Does a FSBO Help You Save More than Selling with a Real Estate Agent?
by Karina Gafford
In this post-recession age of frugality, selling a house without the services of a real estate professional presents the prospect of a tempting opportunity for thrifty home sellers to save money on the sale price of their home. By not paying for an agent’s commission, reason suggests, the homeowner would ultimately retain the fee that would have otherwise gone directly to the agent. Selling a home essentially involves listing the property, responding to inquiries, showing the home, agreeing to a sale price, and finalizing some sale paperwork—all of which most homeowners could accomplish independently. If you can manage these steps by yourself, then why spend the commission on a real estate agent?
"To try to sell [your home] yourself sounds great in theory, but it’s a pretty complicated process," explained Gregg Goldsholl, a real estate agent in Larchmont, NY. "Being a good negotiator is only one thing. You have to know how to price the home and market the home," real estate agent Charlie Fossett, a MilitaryByOwner partner who operates near Shaw AFB in South Carolina, explained to MilitaryByOwner of some of the challenges involved in the sale process. Having an objective third party involved in both determining the value of a home and in the negotiation of the sale price represent some of the greatest advantages of working with a real estate agent.
When considering the fact that 80-percent of people who list on For Sale by Owner (FSBO) ultimately end up employing the services of a real estate professional, reason also suggests that perhaps the real estate transaction involves more complicated steps in the process than it may seem to those of us who do not actively sell homes. Further, when considering that the Founder and former CEO of FSBO, Colby Sambrotto, eventually employed the services of a real estate agent after an unsuccessful six months of attempts to sell his 2,000 square foot condominium in New York by himself in 2011, it seems prudent to at least consider the option of hiring an agent before embarking on a lengthy DIY that may entail far more complications than first anticipated. For the record, Sambrotto did pay a 6-percent commission; however, his final sale price came to $150,000 over the listing price he had originally posted on FSBO. The broker, a New York Condo specialist, analyzed the market and determined that his price point was not attracting the appropriate buyers; the condo eventually sold for $2.15 million.
While considering that selling independently may come with a whole host of unforeseen challenges, military families considering the prospect of selling independently must also consider their own unique obstacles to selling a home—lack of time, both in terms of the time available for moving and the time spent in the neighborhood to have a keen understanding of competition in the market. This article aims to define some of the advantages of using a real estate professional in the pricing of your home, so that by the end, you should be able to better determine if a FSBO serves as the best decision for your family. Should you choose to avail of the services of a real estate professional, MilitaryByOwner’s Business Directory can help you find one who works in your neighborhood!
Determining the Value of the Home
Determining the value of a home involves a process far more complicated than looking at last year’s tax assessment value and online market reports. Even though you may have paid a certain amount for a property as little as two or three years ago when you moved to your last duty station, does not mean that the home has either the same value today. It also does not mean that the sale price of the home will cover both the closing costs you originally rolled into the sale price of the home, particularly if that cost involved a rolling in of the VA funding fee, which may amount to approximately 3-percent of the total sales price. A real estate agent, Goldsholl explains, can provide far more than the small snapshot of the market that online services can provide. An agent is especially useful in pricing for military families who do not have either the luxury of time or in-depth knowledge of the community at which they may have lived for just a few years, Goldsholl stresses. The brokers and real estate agents, however, "…have probably been in most of the homes in the neighborhood for many years," he explains, so they will know exactly what prospective buyers are seeing in other homes for sales, and where your home will rate in terms of comparable properties in your neighborhood.
On a more positive note, your home price may actually be worth more than your tax assessment or any online market report shows, and as Phil Georgiades, the Chief Loan Steward of VA Home Loan Centers, explains, "a Realtor will evaluate the home…Selling without an agent could cost the seller thousands as opposed to saving thousands." This means that even though a seller may believe that he is saving money by doing the legwork of a real estate agent in the marketing and showing of his house, he may actually wind up selling the house for far less than a real estate agent could have attained in the sale. The National Association of Realtors Report showed that FSBOs accounted for 9-percent of homes sold in 2012, which Georgiades explained translated to the typical FSBO selling for $174,900 while agent-assisted home sales averaged $215,000 that year.
That homes sold with the assistance of an agent may sell for more than FSBO homes stems from the fact that those who seek out FSBO homes believe that they, too, have an advantage when negotiating a sales price. Buyers, Goldsholl explains, will automatically begin their price negotiation for a FSBO 5-percent lower than they otherwise would have for an agent-assisted sale. If the buyer believes that the seller does not have to pay a commission, then the value of the property is the market price minus the commission amount. This sort of makes sense when you consider that other comparable properties in the neighborhood who sell with the assistance of an agent do have to pay an agent. The seller may be performing the service of the real estate agent, but the buyer, Goldsholl explains, sees this cost savings on the part of the seller translating to a prospective cost savings for them, too.
Even with all of the requisite information—market reports and comparable home reports, one of the most challenging aspects of determining the appropriate price point in a FSBO situation revolves around the homeowner’s personal attachment to the property itself. Once a homeowner decides to sell the property, the home must become a house, a commodity that a family must disassociate from endearments such as "the family home." Otherwise, the sales process becomes subjective, not objective. "[Sellers] must detach themselves from the sales process, Kurt Wannebo, CEO of San Diego Real Estate and Investments, explained to MBO." Wannebo,whom the Wall Street Journal ranked as number 73 in the country for transactions last year, agrees with Fossett that the sale of a home "…is a highly emotional process... Sellers have invested a lot of time, energy and emotion into making the property the way they want it." As a result, buyers develop emotional attachments to their home, and accordingly, can grow emotional about the value of the home, determining that the home should be priced much higher than the market will bear. This makes pricing quite challenging, but having the objective opinion of a third party can help create the separation from the emotional connection to the home that the sellers need.
Imparting the Value of a Home to Buyers
Imparting the value of one’s home to prospective buyers also involves several key steps, including helping to make the buyer feel not only as if the home conveys a value either in line with or in excess of the listed price, but also that the home will fit his family. Appropriately staging a home can help a seller achieve both of these goals. Staging a home no longer remains only an element of the sales process for high dollar homes; instead, staging a home is a necessary step in the process for just about every home. In tougher markets with a large inventory of properties for sale, staging a home may just make the difference between selling this month and selling in six to twelve months. A property that remains on the market for this period not only incurs additional tax payments for the seller, but also costs the seller both valuable time and money, particularly if the home remains under mortgage and he has had to continue making monthly payments for the duration of the sale. Fossett explains that he strives to impart to prospective sellers that their "…personal tastes may not appeal to the larger audience of buyers out there… You want to appeal to as many buyers as possible, and not simply rely on your own personal tastes."
Though neutral walls and stock photos of landscapes may not appeal to your vibrant, family-loving style of décor, a plain and simple style presents the best empty canvas on which prospective buyers can envision their own vibrant style. Your buyers want to imagine their wedding pictures gracing the wall space, not yours. Further, though you may love the memories your canvas artwork may elicit of travels throughout Europe during an assignment at Ramstein AFB, images of Germany may only remind a prospective buyer touring your home of deployments or a similar challenging time experienced by that family during that duty station. You do not want the buyer to ultimately associate your home with their negative experience. For these reasons, Wannebo makes sure to walk through houses with his buyers to discuss necessary changes.
Wannebo also stresses the importance of de-cluttering. Even though you may fervently treasure your collection of porcelain animals carefully selected during a series of duty stations throughout Japan, it is imperative to remember that buyers touring your home are not your personal guests admiring your style. Those touring are simply there to survey the space and cleanliness of your home to see if it will fit their style and their treasures from previous assignments. "I ask for as much to be taken off the wall to show wall space and open up as much floor space as possible," Wannebo explains, "…pack all of that stuff up and either put it in the garage or storage unit." This is great advice, as aside from just helping your buyers, packing up will ultimately also help you when it comes time to the final stage of the sale process—moving out! Is that not the goal of the sale?
Negotiating the Sale Price
Finally, an objective third party can perhaps best help reduce the possibility of involving unconstructive negative emotions during the negotiation part of the sale process. Advocates of using a real estate professional often cite the importance of having a third party agent as crucial to the transaction, as they offer the necessary impartiality required to achieve a successful closing. The sale of a home can quickly deteriorate into a highly charged, emotional event during the process of negotiating agreed upon sale price and sales terms. If a prospective buyer presents a price that is far lower than the asking price, a seller can easily misconstrue the buyer’s frugal nature and love of bargaining with an insult. By offering a low offer, the buyer is not necessarily insulting the homeowner by suggesting that the home is of low value; instead, the buyer has directly expressed interest in the home, but it simply may be above his financing limits, or perhaps above his personal comfort in spending level. Using a broker or sales agent, however, helps provide the necessary emotional space of an arms-length transaction to take out any emotion and help you get the best deal, Goldsholl explains.
If you believe that a real estate professional may be able to help provide you with the sufficient impartiality that you may need in order to price your home, convey that value to buyers, and negotiate the optimum deal that will help you achieve the best possible closing, make sure to consult MilitaryByOwner’s Business Directory to find an agent near your home! Beyond provide impartiality, real estate agents can offer additional benefits in the form of marketing and avoiding litigation. We will address these important topics in upcoming articles.