Selling, or Buying, a “For Sale By Owner” home may seem appealing for homeowners who don’t want to pay a commission.  But there are big risks to going this route!  Here are 11 risks to selling or buying a FSBO home.

1. Scams happen

Home Buyers, what happens if you fall in love with a FSBO home, agree not to use an agent, pay the homeowner $3,000 in earnest money, and then the homeowner changes his mind?

Without a signed real estate contract or a legal receipt, you may lose all or part of your earnest money while trying to recover your money in litigation expenses.  Why trust a stranger with your monies when she should have had a REALTOR looking after your interests?

FSBO scams happen to both Buyers and Sellers with little recourse besides hiring an attorney.

Common scams include fraudulent papers (appraisals, loan documentation), foreign buyer deposits (scammer sends too much in a bad check and then requests a refund), purchases through a third-party (a fake attorney, etc.) and asking for personal information.

2. Liability is almost always on the Seller

Everyone makes mistakes.  A Seller (or Buyer) who doesn’t have the representation of a licensed agent pays for those mistakes.  Attorneys can close a real estate transaction, but they don’t carry errors and omissions (E&O) insurance.

So if the homeowner lists “hardwood floors” as a feature and the Buyer discovers it’s just a wood veneer, chances are the homeowner is going to pay for that mistake, and the Buyer is going to incur legal expenses to correct that mistake.

A REALTOR would have either caught the mistake or covered it with their E&O insurance.  Let’s face it, this is a litigious society, so what homeowner wants to be a target for lawsuits?

3. Paperwork is daunting

The 2015 National Association of Realtors’ Profile of Home Buyers and Sellers showed that understanding paperwork was one of the most difficult tasks for FSBOs.

Depending on the state, there are a variety of legal forms that are needed, including but not limited to a sales contract, property disclosures, occupancy agreements and lead paint records.

Sure, ready-made contracts can be downloaded easily enough, but does an untrained Seller understand what all that means?  Would the Seller know how to customize that one-size-fits-all contract?

Understanding paperwork was one of the most difficult tasks for FSBOs.

4. Sellers can get stuck in a bad deal

What happens when a FSBO Seller signs on the dotted line and then realize they made an error?  Legally, that Seller will have to pay the Buyer (if they’re willing) to get out of it or just take the deal.

5. FSBOs sell for less

FSBO Sellers don't have the proper resources to understand the true market value of their home, don't have the time to devote to the process, and don’t properly market the property.

FSBOs typically list their home above market value, and end up with a contract to sell their homes up 12-20% less than the market value; a professional REALTOR can & will know the true market value of your home, and even with sales commissions included will assist you to net a higher amount upon closing. 

If the FSBO Seller sells to someone he or she knew, the median price typically drops even further because cousin Vinny is doing you a favor and expects a deal.

6. FSBOs spend more time on the market

Unless the Seller knows someone who wants to buy the home, FSBO homes take longer to sell, and incur marketing expenses without results.  For the same reasons, the additional time on the market will cost you lost profits when you don't get the right selling price.

There's no one “behind the curtain” running the FSBO marketing show.  On average, FSBOs are unable to sell their homes within their anticipated timeframe; and after 30 days, over 50% of FSBO Sellers will contact a REALTOR to sell their home.  Why incur the initial marketing expenses to sell your home?   

7. FSBOs lack representation

There’s no one looking out for the homeowners who sell on their own, and lack a real estate expert to call when they have a problem or a question.  Lack of representation can cost you money.  And most importantly, when you as a FSBO Seller, you are vulnerable when you open your door to strangers.  Why risk you & your family's safety when you can have a professional REALTOR as a buffer to ensure they are bringing a qualified Buyer to your home?     

8. Inspections can be PROBLEMATIC.

FSBO Sellers who don’t understand real estate contracts can get stuck with unnecessary and costly repairs. 

For example, a FSBO Seller may be told by a Buyer's home inspector that he/she needs to change the stairs from the garage to the house because the code had changed.  The inspector also identifies other "safety" or code changes, and the Buyer demands all of these items be corrected.  Potentially, the inspector may not realize that the home had met code when the house was built, and the seller wasn’t responsible for these changes.  A professional REALTOR can assist you to identify issues like this, and to negotiate required & fair repairs as necessary. 

9. Marketing is limited

FSBOs have limited resources to market their home.  The National Association of REALTORS profile of Home Sellers has identified that 42 percent rely on a yard sign, 32 percent rely on friends & family, and only 15% effectively use the internet & social media.  Relying on the neighbors and your Uncle Bob’s contacts has its limitations, and randomly placing DIY internet ads won’t be enough.  FSBO Sellers miss a huge percentage of the potential Buyer's Market by not being listed on the Lubbock Multi-List Service (MLS), and not providing incentive for Buyer's REALTORS to bring a Buyer to your door.

10. Hidden costs add up

The mindset for most FSBOs is saving money.  Chances are, these Sellers will be nickeled & dimed into a pretty big chunk of change while marketing, negotiating the sale of your home, and during the selling process of your home after a sales contract is signed.

As a FSBO Seller, you will be paying retail costs for a lot of extras: signage, photography, flyers & flyer boxes, internet marketing fees, real estate contracts, MLS listing, attorney contract review (required in multiple states for FSBOs), home warranty (an option most Buyers will request), excessive Buyer requested repairs, Escrow fees, and the list goes on.  A REALTOR will absorb many of these costs with the commission you agree to, and/or can assist you to minimize many of the costs associated with selling your home. 

11. Time costs the Seller money

The biggest cost to a homeowner is their time.  You might hear the argument that it doesn’t take a REALTOR that much time to sell a house.  And honestly, given the marketing processes & technology that we pay for, that’s true — to an extent.

But it is also true that it will take a FSBO Seller a whole lot longer to sell their home.  FSBO Sellers don’t have the expertise or the access to the marketing resources that a professional REALTOR have.  How much time will you spend researching the market, coordinating your marketing, and contracts?  Do you have the time to take off work to conduct showings, to find a place to leave your children & pets while you show the house, to open the house for inspectors, appraisers and survey companies (they normally only inspect M-F 8-5), and to coordinate with the Buyer's Escrow company?  What is your time worth to you? 

Call me and let me show you how I can assist you to sell your home; and save your money, time & the unnecessary stress!