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For Sale By Owner vs Real Estate Agent

August 21st, 2010 · No Comments · For Sale By Owner, Santa Barbara Real Estate


1. The 2 most important considerations when selling a home is Price and Exposure. If your home has been on the market and has not sold, it’s one of 2 things. It wasn’t priced right, or the property didn’t receive the right kind of exposure/marketing.

Amazingly, there are some sellers that will take a house that has already been on the market and bring it back on as a For Sale By Owner? For many buyers this if often seen as an act of desperation. Oftentimes prospective buyers that are aware how long this house has been on the market previously, will worry that there may be something wrong with the property.

These sellers, even with a price reduction, don’t seem to understand why they seem to only attract bottom feeders and predatory buyers looking for a steal. And they wonder why the only calls they get are from realtors that chase Expired listings and For Sale By Owners that they hope they can convert into a client.

2. If your house is not listed that means there is no assurances to the realtor that if they show your property, that their buyer might go around them and try and cut a deal with the FSBO seller. And, why not? It happens all the time. Some buyers, if they think they can save some money, will try anything.

Without a listing agreement, there’s no guarantee that the buyer’s agent will be compensated. Even if the FSBO offers to pay the buyer’s side of the commission, most agents won’t want to go through a transaction with a self-represented seller across the table.

This means the pool of potential buyers for FSBO homes is limited primarily to unrepresented and probably unqualified prospects.

3. For Sale By Owners is an attractive concept in a Seller’s market. However, when the market starts to turn cold history has shown that people tend to use Realtors.

4. In fact, a 2002 study on Home Sellers reports that the median sales price of an agent assisted home was 27% higher than ones sold By Owner.

5. For Sale By Owners are also locked out of many home search engines and Web sites including the number one site for buyers looking for homes for sale.

6. Buyers will feel intimidated. Potential buyers will spend less time in a FSBO home especially if the homeowner is present during the showing, and they’ll be shy about discussing it’s pluses and minuses with their own agent if the owner is within earshot.

7. Buyers will also be less inclined to make an offer if they know that they’ll be negotiating directly with the seller.

8. Having an agent on each side of the transaction creates an effective emotional buffer between the seller and buyer.

9. These are unusual times, the stock market and economic markets around the world are in a tailspin. Mortgage options are limited from what they had been, and the super jumbo loan rates have gone up significantly. This is not a good time to “test” the market.

10. And lastly, Buyers are worried about potential legal problems with For Sale By Owner sellers. As we all know real estate transactions are fraught with potential liability, particularly in California where there are extensive disclosure requirements. A For Sale By Owner who overlooks even one required form or legally mandated disclosure could face a protracted and expensive buyer lawsuit after the transaction closes.

My personal experience representing a buyer in a For Sale By Owner purchase is that you end up doing both sides of the transaction so your buyer will be protected. That means making sure all the correct forms and disclosures are part of the transaction. And, when it’s all said and done, you’re only compensated for one side of the transaction. Also be very careful because you may be taking on more liability since the seller does not have any representation. It is probably wise, as an agent representing a buyer of a FSBO, to have that buyer consult with an attorney before closing. Also, document any and all conversations and maintain a “Transaction Log.” And lastly, good luck!

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