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More Profit - Less Time

PROFIT:
You will get more for your house, then selling it on your own. Here are some stats to show that a Realtor will get you more for your house then normally selling it yourself.

Month Realtor
Median Sold Price
FSBO
Median Sold Price
Difference
January 2008$205,000$193,0005.8537%
February 2008$195,200$170,00012.9098%
March 2008$195,900$179,0008.6269%
April 2008$192,338$170,10011.5619%
May 2008$191,650$159,55016.7493%
June 2008$200,000$168,05015.9750%
July 2008$194,000$168,00013.4021%
August 2008$187,000$155,00017.1123%
September 2008$166,232$145,70012.3514%
October 2008$159,900$137,40014.0713%
November 2008$153,950$139,0009.7109%
December 2008$155,000$129,30016.5806%
January 2009$139,450$110,25020.9394%
February 2009$139,900$102,50026.7334%
March 2009$147,250$84,00042.9542%
April 2009$140,000$61,90055.7857%
May 2009$140,000$88,20037.0000%
June 2009$147,000$87,05040.7823%
July 2009$154,638$110,00028.8661%

Year Realtor
Median Sold Price
FSBO
Median Sold Price
Difference
2008$205,000$193,00012.91%
2009$139,450$110,25036.15%

As you can see above, even if a Realtor charged a commission of 10%, overall you would still gain a profit with a Realtor.

MARKETING:
When selling your home yourself, you are taking on the job of the Listing Agent. You should prepare your home for showing just as you would in a Realtor assisted sale. Clear out the clutter, make repairs, spruce up your home with fresh paint & flowers. Ask a friend or acquaintance to come in with a neutral eye to give you an objective opinion of how your home shows. It is often very difficult to see your own home through the eyes of a buyer. How we live in our home & how we market it are very different indeed.

You’ll also need to put away a budget for "FOR SALE" signs, newspaper ads, flyers, postcards, & a personalized website for your home. Unfortunately, you do not have access to the MLS (Multiple Listing Service), which happens to be the most effective marketing tool in home sales. You simply cannot get around the fact that 91% of buyers are represented by a Realtor. Realtors find homes for their buyers through the MLS. Because of this, you will have to push harder & be much more patient in finding a potential buyer. Expect to have your home “FOR SALE” for a few months.

BUYER QUALIFICATION:
One other issue that FSBO’s come up against is buyer qualification. In the industry, it is standard to pre-approve buyers before they start their home search. When you sell your own home, you often deal with buyers who aren’t serious. They aren’t pre-approved, they aren’t financed & they’re really just “looking around.” If they were truly serious about finding a home to buy, they would have retained a Realtor’s representation. You may want to consider requesting that only pre-approved buyers view your home & ask them to bring a copy of their pre-approval with them. This will help you eliminate the non-serious buyers from the real ones.

Ironically, the buyers that FSBO’s tend to attract the most are bargain hunters. People who are looking for a “deal” & to avoid paying top dollar in a crazy market.

MLS (Multiple Listing Services):
FSBOs are not allowed to list their properties in MLS because some MLS publications or websites only permit their members (usually real estate brokers or agents) to make the listing. There are exceptions to the rule & finding the exception is not an easy feat.

PRICING:
This is the common problem FSBOs face. As the owner of the property, you will naturally think that your home is worth more than what the market is commanding. An overpriced home will deter buyers & very few will make a slightly lower counter offer, which you may (or may not) consider.

Realtors have direct access to homes that have sold, are pending, & are active. An active Realtor in your area will also have intimate knowledge about the features of SOLD homes & can provide an in-depth "Competitive Market Analysis" to give you a realistic range of what your home is worth. In fact, Realtors use this CMA information to base the list price (and target end price) for their client's home. Pricing a home is a delicate process, because it takes many features into account beyond just the neighborhood: size, condition, floorplan, style, updates, landscaping, lot position, views, remodeling--all of these are features that will affect your home's desirability. A true CMA can not be garnered by just a click of the button! Thus, simply garnering a list of SOLDS in your neighborhood does not tell you enough.

Why is proper pricing so important? Because over-pricing your home is the kiss of death. You'll have significantly less traffic, less interest & less qualified buyers. As a FSBO, you’re already fighting an uphill battle. Overpricing your home puts the final nail in the coffin. My suggestion is to ask a Realtor to price your home for you. Let them know that you intend to sell your home yourself, but you would appreciate their input. Most Realtors are more than happy to offer you any help possible, because they know that the rate of FSBO-to-Realtor conversion & they hope to be the one you call if you decide to list your home. Just be honest with your intentions from the beginning. Another option is to hire a professional Real Estate Appraiser to appraise your home, which will cost you a few hundred dollars. Make sure that the appraiser you choose is familiar with your area & that they know that the appraisal is for re-sale.

FINDING BUYERS:
No matter how many newspapers/websites you advertise your home in, how many Open Houses you hold, or how big your FOR SALE sign is in your front yard, the fact is you are not reaching the majority of qualified buyers. You will have to market to their Realtor. Confused as to how this works? Let me explain how Realtors get paid:

In the majority of home sales, sellers will hire a Realtor to sell their home. The average commission/marketing fee is 6% of the sale price, which is only paid out to the Realtor after s/he has successfully sold your home. That 6% is divided in 4 ways. Typically, half of the 6% goes to the Listing Agent (the Realtor selling your home) & the other half is offered to the Buyer's Agent (the Realtor who finds the buyer for your home). Thus, each agent receives approximately 3% of the sales price each. Of that 3%, each agent must then split that once more with the Broker that they work under. Splits vary greatly, but can be as much as 50/50. After this final split, both agents are then required to put aside as much as an additional 30% for taxes (agents are independent contractors). The remaining amount is the agent's net. In reality, the Realtor receives only about 1-2% of the sale price (MYTHBUSTER: Agents are overpaid!).

This entire set-up (compensation amount to buyer’s agent) is all communicated through the MLS (Multiple Listing Service). The cold hard facts: It is unlikely that most agents will even know of your home’s existence. The ones that do, have absolutely NO incentive to show it to their clients. Nobody likes to work for free. In fact, even listings that offer less than 2.5% commission to the Buyer's Agent get passed over repeatedly. Since 91% of buyers are represented by a Buyer's Agent, you can readily see the importance of motivating Buyer Agents to show your home.

Most people will observe the house down the street as it prepares for selling: an agent comes by, puts up a FOR SALE sign, sends out a few flyers, does a couple of Open Houses, two weeks later the house is SOLD. It looks so easy! But this is only "surface" marketing. More important activity occurs behind the scenes. After the "For Sale" sign goes up & flyers are printed, your agent’s main job is to market your home to other agents, who represent buyers—not buyers themselves.

INTIMIDATED:
Buyers tend to discuss the pros & cons of a unit amongst themselves. In homes where a realtor represents the owner, they would feel more at ease asking about what they see as problem areas & can freely talk about the property. If you’re the one showing the place off, even if you are out of earshot, buyers would feel uncomfortable talking about the place, more so ask you about its troubles.

LEGAL TROUBLES:
Unless you know your real estate laws, you may encounter some trouble with regards to the legal requirements involved when selling properties. There are several documents that you need to fill out & you may have to alert several offices of your decision to sell your home.

Part of the fees that we pay to our Brokerage from each commission check covers our hefty Insurance costs. Real Estate is a very litigious industry. If is often said that if you haven’t gotten sued, you aren’t doing enough deals. With that said, selling your home directly opens you up to a lot of legal vulnerability. Protect yourself by doing what I recommend as my number one FSBO tip: hire a Real Estate Attorney. He will be especially useful during the contract negotiation period. A very delicate process that can easily turn nightmarish with a blink of an eye. I cannot stress enough how important I think it is for FSBO’s to hire an attorney. It’s simply not worth the risk or money to find yourself slapped with a lawsuit several weeks, or even several years down the line.

NOT SHOWN by AGENTS:
Unless you agree to give the buyer’s agent a commission on a sale that s/he might be able to close, you may not find agents gladly showing their clients your property on their own accord. Even if you do give a commission, without a contract (listing agreement), agents would still hesitate to show your property.

SAFETY:
It’s an issue even us Realtors have to contend with, but since the vast majority of Realtors require a buyer to become pre-approved before showing homes, at least we know our buyer’s background, name & personal information. You on the other hand, will be allowing strangers to enter into your home. My advice is to always have someone with you when showing, especially at the Open House. You may want to carry a bottle of Pepper Spray or Mace & very discreetly hold it in your hand as you show your home. Don’t turn your back to the buyer & have them “sign in” with their personal info.

BUYER TRUST:
In an industry that is dominated by professionals with distinct roles, the truth of the matter is many buyers just won’t trust you. The idea of paying out hundreds of thousands of dollars without any professional mitigation or representation is simply too frightening to most. I once had buyers that found a FSBO home on craigslist. It fit all their needs perfectly & because it was FSBO, there was no bidding war to contend with. They contacted the owner & requested that I represent them in the contract. The seller refused & pressured them to deal directly with him. My buyers balked at the idea & grew distrustful of the seller & his aggressive approach. We found a home for my buyers on the MLS shortly after. The seller never sold his home. After a few months he gave up completely & continued living in it.

How are some of the ways you can gain trust? For one, don’t be pushy. You have to be as professional as a Realtor would be in your shoes. Show the buyer that you have honest intentions by having home & pest inspections readily available. Lastly, reassure your buyer that your happy to give them however much time they need to do their own inspections to their satisfaction.