There are many ways to sell your house: through a real estate agent, to an investor, or through the For-Sale-By-Owner (FSBO) approach. Each approach has its intricacies, but none is as complicated as FSBO. You know why? Many homeowners who choose this route are not equipped with the knowledge to handle the problems that come with selling a house on your own. Many of them are selling on their own for two primary reasons:
- to avoid paying real estate commissions, and
- they think it can’t be that hard.
You’ve heard that it is a seller’s market out there, so how hard can it be? Anyone can handle the sale process and get a good outcome, right? Well, it may be harder than you think.
If you have chosen to sell your house yourself, it is essential to know the multiple challenges of this method. We are not trying to dissuade you (or persuade you to hire us as your agent). Instead, we are here to help you understand this process better so you can succeed. In this article, we highlight the five most common problems with selling your house through FSBO.
1. Preparing their home for sale
Regardless of the method of sale you use, preparing your home plays a crucial role in your home’s successful sale. But, this is a big challenge that many FSBO sellers face. According to statistics by the NAR, 13% of FSBO sellers find preparing their home for sale challenging. A majority of their problems come from the fact that buyer-appointed home inspectors keep seeing issues with some of the things the homeowners may think are unnecessary.
When preparing to put your house up for sale without professional representation, ask yourself the following; Are there any inexpensive updates I can make to my bathroom? Do I need to repaint or touch up some parts of your house? How is my home curb appeal? Is your home entirely “up to code”? Check out helpful tips on how to handle home improvement before a sale.
Next, there is a need to reveal information concerning the repairs you must make in your seller disclosure form. According to the law, disclosures must be made if they are considered “material”. So, how do you determine if a disclosure is “material”?
While we may not be attorneys, we believe the definition of “material” includes anything that could affect the financial outcome or influence a buyer’s decisions in purchasing a property. A former Real Estate Commissioner for the State of Utah commented that this definition was “pretty good.” Based on this definition, something is considered material – not when you think it to be relevant or not, but if any buyer can have their decision influenced by that thing. Failure to disclose (what a buyer assumes is) a vital detail could subject you to lawsuits – even after your home is sold! You definitely do not want that.
2. Setting the right price
We are emotionally attached to our homes – rightfully so. We made wonderful memories in them. Memories like watching your baby take their first steps or starting that wonderful family tradition. This emotional attachment becomes a problem for many FSBO sellers as it may prevent them from objectively pricing their property. Instead, they feel the value of their houses is worth more than it is. For example, where the buyer sees serious damage, a seller may see a memory of their child accidentally kicking a ball through the window during soccer practice before winning the state tournament. The seller can live with that “small” damage, but a homebuyer can’t.
Many homeowners think that they can simply use a price estimate from a website like Zillow or Trulia. While those websites can be helpful, Utah is a “non-disclosure” state. This means that sites like Zillow don’t have the full picture. Consequently, those sites often give incorrect pricing numbers. Only a licensed real estate agent or appraiser can access accurate pricing requires obtaining actual sales data from the Multiple Listing Service (MLS)
Then there is the problem of underpricing. Remember that you will be very busy trying to prepare your home to be sold. You may not even have time to perform market research, read market reports, and draw inferences. Also, you may not be able to accurately interpret real estate reports and arrive at the house’s exact value. Without this experience, you can potentially undervalue your property and sell it for way less than it’s worth.
How can you, as an FSBO seller, know your home’s actual market value?
The most accurate way to estimate a home’s value is usually to hire a professional appraiser. Licensed appraisers are trained to value properties and will account for issues even you may not have considered. They will do an accurate evaluation to ensure you do not underprice or overprice your home. Fortunately, professional appraisers are affordable to hire. However, appraisers don’t always consider details that may influence a buyer’s decision.
For example, in your area, an appraiser may not care about the water feature you added to your backyard, but your buyers might be very interested in such a feature. Having a real estate agent prepare a comparative market analysis (CMA) and carefully assess the features of competing properties is an excellent way to get a complete market picture and identify an appropriate price range for the property. This range can help you identify when offers on your property are on the lower side or the higher side of what might be expected for your home’s sale price.
3. Marketing their property
As an FSBO seller, you have access to limited resources when marketing your home. According to the NAR, FSBOs rely majorly on yard signs (31%), open house (24%), and friends, relatives, or neighbors (21%).
These methods limit you from marketing your homes to more buyers and reduce your chances of getting a better offer. How do you go about it?
One of the most significant mistakes FSBO homeowners make is using unappealing photos for their online listings. Therefore, your marketing efforts should start from you staging your home and taking quality pictures. You can enlist the help of an expert. For example, at Bost Redevelopment, we help you stage your home, take HD photographs and even you create a virtual reality tour to entrall buyers. This type of presentation would enthrall online buyers who will be made to feel like they are in your house, especially because the virtual tour allows them to feel what it’s like inside your home without physically setting foot inside the property.
With the social restrictions of COVID-19, this capability is especially valuable for buyers who want to minimize physical visits to properties. Next, use the multiple listing services (MLS) operated by your local realtor association as they are one of the go-to choices for buyers looking to buy a new home. Lastly, invest in increasing your marketing reach by paying for ads on newspapers, radio stations, public bulletin boards, and websites that cater to FSBOs.
4. Getting reliable buyers
After preparing your home for sale, pricing it right, and marketing it to get interested potential buyers. There is still the problem of getting reliable buyers. You see, many buyers choose houses by FSBO sellers for various reasons. Bargain Hunter choose FSBO to get a discount due to the absence of agent commission. The Browser just wants to window shopping with no real aim to buy. The challenger makes unnecessary or expensive demands. And the worst of all – the Thief who disguises himself as a buyer to assess the goods or valuables inside your home, learn your schedule, and later rob you blind.
To know how serious a potential buyer is about buying your home, ask the following questions:
- Are you working with a real estate agent? If buyers are not working with an agent, they are likely not ready to put in an offer and are probably trying to get a feel of the market. Having representation shows that buyers are serious about getting a house as soon as possible.
- Do you need to sell your home before buying mine? Some buyers do something called a contingency sale. This means their purchase of your house depends on the sale of theirs. As you would expect, this could lead to a problem if their house does not sell by the time you are ready to close the deal. Due to this problem and many other complications that may arise, we advise FSBO sellers to steer clear of contingency buyers. It is much simpler when a buyer has already sold their home and is staying in a rental or with their family to avoid these complications.
- Do you have a preapproval letter from the lender? A preapproval letter indicates that the buyer’s information has been verified by the lender and has them qualified to buy a home. You should also know the range of their approval so you can tell if it is what you want. You should not waste too much time showing your home to buyers who haven’t at least been preapproved to secure financing.
- Which type of loan are you thinking of? The most common home loans fall into three categories; conventional, FHA, and VA.
Conventional loans are fixed-rate loans with a single interest rate. A conventional loan sometimes requires a slightly lower down payment than an FHA loan.
Federal Housing Administration (FHA) loans are government-backed loans. They require lower credit scores and are therefore the easiest to qualify for.
Veterans Affairs (VA) loans are the toughest to get. Although they require no down payment and mortgage insurance, they usually come with strict requirements on the type of home buyers can purchase. They are primarily available for veterans.
Knowing the questions to ask buyers will help prevent unreliable buyers from wasting your time.
5. Negotiation and closing the deal
Real estate contracts and documents can be difficult to understand – it is NOT like selling a car or fridge. There are many complicated documents, contracts, disclosures, forms, and other paperwork designed to protect both the buyer and seller. This is why FSBO sellers usually end up agreeing to clauses or payment that could cost them a lot. Also, a seller might be at a bigger disadvantage if an agent represents the buyer as this agent will only look out for the interest of their client.
You also need to be extremely careful with dates and timelines. In Utah, real estate contracts typically have “Time is of the essence” clauses that make deadlines critical to the contract. Be sure to carefully observe all deadlines with precision.
You must learn about real estate contracts and clauses if you plan to sell your house by yourself. Do not ignore the contingencies, and make sure to go through the documents carefully and more than once. You could contact an attorney or a trusted agent to help you go through the document and ensure you are covered from future liability.
Handling your home’s sale on your own is a risk, and it doesn’t always save you money. According to statistics, FSBO houses lose about 40% of their house value when they sell by themselves – way more than the 6% they are to give real estate agents. Also, your chance of having a successful sale is less than 10%.
However, if you must sell your house without a professional real estate agent, make sure you understand these common pitfalls of selling your houses via FSBO to greatly increase your chance of a successful sale.
Do you have plans to sell your house yourself?
Selling your house on your own can be difficult or stressful. This is why we are here to help you. At Bost Redevelopment, we are experts at handling every home selling problem you may be facing. We would use our marketing expertise to ensure you get the best buyer for your home at the maximum value possible. Want to talk more about your options? Please leave us a message below with your contact information and let us know how we can be of help to you.