Now more than ever you see an emerging trend of private sales across the GTA. When I say private sale I mean For Sale by Owner(FSBO) and not through a professional Real Estate Salesperson. There are a few key reasons in my opinion for the emergence of the new breed of home owners who are trying to take the sale of their home in their own hands. There is always the good, bad, and the ugly, so the idea of this blog is to help you make informed decisions. A lot depends on it. Now, some of the reasons to go the FSBO way:
- Access to the powerful MLS(Multiple Listing Service) through flat fee companies such as property guys, commfree, fsbofsbo.com, etc.
- Increased market understanding and easy availability of resources using the internet.
- Seller's market conditions, giving the sellers the ability to be liberal with the price on the higher side of the margin.
- Risk free option, if it doesn't sell will get a Realtor mindset. Nothing to lose.
- Attracting realtor calls and interviews. Allowing sellers to collect information such as market analysis, marketing plans, listing price range, etc. from Realtors, which they could use for pricing and marketing their home.
- Fear of paying a lot of commission to a Realtor for a job that doesn't requires much other than listing on MLS. (Consider your self warned if you are in this category!)
- Degrading level of professionalism being displayed by some Realtors. Actions of few have tarnished the image of the profession and these home owners/sellers think all suits are cut and made the same way from the same cloth.
Although, it might seem as an option which is worth a try for sellers but here is some food for thought.
The average success rate for seller to sell their home privately is 9% out of which in 40% of those deals the buyers were known to sellers according to the survey by NAR( National association of Realtors). So the number of sales to buyers unknown to sellers is even lower. My point is when you embark on this route know that you should expect 91% failure rate or in other words the chances of the home not selling is about 91%.
For Sale By Owner (FSBO) Statistics
FSBOs accounted for 9% of home sales in 2010. The typical FSBO home sold for $140,000 compared to $199,300 for agent-assisted home sales.
FSBO Methods Used to Market Home:
• Listing on Internet . . . 27%
• For-sale-by-owner Web site . . . 11%
• Yard sign . . . 46%
• Friends/neighbors . . . 39%
• Newspaper ad . . . 12%
• Open house . . . 14%
Most Difficult Tasks for FSBO Sellers:
• Getting the right price . . . 23%
• Preparing/fixing up home for sale: 18%
• Selling within the planned length of time: 14%
• Having enough time to devote to all aspects of the sale: 13%
• Understanding and performing paperwork: 10%
Second, the MLS helps to promote your home and does get the exposure you need but the best homes don't sell just with exposure. Let me assure you that your chances of not selling will be let's say 99% if not priced according to the market conditions and the condition of the home. Pricing is KEY.
Third, expect dozens and dozens of enquiries about the home from Realtors and buyers alike. That being said, they are prospective sales leads and if you are not ready to answer questions by asking questions, chances are you will loose the prospective buyer. You! Sir/Madam are now the listing agent for your property. Be prepared to understand that you have come into the competitive and skilled world of Sales. You are a salesperson of the property. Train yourself with your pre-qualiying questions before the phone starts ringing and make sure you don't scare the prospects away with your tone. Be confident yet inviting, pleasant and skillful. Know your area sales and statistics. Visit other homes for sale in the area and compile a list of upgrades, size and features in each home. This will come extremely handy in the negotiation phase of the sale. Very Important Phase. It's during the negotiation you will net the most in your pocket. If you are not good at it, your chances of a successful sale out of the 9% success rate will again drop down drastically. Think of yourself as a doctor at a hospital who is 24 hours on call in the emergency ward.
Fourth, budget, just MLS by itself will not sell your home. Research various marketing mediums that you could use within your budget. Consider the importance of staging the home, understand the concept of getting the home in "showcase condition." You have to be ready 24-7. All it takes is one visit or one picture of the marketing material to attract the buyer and get your homes sold.
Fifth, it is a legal transaction so, it is imperative you know the contract inside out. Not surprisingly, there are many important legal contracts and documents which you must assemble, complete and understand. A partial checklist of forms that you will require for prospective buyers and for legal documentation is as follows:
* Seller Disclosure
* Purchase and Sale Contract
* Mortgage Payoff
* Loan Application
* Deposit Receipt
* Property Profile Fact Sheet
* Buyer's Cost Sheet
* Closing & Settlement
* Personal Property Exclusion List
* Property Survey / Plot Plan
* Seller's Statement of Representation
Know the lawyer you will be using and discuss the clauses with him before getting signatures. Ask him to walk you through the entire process of FSBO. Another safety net could be, to put a clause stating any deal is firm pending lawyers approval. You want to make sure everything is in order. This will not only help you close the deal but also save you from potential lawsuits in the future. And believe me you, if you are unfortunate to encounter one you will pray to undo every thought that made you Sell it privately and wish you had enlisted a professional Realtor in the first place.
Knowing all this should give you something to think about. One thing you should know is that real estate services are negotiable. Do not assume it is only paying the real estate agent’s commission which is often in the 5% range and on a $400,000 home, that represents about $20k in savings. It could be drastically lower depending on the services you choose to take from the brokerage. You could hire a realtor for pick and choose services. Briefly mentioned below are just some of the main headings:
- Pricing or comparative market analysis (CMA).
- Marketing strategy.
- Recommending lawyers, stagers, movers, photographers, mortgage specialists, etc.
- Feature sheet keywords.
- MLS posting only.
Anything you choose to do, always get everything in writing to avoid issues later on. Do the math and work on the net sheet to see how much you would net from the sale of your house using various methods. Go for the best as per you needs. If you need assistance get a no obligation private consultation with a Real Estate Consultant.
Happy selling !!