The Chicago Real Estate Minute

13 powerful reasons selling a home by owner is a bad idea

For most home­own­ers con­sid­er­ing it, to say that there are more questions than answers is an understatement. 
9 minute read

The google search “what forms do I need to sell my house by owner” yields over six billion results (yes, billion). Selling a home by owner, known as a FSBO (pro­nounced “fizbo”) in the biz, is a thought that some home­own­ers may have but most smartly shy away from it. Here are 13 reasons why it makes more sense to work with an agent.

1) Knowledge of the process

Image by Gerd Altmann from Pixabay

There is a logical pro­gres­sion of events that lead to the suc­cess­ful sale of a home. A knowl­edge­able and expe­ri­enced agent will know these details cold, and work to ensure that all goes as smoothly as possible. If selling a home by owner, ask yourself:

  • What is supposed to happen, and when?
  • Are things going the way they’re supposed to?
  • What happens next if things go sideways?
  • What can be done if a deal falls apart?

2) How to determine home value

This is the biggest challenge someone selling a home by owner faces. They have no frame of reference, no expert, no advocate guiding them along the way. They normally expect they will receive full reim­burse­ment for any improve­ments or costs sunk into the home and bake them into their listing price. 

Selling is an emotional process to begin with, so doing it without an agent makes it 10x more extreme. These sellers tend to over-inflate what their home is worth — either by basing their list price on what others (that may or may not be similar) are asking, or thinking that their home is worth $10,000 more because it has one extra square foot of granite.

Accessing the recently sold infor­ma­tion can be done online by anyone. The value of a broker isn’t in having the infor­ma­tion, it’s in being able to correctly interpret the infor­ma­tion. The best comps are based on three things — sim­i­lar­i­ty, proximity, and recency. Another important factor that someone selling a home by owner won’t know is how the market trends may have changed since one or more of the comps have sold.

3) How to prepare the home

Oh, how a fresh set of eyes makes a dif­fer­ence when a home is being sold. Someone selling a home by owner is often noseblind to how their home smells. And they think that the way they have lived in the home is how everyone else would live in the home, therefore assuming that’s how it should be shown to potential buyers. Selling a home requires a five sense appeal, and preparing your home without help is a major problem for most.

4) Marketing of the home

Talk about putting your foot in a bucket … Someone selling a home by owner often knows very little about how to do so and knows even less about how to properly market it. 

5) Liability of selling a home by owner

When someone is selling a home by owner, they usually have no idea about all that is involved. And many of those aspects of selling can include handling the process the way it’s supposed to go — and therefore under­stand­ing the liability that must be assumed by someone. And if you’re a seller selling on your own, that someone is you.

6) Expecting to save themselves money

This is likely the reason most people selling a home by owner are trying to do so. They want to save money, at least on the “listing side” (i.e. they’ll pay a buyer’s agent but want to save paying an agent to represent them). I’ve got bad news though … When a buyer sees a home being sold “by owner”, guess what their first thought is? Yep, that they deserve to get the money the seller is trying to save. 

How can both the buyer and the seller save the same money? Spoiler Alert: they can’t. And what’s the dif­fer­ence in average selling price between working with an agent or going FSBO? A whopping 24.67%!

7) Handling showings & open houses

Many FSBOs are also DIY’ers who just figure that this is something else they can do on their own. And more power to them. Except, they don’t realize that they are likely taking on a second job when needing to coör­di­nate and handle the showing requests that come in. If they plan to be there when buyers are viewing the home, they are now tied to the home for all showings. 

Image by Paul Brennan from Pixabay

Sellers make plans just like everyone else, and when a showing request comes up, it often throws a monkey wrench into the works. And oh by the way, sellers who think that a buyer will change their schedule around in order to see their home if the time requested won’t work are dead wrong. There are often other homes that can replace it on the schedule, and buyers likely assume that a FSBO will probably be more of a headache to begin with due to the fact they don’t have an agent guiding them.

Open houses are another touchy subject. How should a FSBO handle them? Another hassle that gets alle­vi­at­ed by working with an agent.

8) Knowing what’s important to buyers

Do you think that someone selling a home by owner knows the ins-and-outs of what is most important for buyers, espe­cial­ly in the tech-driven real estate market of today? Nope.

9) Qualifying an interested buyer

So, let’s say you do get to the point of having a buyer view the home. How do you gauge their interest level? How do you get feedback to begin with for that matter? Do you just take a buyer’s word for it when they say they can buy your home — if not, what is accept­able to prove it?

10) Negotiating your own sale

Remember the part about emotions naturally being part of the process for a seller? For those selling a home by owner, they have no filter between them­selves and the offer terms — terms that are often not seller-friendly on the outset. Mix a buyer-friendly offer with lack of seller expe­ri­ence, ample seller frus­tra­tion and lack of an advocate and what do you get? A hot mess.

11) Handling the inspection

If you think a FSBO may have struggled so far, just wait until the inspec­tion comes around … The inspec­tion is an everyday, common occur­rence in real estate. But when a seller is handling it without an agent’s guidance, it can get ugly. Does the seller attend the inspec­tion? If so, they will likely hover over the inspector and explain why things are the way they are — a surefire turnoff for any potential buyer.

12) Attorney review & closing process

Image by edar from Pixabay

Even after the inspec­tion, the often extensive attorney review period and remainder of the process are still ahead. Most FSBOs do have an attorney, but it’s hard to know whether it’s one that “does some real estate” or one that focuses exclu­sive­ly on it. 

Most sellers working with an agent also know that they should work with an attorney who’s sole business is real estate, while those selling on their own may think their cousin Joey might be able to handle it and save them a few bucks (and remember, they’re often motivated by the prospect of saving money). If I had a nickel for every time an unqual­i­fied attorney messed up an otherwise perfectly good deal, I’d have a lot of nickels.

13) Knowing reputable tradespeople

Yet another hidden benefit of working with a knowl­edge­able and expe­ri­enced agent is tapping into their often extensive network of proven and trust­wor­thy trades­peo­ple. There are issues that come up at the inspec­tion in almost every deal. Someone selling a home by owner may just look up someone online and hope for the best. An agent may have several solid options at the ready and be able to create potential solutions almost immediately.

Final word: Selling a home by owner

There is no law stating that someone must use an agent. For those who feel they must try FSBO, they should. There is a reason (or 13) why most of them decide to work with a realtor. The number of sellers working with a realtor has con­sis­tent­ly grown while the number of FSBOs has con­sis­tent­ly dropped. Not sur­pris­ing at all.

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