6 things to consider when considering not using a real estate professional.
With record low inventory, top dollar prices, and rock bottom interest rates it is no surprise that the housing market is, to use the professional term, “BANANAS” right now. This means a lot of homeowners are considering selling to cash in on their equity and finally move on up to that deluxe apartment in the sky. Naturally, they are considering how to get the most cash in their pockets and the first thing that comes to mind is by saving on the realtor fees, after all, “how hard could it be?” Read along to get an idea of the work that is typically involved to decide if going For Sale By Owner (FSBO) is right for you.
Finding a buyer is the easy part.
With the aforementioned inventory shortage, low-interest rates, and the extra time at home people had in 2020 record numbers of people are surfing the internet as a means of escape. Seriously, even the New York Times had an article about it. So finding people that are curious to see inside your home isn’t the hard part. The time-consuming part is finding a buyer that is ready, willing, and able to purchase your property. Sure, you get phone calls (like a lot of phone calls) of people that want to set up a showing, sometimes they’ll even be sitting in your driveway and want to see the house immediately. But will they all be preapproved for your purchase price? Probably not. Will they all have a partner or spouse that is 100% on board with moving again? Maybe. The truth is people are curious by nature and most of us like to appreciate beautiful things; so when given the opportunity to see inside of a home that is beautifully decorated and just slightly out of our price range we’re still eager to see the home because “maybe they’ll come down on the price”. It is usually more aspirational than malicious, but it still costs the seller valuable time.
Your Phone Will Ring… OFTEN.
This goes back to the low inventory and rising rental costs again. Buyers are desperate and agents are getting creative which means you’ll likely get calls from both. You will also get calls from people asking if you will rent to own or sell “on contract”. It isn’t uncommon for prospective buyers that are only a few months away from being preapproved to propose a rent-to-own offer to a FSBO seller. Unfortunately, most sellers are not interested in being landlords and are likely to be relying on the proceeds from their sale to purchase their new home. Most of the FSBO sellers that decide to list with me cite this as their #1 reason for deciding to do so. Just to make the phone calls stop.
Vet People Before Showings.
A lot of people think they can wait until they find a home to get preapproved. In fact, some less experienced buyers may even make an offer on your property before even applying for preapproval. Experienced agents realize what a gamble this is. Plenty of prospective clients are shocked to find that an error on their credit report or a high debt to income ratio (thanks student loans) is enough to prevent them from getting preapproved for their dream home. Conversely, a buyer may be shocked to find out they can actually afford much more home than expected and decide to move on to a different home with more space or extra bells and whistles.
Any agent worth their salt should request a preapproval letter prior to showing your property. Especially in the age of COVID-19.
Unfortunately, many buyers that are turned down by agents because they aren’t preapproved are still excited about the prospect of buying their next home and are excited to view and compare properties in person. Many of these buyers will contact FSBOs because they don’t expect the owner to vet them quite as well as a real estate professional.
Similarly, you may get calls from prospective buyers and sellers that are thinking about buying or selling in the future but are not ready to talk to an agent yet (i.e. they aren’t actually ready to buy or sell yet) so they are exploring FSBOs as a way to scope out the market without having to deal with a “high-pressure salesperson”. The rationalization is that the seller must be ok with window shoppers if they expect to sell the home. While this is a completely logical thought process it also means a lot more phone calls & showings that will result in dead ends. While it is true that a certain amount of traffic is necessary to show your property to prospective buyers, it has never been more important to keep unnecessary traffic to a minimum than in the current age of COVID-19.
Ready, Willing, Able buyers are almost always working with an agent.
A whopping 89% of the time to be exact*. According to the National Survey of Home Buyers and Sellers for 2020 a whopping 89% of real estate transactions closed in 2020 were assisted by a real estate professional in some capacity. While only 8% of the total home sales of 2020 were unassisted by a real estate professional in any capacity.
You can blame this on inventory as well. The fact remains that ready, willing, and able buyers are usually on a deadline. This is especially true if their home has already sold, their lease is about to expire, or they have already accepted a new job in a new city. People that are in urgent need of housing (“A buyers” as they are known in the biz) are rarely perusing FSBO websites, making 10 individual calls, and scheduling 10 individual showings spread out over several weeks to accommodate the schedules of all buyers/sellers and family members that plan to attend each showing. These people are making one call to a Real Estate Professional and letting them sort out the scheduling nonsense. They are telling their agent what they are looking for or maybe exact addresses they want to see on Saturday and moving on to the next item on their list. After all, they’re in the middle of a move now and have a million and a half things to tick off their list before their family is ready to move.
Furthermore, many first-time buyers are intimidated by the process and are much more afraid that a more experienced FSBO seller will take advantage of their lack of knowledge. These buyers often feel more comfortable having an experienced professional representing them and protecting their interests.
Be prepared for low offers and high emotions.
Some of the most delicate conversations an agent will have with a client are the conversations around expectations. Most first-time homebuyers are unfamiliar with the costs of repairs or renovations. It isn’t uncommon for buyers to overestimate the cost of a simple repair and subtract that inflated cost from the list price to determine how much they should offer.
More experienced buyers that have not purchased real estate in several years may rely on old practices or outdated information to determine what repairs they will ask the seller to make after inspections. A buyer that asks a seller to address every item on an inspection report may offend a seller. While a buyer that pays top dollar is likely to expect a property to be in “like new” condition. These conflicting perspectives often result in heated or emotionally charged arguments and, in many cases, result in one party walking away from the contract. Meaning more lost time and lost money for both parties.
Talk to an agent before you make a final decision.
Come on, you knew it was coming. And while I genuinely home it is me that you choose to represent you, the most important thing of all is that you choose a representative that you trust to have your goals and interests in mind. Find someone that takes the time to understand your unique circumstances so they understand what is important to you along the way. Because it isn’t always the same for every seller. The grandparents selling the home they raised their family in certainly cares about money, but might also like to know that the next owner appreciates it as much as they did. A busy family shuttling back and forth between practices and recitals may be more concerned with finding a buyer that can look past some deferred maintenance they haven’t had time to take care of. An investor looking to liquidate assets may prefer a cash buyer with a quick close, even if it means taking a few thousand dollar hit.
You may be surprised to learn that paying an agent can save you time and net you more money. One way this is possible is through pricing. While you may have been keeping an eye on what has recently sold in your neighborhood a good agent should be able to price your home for where the market is going as well as where it has been. Using the MLS to see what properties are sitting on the market longer than expected as well as properties that are currently under contract that will serve as comparable sales for your property 30–45 days from now. Agents should also be monitoring policy changes and other external factors that could impact your transaction; how might an impending government shutdown affect your buyer’s USDA or VA loan for example.
As you may have noticed, most of the advantages of selling with an agent revolve around protecting the seller’s time. While saving a few thousand dollars on commissions may seem like a great idea, take some time to truly consider the time and energy cost associated with selling FSBO. Time spent on dead-end showings, phone calls from strangers sitting in your driveway asking to see the house at a moment's notice, or a few days lost while waiting by the phone for that nice couple that swore they would call when they made a decision. That time lost at work along with family weekends interrupted, it all adds up and you are more likely to find yourself losing days to save dollars.
*Copyright ©2020 “Profile of Home Buyers and Sellers.” NATIONAL ASSOCIATION OF REALTORS®. All rights reserved. Reprinted with permission. February 5, 2021, https://www.nar.realtor/research-and-statistics/quick-real-estate-statistics