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Thinking of selling on your own? Think again.

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ANNA SPIEWAK, Special Sections Editor
 

The ramifications of going FSBO.

As the weather has warmed up this spring, so have the sellers, to the idea of putting their properties back on the mar ket and trying their luck at a good sale. While several real estate agencies out there are prepared to help any homeown er with a transaction, a certain few still choose to sell on their own, also known as for-sale-by-owner, or FSBO. But given today's complexities of a real estate trans action, and the slower-paced market that is leaning more towards the buyer's side now, most realtors and some sellers alike, advise against it.

“It’s very difficult for FSBOs today to sell on their own,” said Lydia Russo, president/owner of Russo Realty with offices in Bergenfield and Teaneck. “Maybe when it was a hot market earlier they had a chance, but now it’s more difficult, there’s too much competition and the seller is taking a great risk.”

According to RealSource Association of Realtors, a local trade association representing nearly 3,700 Bergen County realtors, the common misconception with FSBO sellers is that they can make more money by selling without a realtor, which is not always the case. For one, while independent sellers focus on avoiding the 4 to 6 percent commission fee that comes with listing with a realtor, buyers already subtract that in their heads when negotiating the price with them.

“Homeowners overprice their homes and want to pocket the money,” said Russo. “But if you have 12 houses on the market, you have to price it a little lower than the rest.”

That concept may be one of the reasons why the National Association of Realtors (NAR) 2006 statistics show that FSBO homes sell for about 16 percent less than transactions managed by a realtor.

While FSBOs might have been successful for sellers in the pre-Internet and limited-competition-from-realtor-agencies days, when all one had to do was put up a sign, make lemonade and invite people, today the process is more strenuous and competitive, according to experts.

“Today’s buyers and sellers are more cognizant of the risks and complexities of the real estate transaction and have far less time to dedicate to the real estate process,” said Tom Beritelli, president of RealSource. “Accordingly, they want their transaction handled by a professional – that’s why more than three-out-of-four partner with a realtor.”

Most recent national statistics seem to reflect this evolution of the real estate industry. According to NAR, there’s a downtrend in the number of for-sale-by-owner transactions, currently at a record-low market share of 12 percent, compared to 13 percent in 2005. The level of FSBOs has been on the decline since reaching a cyclical peak of 18 percent in 1997.

Some of the pitfalls that professionals list when selling on your own include: lack of access to the local market data for accurately pricing a home, the arduous process of the paperwork, transaction mistakes, improper disclosure about your home, lack of objectivity on the homeowners’ end when selling their own home, the buyers’ discomfort as a result, and lack of qualified buyers walking through the doors.

Renee Uhlich and her husband, George, found out about the effects of selling on their own the hard way when they put their 1970’s sugar-maple split in Harrington Park up for sale as a FSBO.

“You get to the point where you think to yourself the best way of thinking is the old way of thinking,” said Uhlich, referring to the old days of selling a home on your own.

She figured that being a retired paralegal/secretary of a real estate office would provide her with enough knowledge about the process of selling a home to do it on her own. So the Uhlichs placed an ad about the sale in the New York Times and on the Internet for a week.

The couple spent close to $3000 in advertising, baked cookies and greeted potential buyers for three full months, getting about four to five visitors per weekend.

“There were a lot of curiosity seekers, but not many of those who were ready to buy,” said Uhlich. “They were just looking. We misjudged the current generation, which has no time (to shop around on their own for a home).”

Even after they dropped their house price by $20,000 from the original $789,000, no serious offer was made.

It was not until a realtor approached the couple about helping them that things started to change. The realtor brought people to look at the home, she advised the Uhlichs on what to improve and what to emphasize inside the home for a better sale, and did a virtual tour of the home for the buyers. Renee Uhlich was impressed with the realtor’s presentation.

“We finally realized that the consumer who is ready to purchase, that person will go with a realtor,” she said.

Within two weeks, the realtor got the Uhlichs an offer close to what they wanted, and their home was officially sold in mid-July 2006.

According to Russo, of Russo Realty, sellers don’t know if a buyer is qualified when walking through their home.

“They could be sizing up your house (for a later burglary) for all you know, you’re taking the biggest risk,” she said.

Another advantage to realtor representation, according to Russo, is having a realtor checking up on the mortgage approval and other paper-work related matters.

Some sellers, such as Janusz and Marzena Janisiewicz, who are selling their home in Norwood, went with a realtor from the get-go to avoid some of these pitfalls and are happy with the results.

“It’s the only way to get people to the house, we don’t have the experience,” said Janusz Janisiewicz. “It’s a difficult mission selling on your own.”

Janusz Janisiewicz says he’s seen for-sale-by-owner signs around his neighborhood, which eventually had turned into for-sale-by-realtor signs.

But according to RealSource, the eventual switch from a FSBO to a realtor comes too late, when the seller has already spent unnecessary time and money, instead of partnering with a realtor from the start.

“Three years ago it was more realistic to sell FSBO, when the market was hot, but not today,” said Russo. “Now you need all the help you can get.”

 

 

Risks and remedies in FSBO transactions

 - RealSource Association of Realtors

 

RISK 1 – Your home may be priced incorrectly.

How much are you asking for your property? Is the price too high or not high enough to reflect the true value of your home? Did you base the price on local market conditions or just choose a number? Do you know how to price for short or long-term selling?

 

Remedy: Price is one of the most important factors in selling a home. Realtors are experts in selling homes and have access to the latest local market trends and pricing information to help sellers receive top fair market value for their homes. Realtors will also discuss strategies with the seller and make price recommendations accordingly.

 

RISK 2 – You may be wasting your money on ineffective marketing.

Are you effectively marketing your property? Are you reaching enough qualified potential buyers? How much is it costing? Simply purchasing an ad or putting up a sign is not enough.

 

Remedy : By listing with a realtor, sellers place a professional marketer on their team. From customized brochures, open houses and signage to advertising, online showings and more, realtors ensure the seller’s property receives maximum exposure to numerous buyers. In addition, realtors offer the seller access to the Multiple Listing Service (MLS) where the property can be posted and viewed by hundreds of other realtors and countless buyers.

 

RISK 3 – You may be wasting your time with non-qualified buyers .  

Anyone can respond to a classified ad – even those who are not interested in buying. FSBO sellers may show a home countless times, but who is looking at it? Is the prospect qualified to make an offer? Is s/he just looking out of curiosity, or for the purpose of committing theft/damage while you’re not home?

 

Remedy: Realtors pre-qualify prospective buyers by evaluating their financial position and their needs. In addition, realtors typically do not show properties to clients unless those buyers are financially qualified and potentially interested in making an offer.

 

RISK 4 – You may not be disclosing enough. What are you required to tell the buyer about the structural/environmental condition of your property? Must you mention current or past termite infestations, flooding problems, roof leaks, etc.? If you don’t properly disclose, you could be responsible for significant legal and financial losses.

 

Remedy: Realtors are familiar with disclosure laws and can guide your through proper procedures for disclosing underground oil tanks, well-water contamination, structural and other issues to ensure that you’ve met necessary obligations.

 

 

Article courtesy of Community Newspapers of North Jersey Media Group

BY ANNA SPIEWAK

Special Sections Editor

Northern Valley Suburbanite, April 25, 2007

 
ANNA SPIEWAK, Special Sections Editor
 
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