends, relatives, or neighbours: 18%
Online classified advertisements: 6%
Open house: 10%
FSBO websites: 5%
Social media: 12%
Multiple Listing Service (MLS) website: 4%
Print newspaper advertisement: 2%
Direct mail (flyers, postcards, etc.): 2%
No advertising: 49%
• Most difficult tasks reported by FSBO sellers:
Getting the right price: 17%
Understanding and performing paperwork: 12%
Selling within the planned length of time: 5%
Preparing/fixing up the home for sale: 8%
Having enough time to devote to all aspects of the sale: 3%
Risks and rewards
For novices, the FSBO transaction can be tricky. As with all things, the more you do something, the better you’ll be at it. Experienced real estate agents can be worth their weight in gold. Again, we’re not saying you can’t sell your home yourself, and in fact, many people do. But there are risks that can be mitigated by working with someone who’s been there, done that. Potential pitfalls include:
• Pricing that could turn off prospective buyers.
• Misunderstood legal matters disclosed in writing.
• Safety concerns with showing your own home.
• Poor negotiation that leaves money on the table.
• Unrealistic promises as part of the deal.
Your agent is a Boy Scout: always prepared.
As a seller, how do you get the phone to ring? Generating interest from potential buyers is the key objective of listing agents. Especially in a buyer’s market, yard signs won’t cut it. If you’re not a real estate agent, or a marketing or advertising professional, you likely don’t know where to start – and who could blame you? Marketing through yard signs, brochures, and online and print advertising can help spread the word. How does a virtual tour sound? Do you plan to host an open house for buyers? What about an open house for agents and brokers? Beyond marketing, an FSBO means you get to juggle third parties such as a home stager, photographer, appraiser, the buyer’s agent (or if they’re DYI-ing it as well, the buyers), then throw in a pile of paperwork, just for fun – NOT.
Then there’s the legal stuff…
Once you have a buyer who is interested in purchasing your home, consider the legal side of things. The buyer will submit an offer, and when you’re confident that you have a good deal on the table (you are confident that it’s a good offer, right?), a contract will need to be signed by yourself and your buyer. Remember, if it’s not written in the contract and signed, then it doesn’t count. An Agreement of Purchase and Sale will include details about the buyer, the seller and the property. It will outline the purchase price, the deposit, fixtures and chattels, title searches, closing arrangements, conditions and clauses. A real estate lawyer can help with this step of the process. The benefit of working with an agent is that oftentimes, they already have a lawyer they regularly work with, to ensure all legal matters are handled correctly and in a timely manner.
Your home is likely your biggest asset. When you’re ready to sell the place, ensure you’re well-represented – whether you represent yourself, or are backed by a professional real estate agent. A “minor” mistake can mean the difference between a lucrative sale, or tens of thousands of dollars left on the table. As the consumer, do your due diligence and make an informed decision before you start the selling process.