How Does For Sale By Owner Work?
Traditionally, if you wanted to sell property you call the services of your friendly neighborhood real estate agent. And why not? The real estate agent is a licensed professional armed with the tools of the trade; the experience and the expertise to sell your home when and at the price you want. But then FSBO happened.
What was that? FSBO?
FSBO is the acronym for For Sale By Owner an approach to selling one’s home whereby the real estate agent is taken out of the picture. Yes, the property owner takes it upon himself to sell his own property.
Is that possible?
In countries such as the United States and the United Kingdom, property owners have been going the FSBO route for years with much success.
It has been gaining popularity in Australia as more people want to maximize return on their property at a time when demand is high, supply of available homes is tight and the cash rate is favorable for borrowers.
So why are more people turning toward For Sale By Owner?
There are 2 main drivers as to why the FSBO approach is gaining ground among property owners:
1. Net Return on Property
Real estate agents are great at selling homes. They are updated on developments, property prices and market trends. They are also familiar with real estate legislation and the real estate sales process which depending on the city state, can get complicated.
Overall, dealing with real estate agents makes selling your property more convenient. The agent can prepare and review the contracts, schedule the home visits, handle negotiations and do the leg work.
But all of these advantages come at a steep price.
Real estate agents are paid a commission that is calculated as a percentage of the final sale price of the property. Commissions can range from 2% to 3%.
So assuming your property has an agreed- upon selling price of $500,000, would $10,000 to $15,000 validate the cost of convenience?
There are also out- of- pocket expenses that an agent incurs such as marketing and arranging home inspections. Collectively these expenses could easily knock off 8% from your selling price.
2. Time- Table for the Sale
When you put up your home for sale, the dates begin to tear themselves out of your calendar.
The sooner you are able to sell your home the better. As a rule, if your home remains on the market after 4 months, the perceived value starts to drop.
A real estate agent will ask you to sign an Exclusivity Agreement for the sale of your home. It may seem like a commitment to have your home sold come hell or high water. But the truth is an agent cannot commit to your property.
He or she has other properties to manage. The agent will work on whichever property will result in a faster sale. If your home is located in an area of sluggish growth and low demand, what do you figure are your chances for a quick sale?
By going the FSBO approach, you can focus 100% more time on the sale of your property.
FSBO might seem like a daunting task but with a bit of thought, strategy and effort you can successfully sell your own home.
The first thing that you should do is research on the real estate market. Find out everything that you can about it. In particular, focus on trends in your city state then zero in on pricing movements in your area.
One of the best resources you can use for research is the REIA website in your city state. REIA or Real Estate Institute of Australia is a politically non-aligned organization that provides valuable information to the Federal Government on all matters related to the property market.
You should also use research to find the best price for your home. Pricing is often the deal breaker so you have to be careful of how you calculate the value of your home.
Here are a few ways you can arrive at an acceptable pricing range:
- Visit home valuation websites
- Hire a Property Appraiser
- Visit auctions and open houses
- Conduct a Comparative Marketing Analysis (CMA)
- Purchase comps from a real estate agency
Even at the early stages, you should already have the sales contract prepared. An attorney or a conveyancer can get this done for you.
Marketing is a big part of selling your home. You will need to set up accounts in FSBO sites and social media which will be conduits to distribute marketing collateral. If you want to generate interest, you must produce great ad copy which includes high resolution pictures.
Hire a professional photographer who has experience shooting homes for sale. It may cost a bit of money but the expense will be worth it. Don’t even try to do it yourself even if you own an iPhone 7 Plus.
A professional photographer knows how to use all the elements of good photography to capture your home at its sellable best.
Once you have the pictures and ad copy ready, open an account in an FSBO site. These are website dedicated to help property owners sell their own homes. If you opt for the free subscription, you will be tasked to regularly update its content.
You should also utilize the power of social media. Chances are your neighborhood has a community page in Facebook. If so, ask to be accepted as a member then post your marketing copy. You should always link your social media posts to your FSBO account.
Negotiations can be tricky. Buyers often hire the services of a Buyer’s Agent to negotiate on their behalf. This is where the cost savings generated by removing real estate agent will come into play. You can use the 2% to 3% savings from commission payouts to navigate through negotiation.
Your pricing range should be realistic. Buyers also do their homework. As long as you have done thorough research and can justify your price range, you should do just fine.
There will be quite a bit of legwork between getting the paperwork done, observing “cooling off periods” and having contracts signed.
But when the glorious day arrives and the balance of payment is fulfilled, you will realize the experience was well worth it.