Selling a home without the assistance of a professional Realtor is known as a for-sale-by-owner, colloquially known as a FSBO (pronounced “fizbo”).  Over 85% of all FSBOs do not sell themselves, but end up listing with a Realtor.  Why?  What is so hard about selling a home oneself?  Here’s a simple graph that presents complex truths about why FSBOs lose so many potential buyers.  I thought a picture might be worth more in this case than 1,000 words.  Click on this image for an enlargement.

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• Why Can’t I Just Sell My Own Home? What’s So Hard About That?

Question:  I found your website doing a search for “for sale by owner” information. I am considering the pros and cons of listing this myself, or enlisting a broker to help me out.  I am impressed by the amount of information you provide for free.

Although my property is in Kitsap County, I am writing to ask your advice regarding setting a price that is well above the current market value.  The reasons I am considering this are:

1. I am in no hurry for a sale. If it takes the market improving to the point that my asking price is more obtainable, I may be willing to wait for that.

2. Property is 1+ acre in a location that would be perfect for a small business owner. we are on a busy road, and although right now it is zoned residential (the home is manufactured), there are several businesses very nearby. It is only a matter of time before this property is used commercially as well.

Thank you for your time and thank you also for being so generous with the information on your website.

Joe [not real name]

Answer:

One of my pet peeves is overpriced real estate. An overpriced home on the market can actually cost a seller a lot of money. A home only sells for fair market value (FMV), not more than buyers are willing to pay. That’s what FMV is–what a ready, willing, and able buyer is willing to pay for a home. Yet we still see both FSBO’s and agent listings on the market above FMV, and some are substantially above FMV.

If your home is for sale at a price above FMV, you can end up selling it for even less than FMV down the road. I’ve been preaching this for almost 20 years now, but finally there is authoritative proof. [See my earlier blogs on this: Save $10,000 Buying and Port Angeles and Sequim Overpriced Listings]

The proof is in the Sunday, October 28, 2007 issue of the Seattle Times at page E7:

“Real estate agents often warn sellers about the danger of overpricing a house. Now they have evidence to show skeptical clients: research by Jeffrey Otteau, a New Jersey appraiser. He found that in a market where prices are declining, sellers who ‘test the market’ with a high price usually end up with a lower price than those who price realistically.”

The article points out that a house that is priced right for the current market sells within a reasonable time, but one that is overpriced will sit on the market while the market prices decline, and when the home does finally sell, it sells for less than the FMV of that home when it was first on the market.

The statistical proof showed that in a market where a home that was listed for $599,900 (FMV) and which sold for $599,000 (almost full listed price within 30 days), a comparable house that was overpriced at $634,900 actually sold for $585,000 months later when the market had declined even a little more.

There’s another solid reason not to overprice your home.  When a home first goes into the MLS and is advertised at that price, you have an opportunity to reach a small percentage of buyers who may be interested in your home, can actually afford it, and who are ready to do so now.  An overpriced home may cause them to look elsewhere.  And this is the clincher, buyers rarely come back to look at the same home again even after you’ve reduced the price.  That’s true.  Not only will most buyers not come back to see if you’ve reduced the price in the months to follow, but by the time you actually do reduce the price in the MLS, those original buyers are long gone, most having purchased a home that was not overpriced.  So as a practical matter, you have one shot at each buyer.

Sometimes a seller who wants to gamble by asking far more than his home is worth will say, “I’m in no hurry to sell.  If it doesn’t sell, I can hang on to it until prices go back up.”  If that’s your sentiment, then don’t waste time and effort listing it for sale when you know it won’t sell.  Hoping you will get lucky and find an uninformed buyer who will pay way more for your property than the true FMV is a pipe dream.  Buyers are very intelligent these days, especially with the availability of the powerful tools on the Internet.  If you want more, then don’t list your home until prices actually do appreciate to that level.  Believe me, no one will buy an overpriced home.

This is such an important lesson for homeowners who want to “test the market” with an excessively high price. Don’t do it. You could lose a lot of money by the time you end up selling it for much less in a slower market.

Possibly Related Posts:

• Is The Listing Price Fair?
• Real Estate Prices – What is a Fair Price?
• Home Values Tumbling?
• Why The For-Sale-By-Owner (FSBO) is Hard to Sell
• Listing Prices, Appraisals and Home Improvements

Selling your home as a FSBO (for sale by owner) puts you at a huge disadvantage from the starting gate. I’ve seen that many times over the past 30 years. I don’t do any cold calling of FSBO’s. I’m pretty darn busy just working with buyers, and I don’t have the time. Keith Sorem, an agent in Glendale, California, wrote a concise article on FSBO’s, and with his permission I’ve reprinted it here.

Given the current market condition I suggest that you think long and hard about your decision [to sell on your own]. A couple of helpful facts:

In a “normal” market about 10% of homes sell without professional representation. This is not a normal market.

There have been significant changes in how appraisals are conducted since May 1st causing major problems in valuation. so buyers who finance their purchase are having to cancel escrows, sellers are having to lower prices.

In August there are new underwriting guidelines coming out, which are going to make it even harder for buyers to qualify.

According to a recent survey buyers have a Realtor represent them about 90% of the time. From the buyer’s perspective they get a “free agent”, so it is a good deal for them, In most markets there is a lot of inventory, so the problem by selling on your own is that the Realtors are not looking on other websites for their buyer’s homes. Your listing basically does not exist.

My suggestion is that you should interview a few Realtors, have them analyze your property and situation, then if you want to try it on your own, go ahead, you might get luck.

Know that 76% of sellers eventually list with a Realtor. 5% sell to someone they know, 5% sell to someone they don’t know. When they sell they, on average, sell for 16% less than the average sold by Realtors.

For a full discussion of the two multiple listing services and how marketing real estate compares, including the FSBO issues, see the Sequim MLS and the NWMLS.

Possibly Related Posts:

• Why The For-Sale-By-Owner (FSBO) is Hard to Sell
• FSBO asks Should I List My House Above FMV
• Free For Sale By Owner Consultation with Retired Real Estate Lawyer and Broker
• Sequim Homes for Sale – FSBO eBook Download
• Why Can’t I Just Sell My Own Home? What’s So Hard About That?

If you are a For Sale By Owner, FSBO, and you want the best professional advice from years of experience to help you make tough decisions, Chuck Marunde is offering a free consultation.   Now any Realtor can offer a free consultation, right?   This is much more.

First, you get a consultation with a 30-year veteran who practiced real estate law for 20 years.   He’s been involved in nearly every aspect of a real estate transaction.   He’s negotiated hundreds of transactions, drafted hundreds, and helped clients avoid litigation and resolved many difficult issues.

Second, your free consultation includes what you would expect of any Realtor, plus honest and frank discussions about how selling really works in the real estate industry, how the competing multiple listing services actually work (or don’t), what advertisting works and doesn’t work, what role the Internet plays in marketing your property, and where the buyers are coming from and exactly what they want.   I track these subjects with research and analysis, and I offer these free in this consultation.

Third, I open up what I am doing, so you can see how to do what you need to do.   Now, I’m not going to share my trade secrets that I don’t want other Realtors to know about, but you will be surprised at how much I do share.

Fourth, you will be so impressed with how hard I have worked to create the systems I have in place that there is a significant probability that you will want to list your property with me, BUT there is absolutely no obligation and no pressure to do so.   I won’t even ask.

There’s a lot at stake in this market if you want to sell your home.   Don’t you want to be sure that you will do everything possible to get the highest price in the least amount of time?

Email me or call me at 360-775-5424.   I’d be delighted to share whatever I know and have learned with you.

Possibly Related Posts:

• Why The For-Sale-By-Owner (FSBO) is Hard to Sell
• FSBO asks Should I List My House Above FMV
• Selling FSBO Huge Disadvantage
• Sequim Homes for Sale – FSBO eBook Download
• Why Can’t I Just Sell My Own Home? What’s So Hard About That?

Do you have a Sequim home for sale, maybe a FSBO?   Retired real estate attorney Chuck Marunde, now a real estate broker, Internet marketing consultant, and writer, wrote an eBook for homeowners who have thought about selling their own homes.   The eBook is short and to the point, but with the content and the resources made available in the eBook, there are over a 100 pages of solid content, especially for the Sequim and Port Angeles homeowner.

The subjects covered include topics on arriving at an accurate fair market value, appraisals, advertising and marketing, negotiating like an expert, an MLS tool for homeowners to look at what is for sale now in Clallam County, free classifieds for advertising, a list of document titles for the legal documents that may be needed, and traps for the unwary (like the Form 17 Seller’s Disclosure).

Download Free FSBO eBook

FOR VISTA users:   If you are running VISTA on your computer, after you download the program, you open it by right clicking on the icon and then clicking on the “Run as Administrator” button.   On XP or other operating systems, you don’t have to do that, but VISTA is quirky.

Offered as a courtesy of Chuck Marunde, J.D. and SequimRealEstateNews.com.   May I also recommend a new online newspaper at Sequim-News.com.

Possibly Related Posts:

• Why The For-Sale-By-Owner (FSBO) is Hard to Sell
• FSBO asks Should I List My House Above FMV
• Selling FSBO Huge Disadvantage
• Free For Sale By Owner Consultation with Retired Real Estate Lawyer and Broker
• Why Can’t I Just Sell My Own Home? What’s So Hard About That?

From a FSBO in Sequim I received the following question.   Enclosed is my response.

Question: I’m interested in selling my own home for one reason–to save the real estate commission.   What’s wrong with that?

Answer: Nothing.   That’s a good American reason to be a For-Sale-By-Owner.   The question is, can you?   In other words, do you know how to price your home?   Do you know how to collect accurate information on fair market value?   Do you know how to make adjustments in the prices of the comparables?   Do you know the most and least effective ways to advertise and market?   Do you have experience developing compelling sales scripts that will attact buyers?   What about negotiating?   Can you negotiate for top dollar while not killing a transaction with a good buyer?   Do you know all about terms that change your net proceeds?   Are you aware of the top mistakes that FSBO’s make regularly?   Do you know about tax implications?   Are you a competent document draftsman?   Can you include all relevant terms and langauge without ambiguities?   Do you know what legal documents are required by law in Washington and Clallam County, and in Sequim and Port Angeles?   Can you help your buyer get a loan (there’s much more to this step than 99% realize)?   Can you provide the kind of attention and focus needed from the day there is a written agreement with your buyer  until closing?    Iin other words, do you know how to be a transaction coordinator?

If your answer to all of these question is an intelligent “yes,” than I encourage you to sell your own home.   But if you can’t talk for 20 minutes on each of these issues, you may be  unprepared.   It takes many of us a lifetime to really begin to get good at many or most of these steps.   No one is naturally good at all of these things.    There are too many details that must be learned on the street.    If you have gained the knowledge and experience to competently handle all these questions and all the issues  within each question, I would say, “Go for it, and God speed.”

Possibly Related Posts:

• Why The For-Sale-By-Owner (FSBO) is Hard to Sell
• FSBO asks Should I List My House Above FMV
• Selling FSBO Huge Disadvantage
• Free For Sale By Owner Consultation with Retired Real Estate Lawyer and Broker
• Sequim Homes for Sale – FSBO eBook Download