Understanding FSBO

US News & World Report quoted me in 3 Things to Know About Selling a House on Your Own. It opens,

The internet is full of sites that help homeowners sell property on their own, promising thousands in savings by avoiding commissions, but the National Association of Realtors says commission savings on a for-sale-by-owner transaction, or FSBO, are more than offset by lower sales prices.

The truth lies somewhere in between, according to most objective analysts. So for most sellers, deciding whether to go FSBO is a tough call.

Ali Wenzke, a Chicago writer with a blog called the Art of Happy Moving, says do-it-yourself transactions have worked well for her.

“My husband and I have sold two houses FSBO and purchased one home without an agent,” she says. “Be objective. Work hard. Be flexible to do showings at any time.”

“Anyone can do it and the average home is shown five times or less,” says Sissy Lappin, co-founder of the FSBO website ListingDoor.com.“The notion that no buyers or sellers can understand or manage what happens in a transaction is simply absurd.”

One thing is sure: the average seller’s experience does not necessarily apply in any specific case. What matters is whether you can succeed with a FSBO, regardless of whether your neighbor has.

Adjust your expectations. Experts do agree that FSBO novices should be realistic. Even if you get top dollar and avoid the agent’s commission, the process can be a time-consuming headache. And even if you don’t have an agent of your own, you may have little choice but to pay one representing the buyer, cutting the savings in half.

“While listing on your own seems easy, you are in fact replacing a job which you usually employ a broker to do full time,” says New York-based real estate agent Dylan Hoffman, who is not a fan of FSBOs. “You will need to organize showings, tours, previews and open houses. Plus all the back-end work, like maintaining photos and descriptions on websites, checking for a clear title, etc. An owner would also take on the role of marketing, both digital and print.”

The internet has made the process much easier, with many sites now offering listings, advice and services like printing signs. For a fee, usually several hundred dollars, some services will get your home on the multiple listing service used by real estate agents and buyers, though Lappin says it’s good enough to list on a site like Zillow.com, which is free. The goal is to save the agent’s commission, typically about 6 percent of the sales price, or $18,000 for a $300,000 home.

“FSBO has grown up and sellers don’t have to settle for a red-and-white generic yard sign,” Lappin says.

She says the seller of a $400,000 home with $60,000 in equity would spend 40 percent of that equity if they paid a real estate agent 6 percent commission, or $24,000.

What kind of homes sell without an agent? The National Association of Realtors says about 10 percent of home sales are conducted without an agent, though some critics say the figure is higher. The association says the average FSBO sells for 13 percent less than the average agent-assisted sale. Again, critics like Lappin disagree, with many noting the association’s studies do not look at comparable homes and lump in mobile homes and other inexpensive properties, as well as intra-family deals that tend to have low sales prices. Association figures do show that FSBO is less common with high-priced homes.

FSBO advocates generally agree that doing it yourself is more difficult for the seller, and can take longer. Though you might catch a buyer’s eye right off the bat, the FSBO approach is relatively passive, as you won’t have an agent steering buyers your way. Obviously, the seller must be available to show the house, and that can require weekdays, not just Sunday afternoons.

“It takes a lot of people skills to sell your own home,” says law professor David Reiss, director of The Center for Urban Business Entrepreneurship at New York’s Brooklyn Law School. “Can you engage with potential buyers even as they are criticizing your house and the choices you made about it? Can you distinguish serious buyers from window shoppers? Can you negotiate without giving away the farm or playing too hard to get?”

Anti-discrimination laws limit what you can tell buyers about issues like the ethnicity of neighbors, or even the number of school-aged kids or seniors on the block. And you have to be willing to show to all comers.

Going it alone also means you won’t have an agent’s advice setting the home up to it up to look its best, though you could hire a professional stager.

Why Are There Real Estate Agents?

photo by Mark Moz

Realtor.com (admittedly not a neutral source on this topic) quoted me in 6 Reasons Real Estate Agents Aren’t Extinct. It opens,

It’s 2016, and it seems our need for real live people is ever-diminishing. There’s self-checkout instead of cashiers, selfie sticks instead of photographers, self-driving cars, self-watering plants, self-administered colonoscopies … well, you get the idea. Given that technology has become so important to buying and selling homes, you’d also think real estate agents would be a dying breed — yet they aren’t showing any signs of slowing down, with approximately 2 million active real estate agents throughout the country.

So why did real estate agents make the technology transition fully intact as opposed to, say, travel agents? We asked some experts to weigh in.

Reason No. 1: Selling is complicated

For many people, “a real estate transaction is financially momentous and complex — the most complex transaction people do in their life,” explains David Reiss, a law professor and academic program director for the Center for Urban Business Entrepreneurship at Brooklyn Law School.

Comparatively, personal travel agents — the kind where you’d walk in their office and have them book you a hotel and a flight — have gone the way of the dodo, because now that’s all simple DIY stuff (to be fair, not all travel agents are out of a job — there’s still a healthy travel agency sector that thrives on corporate and luxury bookings).

“People like having an expert when dealing with large, complicated transactions,” says Jeff Tomasul, founder of Vespula Capital LLC, an investment management company based in Greenwich, CT. “Why do people still have financial advisers? They want someone who does it full-time to make sure they are not doing anything wrong.” Same with real estate agents.

And real estate transactions are often anything but straightforward. Some deals, like short sales, can be “much more intricate than a regular transaction,” Reiss says, with lenders who have requirements that “a regular person would have no idea about.”

Reason No. 2: Buying ain’t easy, either

Buying a home, even if you come in with all cash, is not a cookie-cutter task, and you can find yourself drowning in paperwork and stressed out juggling things like meeting buyers, and dealing with the seller’s agent, lender, and title companies. Agents ease the whole transaction, and it’s something that has kept their profession alive.

“They can hold your hand through the process,” Reiss explains. “They might say, ‘This lender takes a long time, so put in your contract immediately and sign this and that paper and get all this stuff ready before you’re walking over hot coals with the lender for money.”

Reason No. 3: It’s their top priority

Your own interests and priorities will very likely always be split — because of those pesky little things like, say, job and family — but a Realtor can be laser-focused on getting the deal done. “A Realtor has a singular aim: to sell houses,” Reiss says.

Simply put, having a real estate agent can make your life easier. Tomasul found himself in a frustrating position when he tried to sell his apartment in Manhattan without an agent. “Showing it was so tough with my schedule, and it was hard having a full-time job and keeping up in a timely matter with potential buyers,” he recalls.

That means the less you make time for buyers, the longer your place will stay on the market — and that’s not good for your bottom line.

Reason No. 4: They know the market, and the players, better than you

“The agent knows the market intimately, even more than a pretty informed resident,” Reiss says. And all that knowledge saves time. “Tracking sales, knowing listings, spending a lot of shoe leather on houses already for sale — right off the bat, they know more than the ordinary Joe and Jane. They understand condo boards and title companies. As a player in the game, they know what the other players are looking for and how to deliver.”

Reason No. 5: They’re objective

Without an agent showing your house for you, you have no shield from criticisms that can — and will — be made about your house from prospective buyers. Your favorite room in the home might be described as “tacky,” “needing a renovation,” or much worse. Sometimes such comments are negotiating tactics. Sometimes they are heartfelt, off-the-cuff opinions. But either way, they can lead to problems.

“It impacts objectivity for a seller to hear negative things about their own place,” Reiss explains. ” Realtors aren’t emotionally invested. They don’t take comments personally. It’s not ‘Oh, you don’t like my chandelier? Then get out of my house.’”