FSBO – How to Educate Sellers
More and more people are considering selling their homes themselves these days in a bid to “save commission” and as a real estate agent, you may be faced with potential clients asking you why they should work with you. The fact of the matter is that selling a home themselves may actually end up costing them. Read on to find out why.
What are They Really Saving?
- Let’s use, as an example, a 4% or 5% commission of the sale price of their home that they may pay to a full service real estate company for their services.
- When a home is listed for sale with a Real Estate Professional, what they may not know is that often half of that commission i.e. 2.5% is paid to the Agent who is representing the buyer.
- A question they need to ask themselves is – if they plan to sell their home privately, will they be cooperating with agents who are working with buyers and what commission fee are they willing to pay them for bringing a Purchase and Sale Agreement from a buyer?
- If the answer is Yes they will co-operate and the fee that they are willing to pay a buyer agent is 2.5%, they’re realistically only saving the other half.
Armed with this information, are they still prepared to take on the job of being the Listing Agent and of trying to sell their home themselves? Is it really worth it? How many hours of their time are they prepared to spend staging their home, showing their home, hosting Open Houses at their home, hosting Home Inspectors and Appraisers at their home, etc. Is their time worth anything?
Consider the following …
Making Money vs. Saving Money
It’s important to understand that there is a profound difference between making money and saving money. A trained Real Estate Professional will not only save a homeowner money, but will also help them to make money. They are the insurance to protect your equity. It’s true that the most expensive real estate service is one that does not perform, and performance is obtaining the highest sale price possible, not selling the home at any price just to save commission.
Sellers may suffer Equity Erosion
Your client is the homeowner and they have also taken on the job of being the listing salesperson. But they lack access to important MLS data, such as average listing days on the market for their type of home, number of new listings being introduced into the market that could compete with their home, as well as the recent sale prices of comparable homes.
In short, they simply don’t have the ability to keep informed about the changes taking place in their market area and this can prove to be disastrous. By the time they take action to reduce their listing price to compensate for a change in market conditions or increase the listing price due to the high demand for housing, their equity may have become severely compromised. A Real Estate Professional working to protect their best interest will always keep a close eye on market conditions and will keep them informed, ensuring that equity erosion does not occur or is kept to a minimum.
Who is looking after the Private Seller’s Best Interests?
When a home is sold by the owner, there is no one else looking after their best interest
s. In order to get the home sold, the owner is faced with the prospect of negotiating with up to 3000+ members of the Ottawa Real Estate Board who are representing the best interest s of their buyers. Real Estate Professionals are professional negotiators who bring lots of experience to the table; … are they ready for that?
The Private Seller’s Limitations in Marketing
The vast majority of For Sale By Owner (FSBO) companies offer limited services to those looking to sell their home privately. These services are generally limited to a lawn sign, an ad placed on the FSBO company’s own web site, and a Mere Posting on MLS (if the Seller is willing to pay extra for this service). Will the listing even be seen?
Qualifying Buyers for Financing
Consider the difficulty a homeowner will have assessing a buyer’s financial ability to purchase your home. They will be ill-equipped to qualify them as to the type of home best suited to their needs and lifestyle. Understandably, they won’t have the expertise in asking the right questions to determine the buyer’s qualifications. This all too often results in a buyer pulling out of an agreement to purchase when they realize at the last minute that they cannot finance their new home purchase. They are now faced with the unwanted task of starting the wholesale process all over again.
The Private Seller is not trained to deal with the complex process of creating the Agreement of Purchase & Sale and all related documents needed to Close the Sale
When a homeowner is selling their home privately, they may use the services of their lawyer to draft the necessary documents, which again can be disastrous. The lawyer will draft the offer based on their instructions, but how will they know what terms and conditions to include in the agreement? In addition, this service will not be free, lawyers will charge a Seller a significant fee to prepare these documents for them. Will they know which service providers are needed to bring about an unconditional sale? Also, this will add costs to their lawyer’s bill and may end up costing them more than they anticipated in the long run.
Security for You and Your Family
For the most part homeowners won’t know the identity or background of the individuals viewing their home or the identity of attendees visiting their open house. Real Estate Professionals are trained to obtain the identity and background information of the buyer and take the necessary steps to ensure the safety of the seller and their family.
Best Buyer Suited for the Private Seller’s Home May Never Get to See It
The Buyer that’s best suited for their home may never get an opportunity to see it, as the homeowner may not be available. Real Estate is not their full time job and they simply may not be available to show the property when a buyer is ready to see it.
The buyer is not only viewing that home, they usually have a number of other homes to view and may never end up viewing the private seller’s home.
Buyers being relocated have a specific time frame to view homes and may not have an opportunity to make another house hunting trip. The agent working with a relocation buyer sets up viewings well in advance of the buyer’s arrival based on the buyer’s criteria, making all efforts to ensure that the process is carried out in an efficient and timely manner. A relocation buyer may never have an opportunity to see a home that is listed FSBO due to time constraints and the owner’s availability.
Real Estate Professional Gets Paid only on the Successful Completion of the Transaction
No monies are paid up front for a real estate agent’s services. The Real Estate Professional only gets compensated once the transaction has closed. In contrast, FSBO companies require a seller to pay all the listing fees up front, regardless of whether or not the home sells. As a consumer it is important to Note that there is no such thing as No Commission …whether they are paying a Flat Fee for Service up front before their home sells and a 2.5% commission to the brokerage that brings a Buyer… they are all commissions!
The question that needs to be asked however, is if a Flat Fee is paid up front to the Real Estate Brokerage, what incentive or motivation does the agent have in getting the Seller the highest sale price possible as the agent has already been paid??? Could the homeowners hard earned equity be compromised?
Many Pitfalls & Disadvantages
There are so many issues that could arise during the marketing of a home, at offer presentation and prior to closing, and a Royal LePage Team Realty Sales Representative has a wealth of knowledge and experience to guide you through the successful and profitable sale of your home. Armed with this information, you can now let your sellers know why choosing to sell their home themselves may end up costing them.