ERA Resources

A Closer Look at For Sale By Owner Properties

You've seen the signs displayed in front of homes of every description, and whether you're a potential homebuyer or seller you've probably wondered whether going the "For Sale By Owner" (FSBO) route is right for you.

The fact is that there have always some sellers who've chosen to attempt to sell their home without the services of a real estate professional, although their numbers have been decreasing substantially. The National Association of Realtors reports that 12 percent of sellers took the plunge in 2006, down from 13 percent in 2005 and way down from 20 percent two decades ago.

But that doesn't tell the whole story. Of that 12 percent, fully 40 percent were private sales to buyers who were known to the seller prior to the transaction; bringing actual FSBO sales on the open market down to 7 percent.

Before digging deeper into what's behind the trends, it's useful to take a look at how owners of FSBO properties attempt to connect with a buyer. Over half rely on the traditional yard sign and on getting the word out to their network of neighbors and friends. Fewer than half of FSBO sellers run newspaper ads, hold an open house or list their property on the Internet.

In the complicated and sometimes lengthy process of selling their property, FSBO sellers have voiced their share of woes, including the difficulties of setting and getting the right price, readying the property for sale, dealing with the paperwork, attracting buyers, completing the sale within a reasonable time – and simply finding enough time to do it all.

Actually, for many FSBO sellers, the answer is no. After putting in a lot of time and effort, it's far from guaranteed that sellers of FSBO properties will come out ahead. In 2006, homes sold with the assistance of a real estate professional realized 32 percent more than homes sold by owner; an average selling price of $247,000 versus $187,200.

While the statistics don't explain the reason for the difference, it's easy to see some of the advantages that using the services of a real estate professional bring to both buyers and sellers. The FSBO seller is a one-trick pony, a seller with a single product to sell. A real estate professional is not only marketing your home to buyers but to other agents who have their own network of potential buyers.

Buyers don't necessarily fare better by dealing on their own with a FSBO seller; given that many FSBO sales are off-market, the lower average selling price does not present an accurate picture of FSBO sales on the open market.

In addition, both sellers and buyers are typically subject to time constraints when it comes to completing their transaction; hitting a dead end with an unqualified buyer or a seller unfamiliar with the process is a recipe for frustration, delay and dispute.

And with a large inventory on hand and broad knowledge of the area they serve, a real estate professional is positioned to show buyers only properties within their price range that meet their specific needs.

The Internet has dramatically changed the way homes are bought and sold, but not necessarily in the way predicted by technology pundits just a few short years ago. In many ways, the Internet has transformed the role of brokers and agents and how they work with newly empowered buyers and sellers.

The use of the Internet in real estate searches has grown to the point where over 80 percent of buyers use the Internet to search for a home, yet 90 percent use a real estate professional to help with the process, and almost 85 percent of all FSBO sellers eventually list with a Realtor®, underscoring the complexity of the process of buying a home.

Historically, the number of FSBOs decline when market conditions are less than ideal. In a market characterized by softness in some areas and inventory levels that are off their historic lows, the wisdom of working with a real estate professional is clear.

Homes that remain on the market week after week are perceived as distressed properties by potential buyers, who may become wary of making even a below-market offer. The increased costs to carry a property over time further reduce any profit eventually realized by the FSBO seller. In short, the longer a property is exposed to the market, the lower the marketplace perceives its value, and the lower the price and net profit received by the seller.

As a seller of a FSBO, why would you choose to go it alone and attempt to handle the sale of your home, perhaps the largest, most complicated and most emotionally charged financial transaction of your life, particularly when working with a real estate professional has historically realized a significantly higher sale price?

As a potential buyer of a FSBO, why would you choose to invest your time and resources working with a seller with an inventory of just a single property, hoping that it is the perfect home for you, that the property is exactly as represented by the seller, and that the seller has the skill, knowledge and emotional detachment to see the transaction through to a successful conclusion?

We believe that it makes sense for sellers and buyers to work with a knowledgeable real estate professional. If you're a seller, you benefit by working with someone who can expertly market your home to a large pool of interested, qualified buyers, and can successfully guide you through what can at times be a complex and emotional process.

If you're a potential buyer, you're working with a trained professional with access to the tools and inventory to help you find just the home you're looking for and help ease the process for you, all the way through to closing.

Helping buyers and sellers realize their goals is what we do, and it's why "Always there for you" isn't a slogan – it's our job description.