The fact is, it is tough to sell real estate by owner. Only a small percentage of sellers who list their homes by owner are able to sell by themselves. For sale by owner homes are not part of “the network” and don’t get nearly the exposure homes listed with real estate agents get.
From a buyers perspective it is less convenient, and less comfortable to view and buy for sale by owner homes. A few of the reasons include:
Most people who attempt selling by owner do so because they want to save money. They want to net the maximum possible dollar amount out of the real estate transaction. There’s nothing wrong with this, but there are a couple of points sellers attempting to go about it by themselves need to consider if they want their house to actually sell:
1. For Sale by Owner homes must be priced less than market value– Selling by owner is a huge disadvantage in terms of marketing exposure. Buyers aren’t going to go about the extra work of finding a home, unless they are going to be rewarded by a discount in price.
2. FSBO sellers need to be flexible with the price – For sale by owner sellers should make sure the advertised price allows room to pay for a buyers agent commission/and or closing costs.
When home buyers begin the search, they almost always begin by using a real estate agent. Most homes for sale in Utah are listed by real estate agents, and chances are that a listed home will be the one they eventually buy. When buyers begin working with real estate agents, they sign a “buyers agency” agreement. Buyers don’t have to pay ANYTHING to their buyers agent if they buy a home that is listed on the MLS. If the home is not listed on the MLS, then the buyers must pay their agent a commission, typically 3%, if a FSBO seller is unwilling to pay their commission.
Home buyers themselves almost Never have money themselves to pay their buyers agent a 3% commission. They usually need every penny they have saved to go towards down payment and closing costs. So, if for sale by owners aren’t willing to pay a 3% commission, then they have essentially eliminated 90% of the potential home buyers who can actually find their home that is for sale.
This last week I helped a potential buyer look at a for sale by owner home. Before viewing the home, we asked the potential seller if they would be willing to pay an agent commission. They said they would, and I ended up showing them the house for sale. The buyers really liked the house, and were ready to make a FULL PRICE offer. When we talked to the sellers again, they said they would only pay a lower agent commission, and that the commission would have to be added on to the purchase price. When the buyers heard this, they decided to back off. The FSBO sellers waffling cost them the deal of represented, qualified, home buyers. Had the home been priced a couple thousand more, and had they been willing to pay the buyer agents commission, this house would likely be under contract today.