We all like to save a few bucks here and there, especially when it comes to home ownership.
But some boot-strapping home owners take DIY too far.
Sure, it makes sense to teach yourself how to fix a leaky faucet or replace a broken door hinge.
But at what point does this self reliance go too far?
The answer: when you decide to sell your home yourself.
Some people see listing their home for sale by owner (or FSBO) as a way to save an agent's commission for themselves.
"I can put a few signs in the front yard," they tell themselves. "And what's so hard about taking some pictures and posting them online?"
- Actually, a whole lot about real estate photography is easy to overlook. For starters, getting rid of the stuffed animals and Simpsons-esque furniture. (Photo courtesy of terribleagentphotos.com)
What they don't realize, however, is that their choice to go it alone could potentially cost them a lot of time and money.
So how do you turn FSBOs into a client?
In short, through education.
Inform FSBOs of the risks they're unwittingly taking on and explain the possible negative implications of those risks.
1. The potential for scams
FSBO sales create the potential for fraud by both parties.
Some FSBO sellers will ask that their buyer go forward without an agent as well. "We can make this deal without either of us losing money to an agent," they might say.
Hoping to save a few extra dollars in the deal, the buyer might agree, throwing down an earnest money deposit in the process. If the FSBO decides they don't like the deal, the buyer might be out of luck without a valid contract or receipt, saying goodbye to their EMD.
FSBO scams can include producing fake papers, such as appraisals or loan documentation, or purchases through a fake third party, like a non-existent attorney.
Ask an FSBO why they would open themselves up to these potential scams. Tell them you're a trained professional who specializes in these transactions and, believe it or not, they're not as easy to pull off as they might seem.
2. For the love of paperwork
One of the biggest unforeseen obstacles FSBOs encounter is the daunting paperwork of a real estate transaction.
Maybe the FSBO did a Google search and found a one-size-fits-all contract and thought their work was done. But do they actually understand what's on that contract? Are they capable of customizing it?
Ask the FSBO how valuable their time is and how it could be used in better ways than learning the ins and outs of real estate contracts they may use only a few times in their life.
Sales contracts, lead paint disclosures, property disclosures—inform the FSBO that any missteps in these papers can lead to legal problems that could've been easily foreseen by a real estate agent.
3. Bad deals
FSBOs aren't as practiced or as knowledgable at finding discrepancies in contracts before signing on the dotted line. For example, let them know that they may have to pay lots of money to back out of a bad deal if there are some oversights in their paperwork. You can help save them that money and headache.
4. They'll get less money
FSBOs make about 16% less than median sales prices. This could be due in large part to them not having the time or resources to devote to understanding their home's market value. Likewise, they may not know how to accurately read market reports, and they might not know how to create a proper marketing campaign.
FSBOs who sell to their friends or someone they knew, dropped their median sale price from $210,000 to $151,900.
Why? Because their friend expected a deal.
Check back next time for part 2.
About Larson Educational Services:
Utilizing 40 years of real estate training and professional education experience, Florida real estate school Larson Educational Services is the premier provider of Florida real estate licensing, exam preparation, post-licensing, CAM licensing, mortgage loan originator licensing, and continuing education in Southwest Florida. Classes are available in Fort Myers, Naples, Sarasota, and online. We are an approved Florida Real Estate School (License #ZH1002299), Florida CAM School (License #PRE31), Florida Insurance School (License # 370501) and NMLS Approved Course Provider.
Brad Larson
Larson Educational Services
1400 Colonial Blvd. #44,
Fort Myers, Florida
33907
239-344-7510
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