1. Scams happen
Common scams include fraudulent papers (appraisals, loan documentation), foreign buyer deposits (scammer sends too much in a bad check and then requests a refund), purchases through a third-party (a fake attorney, etc.) and asking for personal information.
2. Liability is all on the seller
Everyone makes mistakes. A seller (or buyer) who doesn’t have the representation of a licensed agent pays for those mistakes. Attorneys can close a real estate transaction, but they don’t carry errors and omissions (E&O) insurance. An agent would have either caught the mistake or covered it with E&O insurance.
3. Paperwork is daunting
The 2015 National Association of Realtors’ Profile of Home Buyers and Sellers showed that understanding paperwork was one of the most difficult tasks for FSBOs. Depending on the state, there are a variety of legal forms that are needed, including but not limited to a sales contract, property disclosures, occupancy agreements and lead paint records. Sure, ready-made contracts can be downloaded easily enough. But does an untrained seller understand what all that means? Would the seller know how to customize that one-size-fits-all contract?
4. Sellers can get stuck in a bad deal
FSBOs who sign on the dotted line and then realize an error. are stuck. They have to pay the buyer (if they’re willing) to get out of the contract or just take the bad deal.
5. FSBOs sell for less
In 2015, FSBOs lost about 16 percent of the sales price with a median selling price of $210,000 (agent-assisted homes sold for $249,000). Homeowners selling by themselves simply don’t have the time to devote to the process, don’t know the market value, don’t understand market reports and don’t properly market the property. If the FSBO seller sold to someone he or she knew, the median dropped to $151,900.
6. FSBOs spend more time on the market
Unless the seller knows someone who wants to buy the home, FSBOs take longer to sell than homes listed with an agent. For the same reasons, they can’t get the right selling price. On average, 18 percent of FSBOs were unable to sell within their chosen time frame last year.
7. FSBOs lack representation
There’s no one looking out for the homeowners who sell on their own. They have no one to call if they have a problem or a question.
8. Inspections are problematic
Sellers who don’t know the rules can get stuck with unnecessary and costly repairs. The buyer is represented by an agent who know more about the process than you.
9. Marketing is limited
FSBOs have limited resources to market their home. The 2015 NAR Profile of Home Buyers and Sellers showed 42 percent rely on a yard sign, 32 percent rely on friends and family, and about 15 percent use social media. Even paying for the MLS listing won’t be enough because there’s no incentive for an agent to bring a buyer to a FSBO.
10. Hidden costs add up
The mindset for most FSBOs is saving money. Chances are, these sellers are being nickeled and dimed into a pretty big chunk of change. They’re paying for a lot of extras: signage, flyers, photography, MLS listing, attorney (required in multiple states for FSBOs), home warranty (optional but hard to sell without one), home inspection, a wood destroying pest inspection, credit report for buyers (if applicable), contracts and the list goes on.
11. Time costs the seller money
The biggest cost to a homeowner is their time. You might hear the argument that it doesn’t take an agent that much time to sell a house. And honestly, given the technology at our disposal, that’s true, to an extent. FISBOs don’t have the expertise or the access to the resources agents have. What is your time worth? How much time will the seller spend researching the market and contracts? Are you going to leave work to unlock the house each time there’s a showing?