|SARIT FINKELSTEIN, REAL ESTATE BROKER |
|468 N. Camden Drive, Beverly Hills, CA. 90210 |
FSBO Woes: Why It's So Hard to Sell Your Own Home
For most people, a for-sale-by-owner (FSBO) 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
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
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.
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 (e.g., California). A FSBO who overlooks
even one required form or legally mandated disclosure could face a protracted and expensive buyer lawsuit after the transaction
Copyright © 2000 Marcie Geffner. All rights reserved.
What a REALTOR® Can Do for You
The REALTOR® you work with could be one
of your most valuable resources. Unlike many real estate agents who are simply licensed by their state to do business, REALTORS®
have taken additional steps to become members of the local board of REALTORS® and have agreed to act under and adhere
to a strict Code of Ethics. Plus...
- A REALTOR® can help you determine how much home you can afford. Often a REALTOR®
can suggest ways to accrue the down payment and explain alternative financing methods.
- A REALTOR®,
in addition to knowing the local money market, also can tell you what personal and financial data to bring with you when you
apply for a loan.
- A REALTOR® is already familiar with current real estate values, taxes,
utility costs, municipal services and facilities, and may be aware of local zoning changes that could affect your decision
- A REALTOR® can usually research your housing needs in advance through a Multiple
Listing Service--even if you are relocating from another city.
- A REALTOR® can show you
only those homes best suited to your needs--size, style, features, location, accessibility to schools, transportation, shopping
and other personal preferences.
- A REALTOR® often can suggest simple, imaginative changes
that make a home more suitable for you and improve its utility and value.
- A REALTOR® is
sensitive to the importance you place on this major commitment you are about to make. Look for a real estate professional
to facilitate negotiation of a win-win agreement that will satisfy both you and the seller.
Why Use a REALTOR® When Selling
A real estate agent can help you understand everything you need to know about the selling process.
By Ron Schmeadick
The selling process generally begins with a determination
of a reasonable asking price. Your real estate agent or REALTOR® can give you up-to-date information on what is happening
in the marketplace and the price, financing, terms and condition of competing properties. These are key factors in getting
your property sold at the best price, quickly and with minimum hassle.
The next step is a marketing plan. Often, your
agent can recommend repairs or cosmetic work that will significantly enhance the salability of the property. Marketing includes
the exposure of your property to other real estate agents and the public. In many markets across the country, over 50% of
real estate sales are cooperative sales; that is, a real estate agent other than yours brings in the buyer. Your agent acts
as the marketing coordinator, disbursing information about your property to other real estate agents through a Multiple Listing
Service or other cooperative marketing networks, open houses for agents, etc. The REALTOR® Code of Ethics requires REALTORS®
to utilize these cooperative relationships when they benefit their clients.
is part of marketing. The choice of media and frequency of advertising depends a lot on the property and specific market.
For example, in some areas, newspaper advertising generates phone calls to the real estate office but statistically has minimum
effectiveness in selling a specific property. Overexposure of a property in any media may give a buyer the impression the
property is distressed or the seller is desperate. Your real estate agent will know when, where and how to advertise your
property. There is a misconception that advertising sells real estate. The NATIONAL ASSOCIATION OF REALTORS® studies show
that 82% of real estate sales are the result of agent contacts through previous clients, referrals, friends, family and personal
When a property is marketed with an agent's help, you do not have to allow strangers
into your home. Agents will generally pre-screen and accompany qualified prospects through your property.
The negotiation process deals with much the same issues for both buyers and sellers, as noted above under the buying
process. Your agent can help you objectively evaluate every buyer's proposal without compromising your marketing position.
This initial agreement is only the beginning of a process of appraisals, inspections and financing -- a lot of possible pitfalls.
Your agent can help you write a legally binding, win-win agreement that will be more likely to make it through the process.
Monitoring, renegotiating and closing
Between the initial sales agreement and
closing (or settlement), questions may arise. For example, unexpected repairs are required to obtain financing or a cloud
in the title is discovered. The required paperwork alone is overwhelming for most sellers. Your agent is the best person to
objectively help you resolve these issues and move the transaction to closing (or settlement).
Why use a REALTOR®?
All real estate licensees are not the same. Only real estate licensees who are members of the NATIONAL ASSOCIATION
OF REALTORS® are properly called REALTORS®. They proudly display the REALTOR "®" logo on the business
card or other marketing and sales literature. REALTORS® are committed to treat all parties to a transaction honestly.
REALTORS® subscribe to a strict code of ethics and are expected to maintain a higher level of knowledge of the process
of buying and selling real estate. An independent survey reports that 84% of home buyers would use the same REALTOR® again.
You be the judge
Real estate transactions involve one of the biggest financial investments most people experience in their
lifetime. Transactions today usually exceed $100,000. If you had a $100,000 income tax problem, would you attempt to deal
with it without the help of a CPA? If you had a $100,000 legal question, would you deal with it without the help of an attorney?
Considering the small upside cost and the large downside risk, it would be foolish to consider a deal in real estate without
the professional assistance of a REALTOR®!
CRB, is Co-Owner and Associate Broker at Realty Executives, Eugene, Oregon.
What Is a REALTOR®?
A real estate agent is a REALTOR® when he or
she is a member of the NATIONAL ASSOCIATION OF REALTORS®, The Voice for Real Estate® -- the world's largest professional
The term REALTOR® is a registered collective membership mark that identifies
a real estate professional who is a member of the NATIONAL ASSOCIATION OF REALTORS® and subscribes to its strict Code
Founded in 1908, NAR has grown from its original nucleus of 120 to today's 720,000
members. NAR is composed of residential and commercial REALTORS®, who are brokers, salespeople, property managers, appraisers,
counselors and others engaged in all aspects of the real estate industry. Members belong to one or more of some 1,700 local
associations/boards and 54 state and territory associations of REALTORS®. They can join one of our many institutes, societies
and councils. Additionally, NAR offers members the opportunity to be active in our appraisal and international real estate
REALTORS® are pledged to a strict Code of Ethics and Standards of Practice.
Working for America's property owners, the National Association provides a facility for professional development, research
and exchange of information among its members and to the public and government for the purpose of preserving the free enterprise
system and the right to own real property.
up the Price
Every reasonable owner wants the best possible price and terms for his or her home. Several factors,
including market conditions and interest rates, will determine how much you can get for your home. The idea is to get the
maximum price and the best terms during the window of time when your home is being marketed.
In other words, home selling
is part science, part marketing, part negotiation and part art. Unlike math where 2 + 2 always equals 4, in real estate there
is no certain conclusion. All transactions are different, and because of this, you should do as much as possible to prepare
your home for sale and engage the REALTOR® you feel is best able to sell your home.
What is your home worth?
All homes have a price, and sometimes more than one. There's the price owners would like to get, the value buyers would
like to offer and a point of agreement which can result in a sale.
In considering home values, several factors are
- The value of your home relates to local sale prices. The same home, located elsewhere, would likely
have a different value.
- Sale prices are a product of supply and demand. If you live in a community with an expanding
job base, a growing population and a limited housing supply, it's likely that prices will rise. Alternatively, it's
important to be realistic. If the local community is losing jobs and people are moving out, then you'll likely have a
- Owner needs can impact sale values. If owner Smith "must" sell quickly, he will have
less leverage in the marketplace. Buyers may think that Smith is willing to trade a quick closing for a lower price -- and
they may be right. If Smith has no incentive to sell quickly, he may have more marketplace strength.
- Sale prices
are not based on what owners "need." When an owner says, "I must sell for $300,000 because I need $100,000
in cash to buy my next home," buyers will quickly ask if $300,000 is a reasonable price for the property. If similar
homes in the same community are selling for $250,000, the seller will not be successful.
- Sale prices are NOT the
whole deal. Which would you rather have: A sale price of $200,000, or a sale price of $205,000 but where you agree to make
a "seller contribution" of $5,000 to offset the buyer's closing costs, pay a $2,000 allowance for roof repairs,
fund two mortgage points, re-paint the entire house and leave the washer and dryer?
much is too much?
Because all transactions are unique there is flexibility in the marketplace. The amount of
flexibility depends on local conditions.
For example, suppose you're selling a townhouse. Suppose also that there
have been five recent sales of the model you own and that sale values have ranged between $200,000 and $210,000. You now have
an idea of how your home might be priced. In a strong market perhaps you can ask for $210,000 or a little more. If the market
has slowed, $210,000 may be a reasonable asking price, but perhaps more than the final sale price.
scenario. Imagine that you live in a community of Victorian-style homes, most of which were built in the 1920s. All the homes
are different in terms of size, condition, modernization, style and features. In such a neighborhood, an average sale price
is just a statistic without much practical meaning. On a single block one home may sell for $400,000 while another is priced
at more than $1 million. The average price may be outrageously high for one home and staggeringly low for another.
Experienced REALTORS® are active in the local marketplace and can provide assistance with pricing,
marketing, negotiation and closing.
Because experienced REALTORS® have handled many transactions, they're familiar
with the terms and conditions that went into individual sales, not just published sale prices which may not reflect various
premiums, discounts and adjustments.
Tax Implications of Selling a Home
a home can have a major impact on your federal and state tax returns.
Check with your tax consultant on the factors that may affect taxes resulting from
the sale of your home. For example:
you purchased the home or acquired it by gift or inheritance
Whether you used your home partly for business or rental
Costs associated with selling your home
Home improvements or additions, which may help to offset capital gains
Gain from the sale of a prior home on which tax was postponed prior to the enactment of the
federal Taxpayer Relief Act of 1997
federal Taxpayer Relief Act of 1997 says when you sell your home you can keep, tax free, capital gains of up to $500,000 if
you are married filing jointly or $250,000 for single taxpayers, or married taxpayers who file separately. To qualify for
the exclusion, you must have used the home as your principle residence for at least two of the prior five years. It is not
a one time tax exclusion. You can use the exclusion as often as you meet the qualifications.
The federal Internal Revenue Service Restructuring and Reform Act of 1998 further clarified the law and
says you can prorate the $500,000/$250,000 exclusion (not your specific gain) if unforeseen events, such as a job change,
illness, or some other hardship forced you to sell before you meet the two-year residency requirement.
Many, but not all federal tax benefits are also available from state tax departments. Be
sure to discuss your move with a tax professional familiar with state tax rules, especially if you are moving from one state
the MetLife Consumer Education Center with assistance from the National Association of the Remodeling Industry.
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