For Sale By Owner (FSBO)
Please note that information provided is based on Pennsylvania and may not be applicable to other states. This is not legal advice and you should consult Real Estate, Legal and Tax professionals pertaining to your personal situation.
Now it’s easier than ever to sell your home yourself, or pay far less than the standard “6 percent” commission to a real estate agent.
Why? The Internet.
Information is power.For years, real estate agents have had a distict advantage known as the MLS. Multiple Listing Service (MLS). The MLS is a collection of information about virtually all the “listed” homes for sale in a given area, (previously to the exclusion of FSBO’s). Home buyers have had to work with real estate agents in order to gain access to information on the MLS. Direct access is still limited to MLS participants however it is easier than ever for a non participant to gain access through Service companies.
The Internet.The Internet now provides an enormous amount of real estate market information to consumers—information which wasn’t previously available. Today, both buyers and sellers have access to MLS information that filters down via the internet through sites such as Realtor.com.
Advantages of selling as a FSBO.
- Increase your profit margin or net cash from the sale.
- Escrow and Title companies can handle some aspects of the transaction.
- Disclosure services are available to handle the required disclosures.
- The Internet has over 600,000 sites that contain FSBO-related information.
- Termite and Home inspections will show the condition of the property and let you know what needs to be repaired.
- In a seller’s market, you may get several offers within weeks after starting to advertise the property for sale.
- There are a number of “For Sale By Owner listing services where you can advertise.
- Many real estate agents and mortgage loan officers market their services to FSBO’s.
- You still have the option list your home in the MLS.
Disadvantages of selling as a FSBO.
- Not properly pricing and/or under marketing your home will not exposing it to all qualified buyers resulting in a lower sale price and longer sale times.
- Buyers most often work with a Realtor and they hesitate to show FSBO’s because the Sellers have no clue what they are doing. (educate yourself)
- Increased potential law suits. You must provide all applicable disclosures including a sellers disclosure. Lead based paint. Escrow rules. (because you are selling yourself you must know the real estate laws)
- Understand the time and financial commitment before you begin. It can be quite overwhelming. Be realistic about your marketing, negotiating and general sales skills. Setup a budget and compare the cost of the total services provided by a Realtor to what you may spend on your own. Signs, listing services, advertising, attorney and/or Title costs can add up quickly.
- Right or wrong most Buyers will expect a portion of your commission savings. They want a deal too.
- Unrepresented Buyers may pose a risk. Be careful who you let in your house. Theft of property, medication or even bodily harm may occur.
- Listing your home is free. You only pay a Realtor when it sells. If your home doesn’t sell you may have a substantial loss of your time and money invested.
Is a real estate sales commission always 6 percent?
NO! Commission is negotiable. Most real estate sales agents would like a 6 percent commission or higher in some cases. Real estate commission is paid to the Listing Agent and is usually split evenly with the Selling Agent and the agents will also have a negotiated split with their office.
Negotiating the split: If you are selling and buying with the same agent they may be willing to reduce your cost either on your listing or credit a portion of their commission towards your closing cost on the buying side. Remember the commission in most cases comes from the seller’s side of the transaction and you as a buyer do not pay the commission. Let’s assume that you negotiate a 5% listing commission… The agent could split that in several ways; 2.5% listing and 2.5% selling agent, 2% listing and 3% selling agent or 3% listing and 2% selling agent. Do you care? Absolutely! If there are other homes competing in your area that all offer 3% yours will be last on the list if you are offering 2% or less.
Cooperating with Agents:One decision you will need to make is if you will cooperate with a selling Agent. Meaning… will you pay them? If so, how much? If the house next door is for sale and basically the same house and the Realtor will get paid 2.5%, the buyer gets representation, the Listing Agent is going to take care of the Seller’s side and assuming the sale price is the same. What if anything would you be willing to offer?
Open Listing. The MLS is the most powerful marketing tool in existence for the FSBO.
Companies exist which help you list (for a set fee upfront) in exactly the same MLS as if you had paid a traditional real estate agent to list your property. If you sell your property yourself, “By Owner”, without a real estate agent involved, you’ll pay no commission to anyone.(MLS and marketing fees will apply) If a real estate agent is representing the buyers of your property, you’ll pay that agent 2 to 3 percent of the selling price. You will only sign an “Open Listing Agreement” (a non-exclusive listing agreement which is an authorization to place your property in the MLS), which may be canceled at any time. This is one way you can put the power of the MLS to work for you.
Unless your home is relatively new, consider getting a professional home inspection. Many buyers will order inspections if they suspect potential problems. A buyer will use any excuse to justify offering you less than you’d like. A professional inspection can help support your property value.
A professional inspector can accurately assess the condition of your property, and know when to call upon the expertise of others if required. An inspector should evaluate the condition of the exterior: roof, vent pipes, gutters, chimney, siding, masonry, foundation, exterior grounds, (structures, stairs, walkways, driveways, outbuildings, drainage, etc.) Interior inspections should be performed systematically from top to bottom: from the attic to the basement or crawl space. Functionality of doors, windows and storm sashes should be checked. Bio-hazards (lead-based paint, asbestos, etc.) should be noted. The home’s infrastructure should be inspected and/or tested: electrical, plumbing, ventilation systems, heating and cooling, water pressure, etc. In the event a structural engineer’s opinion may be required, a professional home inspector should recognize and alert you to that need. An engineer’s advice might be sought when there are questions about physical conditions, which may potentially threaten the structure and the safety of occupants.
How to find a qualified Inspector:
Ask your escrow agent, title officer, real estate or mortgage agent for referrals. Ask the inspector for their professional credentials, experience, and names of a few satisfied customers. Are there complaints registered with the Better Business Bureau? Are they a member of a professional organization such as:
- National Academy of Building Inspection Engineers
- National Association of Certified Home Inspectors
- American Society of Home Inspectors
- National Association of Home Inspectors
This is a quick overview of FSBO topics.
If you think FSBO is for you and want more info, check out this FREE Booklet that includes; PA forms and disclosures, Step by Step How To, Avoid common mistakes, Open House, Title Company and Attorney information and so much more!! “FSBO Saver”
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