FSBO Challenges
FSBO Challenges
Yes, there are challenges to being a FSBO Seller. Here are just a few (with some solutions):
1. CORRECTLY SET THE ASKING PRICE FOR YOUR HOME.
The first FSBO challenge is the difficultly a do-it-yourself home seller has correctly setting the asking price.
SOLUTION: FSBO sellers should interview at least three successful realty agents who sell homes in your vicinity. The agents interviewed won't mind if you tell them you are considering selling your home without an agent.
They count on "for sale by owner" sellers failing, and listing their home with them within 30 to 60 days. The agent most likely to get the listing is one of the agents who was previously interviewed.
Each agent interviewed should provide the home seller with a written CMA (comparative market analysis) showing the recent sales prices of comparable nearly homes and the asking prices of similar nearby homes now listed for sale (the competition).
The prime reason at least three agents should be interviewed is the home seller then has three expert opinions of market value. If one estimate is very high, that's called "buying the listing." When a market-value estimate is very low compared to the others, that agent could be hoping for a quick sale.
SOLUTION: Contact a title company (customer service desk). Explain that you are a FSBO seller, and that you want to obtain a Property Profile and CMA. Some will assist FSBO Sellers, others won't. There may be a nominal $25-50 charge - but it should be worth the price.
SOLUTION: Use a free online CMA service offered by a Realtor. Both NCaHome and 1Listing.com, for example, offer Home Valuation Reports for free to California homeowners.
2. SUCCESSFULLY SELL YOUR HOME IN A "BUYER'S" MARKET.
In a local "hot market" where there are more qualified home buyers than homes available for sale (called a "seller's market"), it's very easy to sell a home by waiting for the purchase offers from buyers. But when there are more homes for sale than qualified buyers, that is a "buyer's market."
Statistics show more than 70 percent of home buyers begin their search online. The key then, is getting online presence.
SOLUTION: 1Listing.com offers a fixed fee MLS entry only service for $299. The service not only also gets your listing posted in the local Realtor Multiple Listing Service (MLS), but also gets it published on Realtor.com, and almost every major realty company's search engine through secondary/IDX feeds. In other words, your listing populates almost everywhere that counts on the internet! Your residence gets exposed to the largest number of prospective home buyers in your community.
3. PREPARE A LEGALLY BINDING PURCHASE OFFER.
A major problem for many FSBO home sellers is how to create a legally binding and comprehensive purchase contract without a listing agent being involved. Lacking a listing agent, this task can be a major challenge because the home sale forms sold at stationery stores are worthless.
In addition, home sellers must comply with California disclosure laws, such as providing written defect disclosures (Transfer Disclosure Statement; Supplemental Statutory Disclosures; etc.) , smoke detector and water heater compliance statements, natural hazard disclosures, lead-based-paint disclosures, and other applicable disclosures.
SOLUTION: By law, commissions are NEGOTIABLE in California. Contact a local realtor or attorney, and negotiate a fixed fee for these services. It will likely be a lot cheaper than paying 3% commission.
SOLUTION: NCaHome offers a fixed fee Seller Representation service for $3699---that's complete, fixed fee full-service representation from contract to close of escrow for $3699 (no matter what the price of the house is).
SOLUTION: Use California Association of Realtors (CAR) forms. These are standardized forms made available by CAR to its members for use in a California residential real estate transaction. CAR forms are incredibly comprehensive, and they are universally used by Realtors throughout California.
4. WATCH OUT FOR CONTRACT CONTINGENCY CLAUSES.
Virtually every home buyer needs to include, for the buyer's protection, at least two or three contingency clauses in their purchase offers.
The first customary contingency is for a satisfactory appraisal of the home by the lender's professional appraiser. If the appraisal doesn't reflect the sales price agreed upon in writing by the buyer and seller, the buyer probably won't be able to arrange satisfactory financing.
The second contingency is the loan contingency. The buyer makes his offer contingent upon obtaining financing on the terms and conditions stated in the offer. If the financing is not approved, the contingency fails.
The third contingency clause requires the buyer's approval of their professional home inspector's report. Because most home sales today involve such an inspection, buyers can use the results of such an inspection to re-negotiate the purchase price (depending on the problems/defects found during inspection), or cancel the purchase based on the inspection results.
The fourth contingency clause that most home buyers insist upon is a professional termite or pest control inspection clearance. Home sellers sometimes have such a report completed before listing so they can take care of any discovered problems prior to the home being put on the market for sale.
There can be other contingencies, too. For example, the buyer can make the purchase contingent on the sale of his/her existing home. Contingencies dramatically affect the legal consequences of the contract.
SOLUTION: Require Buyer to make an Initial Deposit (up to 3% of the purchase price) to cover your damages in the event of breach, and sign the Liquidated Damages Clause in the CAR Residential Purchase Agreement. The default time limit for removal of standard contingencies (loan, appraisal, inspection) in the CAR Residential Purchase Agreement is 17 days; ask for written removal of all such contingencies when 17 days from the date of the contact has passed.
SOLUTION: Pay a professional a fixed fee to review and advise you regarding the contract and disclosure documentation (discussed above). As stated above, this should generate significant savings versus paying a 3% listing broker commission.
5. REVIEW THE BUYER'S MORTGAGE FINANCING.
Home buyers generally obtain written pre-approval letters or certificates from mortgage lenders before beginning their home search---don't accept a buyer's offer until the buyer produces one.
SOLUTION: Call the lender who pre-qualified the buyer. Ask the lender to verify the information in the pre-qualification letter. Ask the lender if he/she forsees any problems financing the buyer's purchase on the terms stated, and/or if the lender can fund and close the financing in a timely manner so that escrow can close on time.
SOLUTION: As stated above, use a Realtor or other professional to help you review offers, and prospective buyers' financing, for a fixed fee.
6. ARRANGE THE HOME SALE CLOSING DETAILS.
Another task FSBO home sellers have is to arrange for the closing/settlement for the transaction.
SOLUTION: Use a title and escrow company which is friendly to FSBO sellers. Many title and escrow companies have officers who work with FSBO transactions, and are more than willing to provide that little bit of extra help to a FSBO Selller.
SOLUTION: Use a fixed fee service. As stated above, NCaHome offers full-service representation to California sellers for $3699.
IS IT WORTH THE HASSLE TO SELL YOUR HOME ALONE?
Consider these pros and cons of selling a home alone without a professional real estate agent. "Is it worth the hassle to sell my home alone in the hope of saving about 3 percent of the sales price?"
Yes and no. The savings in commisions can be substantial. However, the aggravation and stress can be substantial, too. NCaHome suggests a middle ground---use their fixed fee services for $3699, or negotiate with your own realtor friend or attorney for fixed fee services to help you in your transaction. Paying 3% for a listing broker in today's economy is just too expensive and a waste of good money.
NCaHome is a full service residential real estate brokerage charging only 1.5% commission. Professional real estate services for California buyers and sellers. Visit us today at www.NCaHome.com or call (707) 693-0200.
Yes, there are challenges to being a FSBO Seller. Here are just a few (with some solutions):
1. CORRECTLY SET THE ASKING PRICE FOR YOUR HOME.
The first FSBO challenge is the difficultly a do-it-yourself home seller has correctly setting the asking price.
SOLUTION: FSBO sellers should interview at least three successful realty agents who sell homes in your vicinity. The agents interviewed won't mind if you tell them you are considering selling your home without an agent.
They count on "for sale by owner" sellers failing, and listing their home with them within 30 to 60 days. The agent most likely to get the listing is one of the agents who was previously interviewed.
Each agent interviewed should provide the home seller with a written CMA (comparative market analysis) showing the recent sales prices of comparable nearly homes and the asking prices of similar nearby homes now listed for sale (the competition).
The prime reason at least three agents should be interviewed is the home seller then has three expert opinions of market value. If one estimate is very high, that's called "buying the listing." When a market-value estimate is very low compared to the others, that agent could be hoping for a quick sale.
SOLUTION: Contact a title company (customer service desk). Explain that you are a FSBO seller, and that you want to obtain a Property Profile and CMA. Some will assist FSBO Sellers, others won't. There may be a nominal $25-50 charge - but it should be worth the price.
SOLUTION: Use a free online CMA service offered by a Realtor. Both NCaHome and 1Listing.com, for example, offer Home Valuation Reports for free to California homeowners.
2. SUCCESSFULLY SELL YOUR HOME IN A "BUYER'S" MARKET.
In a local "hot market" where there are more qualified home buyers than homes available for sale (called a "seller's market"), it's very easy to sell a home by waiting for the purchase offers from buyers. But when there are more homes for sale than qualified buyers, that is a "buyer's market."
Statistics show more than 70 percent of home buyers begin their search online. The key then, is getting online presence.
SOLUTION: 1Listing.com offers a fixed fee MLS entry only service for $299. The service not only also gets your listing posted in the local Realtor Multiple Listing Service (MLS), but also gets it published on Realtor.com, and almost every major realty company's search engine through secondary/IDX feeds. In other words, your listing populates almost everywhere that counts on the internet! Your residence gets exposed to the largest number of prospective home buyers in your community.
3. PREPARE A LEGALLY BINDING PURCHASE OFFER.
A major problem for many FSBO home sellers is how to create a legally binding and comprehensive purchase contract without a listing agent being involved. Lacking a listing agent, this task can be a major challenge because the home sale forms sold at stationery stores are worthless.
In addition, home sellers must comply with California disclosure laws, such as providing written defect disclosures (Transfer Disclosure Statement; Supplemental Statutory Disclosures; etc.) , smoke detector and water heater compliance statements, natural hazard disclosures, lead-based-paint disclosures, and other applicable disclosures.
SOLUTION: By law, commissions are NEGOTIABLE in California. Contact a local realtor or attorney, and negotiate a fixed fee for these services. It will likely be a lot cheaper than paying 3% commission.
SOLUTION: NCaHome offers a fixed fee Seller Representation service for $3699---that's complete, fixed fee full-service representation from contract to close of escrow for $3699 (no matter what the price of the house is).
SOLUTION: Use California Association of Realtors (CAR) forms. These are standardized forms made available by CAR to its members for use in a California residential real estate transaction. CAR forms are incredibly comprehensive, and they are universally used by Realtors throughout California.
4. WATCH OUT FOR CONTRACT CONTINGENCY CLAUSES.
Virtually every home buyer needs to include, for the buyer's protection, at least two or three contingency clauses in their purchase offers.
The first customary contingency is for a satisfactory appraisal of the home by the lender's professional appraiser. If the appraisal doesn't reflect the sales price agreed upon in writing by the buyer and seller, the buyer probably won't be able to arrange satisfactory financing.
The second contingency is the loan contingency. The buyer makes his offer contingent upon obtaining financing on the terms and conditions stated in the offer. If the financing is not approved, the contingency fails.
The third contingency clause requires the buyer's approval of their professional home inspector's report. Because most home sales today involve such an inspection, buyers can use the results of such an inspection to re-negotiate the purchase price (depending on the problems/defects found during inspection), or cancel the purchase based on the inspection results.
The fourth contingency clause that most home buyers insist upon is a professional termite or pest control inspection clearance. Home sellers sometimes have such a report completed before listing so they can take care of any discovered problems prior to the home being put on the market for sale.
There can be other contingencies, too. For example, the buyer can make the purchase contingent on the sale of his/her existing home. Contingencies dramatically affect the legal consequences of the contract.
SOLUTION: Require Buyer to make an Initial Deposit (up to 3% of the purchase price) to cover your damages in the event of breach, and sign the Liquidated Damages Clause in the CAR Residential Purchase Agreement. The default time limit for removal of standard contingencies (loan, appraisal, inspection) in the CAR Residential Purchase Agreement is 17 days; ask for written removal of all such contingencies when 17 days from the date of the contact has passed.
SOLUTION: Pay a professional a fixed fee to review and advise you regarding the contract and disclosure documentation (discussed above). As stated above, this should generate significant savings versus paying a 3% listing broker commission.
5. REVIEW THE BUYER'S MORTGAGE FINANCING.
Home buyers generally obtain written pre-approval letters or certificates from mortgage lenders before beginning their home search---don't accept a buyer's offer until the buyer produces one.
SOLUTION: Call the lender who pre-qualified the buyer. Ask the lender to verify the information in the pre-qualification letter. Ask the lender if he/she forsees any problems financing the buyer's purchase on the terms stated, and/or if the lender can fund and close the financing in a timely manner so that escrow can close on time.
SOLUTION: As stated above, use a Realtor or other professional to help you review offers, and prospective buyers' financing, for a fixed fee.
6. ARRANGE THE HOME SALE CLOSING DETAILS.
Another task FSBO home sellers have is to arrange for the closing/settlement for the transaction.
SOLUTION: Use a title and escrow company which is friendly to FSBO sellers. Many title and escrow companies have officers who work with FSBO transactions, and are more than willing to provide that little bit of extra help to a FSBO Selller.
SOLUTION: Use a fixed fee service. As stated above, NCaHome offers full-service representation to California sellers for $3699.
IS IT WORTH THE HASSLE TO SELL YOUR HOME ALONE?
Consider these pros and cons of selling a home alone without a professional real estate agent. "Is it worth the hassle to sell my home alone in the hope of saving about 3 percent of the sales price?"
Yes and no. The savings in commisions can be substantial. However, the aggravation and stress can be substantial, too. NCaHome suggests a middle ground---use their fixed fee services for $3699, or negotiate with your own realtor friend or attorney for fixed fee services to help you in your transaction. Paying 3% for a listing broker in today's economy is just too expensive and a waste of good money.
NCaHome is a full service residential real estate brokerage charging only 1.5% commission. Professional real estate services for California buyers and sellers. Visit us today at www.NCaHome.com or call (707) 693-0200.Labels: Real Estate
