FOR SALE BY OWNERS (FSBO) is a term in real estate used to describe a way of selling property where the owner has decided to do what would otherwise be the job, and reason for hiring the services, of a property sales agent. The three most common reasons for owners choosing this method of sale is the thought that a) they will save money by not paying a commission to an agent; b) they believe they can do a better job at selling their own home; c) they have had unfavourable experiences with agents and can’t find an agent they can trust.
The main advantage for owners in taking on the job of an agent is if they succeed in selling it by themselves for the price they want within the average time a property sells in their area, then there’s a psychological victory that comes with it. The owner-seller can then say with 100% satisfaction; “See, I didn’t need an agent after all. I paid no commission and therefore I got more money for my home”.
The owner-seller didn’t pay commission, therefore he/she/they made more money? This is one way to view it. Fair enough. The bigger question to ask however, is how did you know your property received the highest possible price? Did you have the bank come and value your property and you got higher than what the bank says it is worth? Did you have real estate agents come and appraise your property and they told you it was worth “X” amount and you got a higher price? What marketing strategies did you you use to know for sure that you have flushed the market out for the best paying buyer around? How did you advertise your property and were you able to access every advertising medium aside from the internet? Were you successful in negotiating acceptable terms and conditions of your sale?
There’s a reason why the other methods of sale have gained more popularity in Australia (i.e. private treaty/for sale/by tender) over for sale by owners(FSBO). Auctions in particular have been the top choice for most sellers and this may have something to do with the fact that auction results are a heavily monitored method of sale. Each week you will hear and read reports about clearance rates going up or down. People like to be able to measure results in numbers. An auction also has a way of presenting itself as the fairest way of selling. It’s done with all competing buyers actively bidding for the property in view of everyone. Except for auctions, not many monitoring bodies track any other methods of sale.
Most real estate experts will tell you that when selling your property for the first time, it is crucial to choose the right method of sale because you may only have one chance to get the top result. What they mean is that if you were on the market with the wrong method of sale, you may end up not selling within the average time a property sells in your area. Your unsold property could earn the tag of a “lemon” as people have a general idea of the number of days a property get snapped up if marketed properly.
Buyers may become suspicious of properties that have been on the market too long even if the advertisement sounds good. By the time you decide to change your selling strategy, which may include engaging an agent, your property may have been unnecessarily devalued if it earns the “lemon” tag. What agents don’t tell you up front is that if a property fails to sell, the most common way of attracting a buyer is to keep dropping the price.
So it would be wise therefore to carefully obtain professional advice from trustworthy sources. Develop an understanding of the advantages and disadvantages of each method of sale. Take time to understand the risks and implications of your choice. More than just saving money on marketing and commissions, ensure you get sound advice and focus your energies on the real goal, i.e. achieving the highest and best price possible for your property. If you believe after doing your due diligence you are still the best person to do the job, then go for it.
contributed by Juliet Mutia