8 Reasons why For Sale By Owner is a Bad Idea

14325968663981. Scams are real.

FSBO scams affect both buyers and sellers. They usually have no recourse other than hiring an attorney to recapture a part of their financial loss. Ask them then how much money they saved by not enlisting the professional help of a Realtor.

Frequent scams include fraudulent papers (loan documents and appraisals) foreign buyer deposits, third party purchases, and asking for certain personal information.

2. Sellers take on all liability.

Making mistakes is human. A seller or buyer that does not obtain the guidance of a licensed real estate agent (or better yet a Realtor) pays for those mistakes. Lawyers can bring a real estate transaction to a close, but they usually do not carry errors and omissions (E&O) insurance.

So if a homeowner lists “hardwood floors” as a feature, and the buyer subsequently uncovers that it is a wood veneer, then the homeowner is going to pay for that mistake most likely.

A Realtor should have caught that mistake before it could have any negative consequence, or it would have been covered with E&O insurance. As our culture increasingly becomes litigious, this additional exposure paints an even larger target on you.

3. Intimidating paperwork.

The National Association of Realtors (NAR) Profile of Home Buyers and Sellers stated that understanding paperwork was one of the most challenging tasks for FSBO’s.

In Florida, there are a number of legal forms that are required along the way to a successful closing.  These include a sales contract, property disclosures, occupancy agreements, and lead paint records.

Of course in this internet age, generic contracts can be purchased easily enough.  However, an untrained seller probably won’t understand what all of the language means to them in their specific situation.

4. Sellers can get bogged down in a bad deal. 

FSBO’s who commit to a deal only to subsequently realize a mistake are stuck.  They are obligated to pay the buyer (if the buyer is willing) to get out of the contract, or they will have to stick with the bad deal.

5. FSBO’s sell for less.

According to a NAR study, in 2015 the median FSBO sold for approximately 16% less than the median home listed with a Realtor.

The fact is that homeowners trying to sell by themselves simply do not have the proper time to devote to the sales process, nor do they have the valuation data and marketing strategy.

6. FSBO’s get stagnant.

FSBO’s have the privilege of spending more time on the market than homes listed with a Realtor.  In general that leads to a lower eventual selling price.  On average, 18% of FSBO’s were unable to sell within their chosen time frame in 2015.

7. Limited marketing.

By definition, FSBO’s have limited resources to market their home.  The 2015 NAR Profile of Home Buyers and Sellers states that 42% relied on a yard sign, 32% relied on friends and family, and 15% used social mediaHidden costs pile up.

Saving money is the motivation for most FSBO’s.  It may take some time for them to realize it, but chances are that these sellers are being nickel and dimed along the way to a sizeable amount of money.

If they want to be proactive, they are going to be paying for signage, flyers, photography, listing on the local MLS, lawyers, optional home warranties, home inspections, credit reports on potential buyers possibly, contracts, etc.

8. Time is money. 

If they are lucky, the biggest cost to the FSBO is their own time.




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