FSBO Woes: Why It's So Hard to Sell Your Own Home

For most people, a for-sale-by-owner transaction simply isn't in the cards
By Marcie Geffner

Granted, some people are able to sell their own homes without the services of a real estate agent. Some of these successful do-it-yourselfers are very experienced home sellers. Others are transferring ownership of their home to a child, a coworker or a tenant who's already living in the home. These circumstances are the exception, not the norm, however. For most people, a for-sale-by-owner (FSBO) transaction simply isn't in the cards. Here are five reasons why.

1. FSBOs can't list their home in the MLS. FSBOs aren't permitted to put their home in the multiple listing service (MLS) because these industry membership organizations are open only to licensed real estate brokers and agents. FSBOs are also locked out of many home search engines and Web sites, including the gigantic Realtor.com. Sure, a determined FSBO can put a for-sale sign in his or her front yard and run a tiny advertisement in the local newspaper, but the home won't receive nearly as much exposure as it would through the MLS.

2. Agents won't show FSBO homes. In a typical home sale, the buyer's agent receives a percentage of the commission that the seller pays the listing agent. Without a listing agreement, there's no guarantee that the buyer's agent will be compensated for his or her services, unless the buyer has signed a buyer's brokerage agreement that specifically provides for such compensation. Even if a FSBO offers to pay the buyer's side of the commission, most agents won't want to go through a transaction with an unsophisticated self-represented seller across the table. That means the pool of potential buyers for FSBO homes is limited primarily to unrepresented and probably unqualified prospects.

3. FSBOs usually overprice their home. Like most homeowners, most FSBOs honestly believe their own home is worth more than comparable homes in the same neighborhood. Usually, they're wrong. A real estate agent can provide an update on market conditions, an assessment of the likely selling price of the home and tips for improving the home's buyer appeal. Overpricing a for-sale home is a sure way to deter potential buyers.

4. Buyers will feel intimidated. Potential buyers will spend less time in a for-sale home if the owner is present during the showing, and they'll be shy about discussing its pluses and minuses with their own agent if the owner is within earshot. Buyers will also be less inclined to make an offer if they know they'll be negotiating directly with the seller. Having an agent on each side creates an effective emotional buffer between the seller and buyer.

5. FSBOs are likely to stumble into legal trouble. Real estate transactions are fraught with potential liability for unwary sellers, particularly in states that have extensive disclosure requirements (such as California). A FSBO who overlooks even one required form or legally mandated disclosure could face a protracted and expensive buyer lawsuit after the transaction closes.
© 2000 by Marcie Geffner. Reprinted by permission.

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Number of homes for sale at 4-year low

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Press Release
Cincinnati Area Board of Realtors®

March 21, 2011

Home Sales Up 1.90% in February;
Year-to-Date Sales Up 2.82%

Local home sales in February – for the second consecutive month – improved over a year ago. Sales last month totaled 963 compared to 945 in February from a year ago, for a 1.9% improvement.

In addition, the February 2011 sales figure is 7.6% ahead of January sales (963 vs.895)

Sales Jan. Feb.
2011 895 963
2010 862 945

Year-to-date home sales (counting January and February) are up 2.82% over the similar 2-monthperiod a year ago (1,858 vs. 1,807).

The Cincinnati-area housing market, with a gain in sales, was one of the top metro areas in the state last month. The Cleveland/Akron, Columbus and Toledo markets saw a decrease in sales. “Real estate is always a local issue, and the fact that Cincinnati posted gains for the month shows the relative health of our region,” said Pete Kopf, president of the Cincinnati Area Board of Realtors.

Kopf cited three primary reasons why sales, in general, are on the upswing:

1) Buyers’ concerns that if home mortgage rates increase later in 2011, it is smarter to lock in attractive rates now instead of waiting for higher costs as the year progresses. A 30-year fixed rate loan slipped to 4.85% last week, but that isn’t expected to last through the summer.

2) Rent increases currently going on are making renters realize the tax benefits they could receivewith home ownership compared to no tax benefits in renting. [Mortgage interest costs andproperty taxes are deductible on federal income tax returns for home owners.]

3) There currently is an ample inventory of homes to choose from, which offers attractive buying opportunities at all price levels.

February Home Sales

“More home showings are happening early this year,” said Kopf. “That’s a positive sign the housing market has stabilized and the pent-up demand for homes is being handled successfully.”