Why FSBO Fail: The 7 Biggest Sell by Owner Mistakes


why does fsbo process fail?

So you've decided to sell your home. Congratulations! That's a huge step.

Now you're wondering whether you should list your house with an agent or as "for sale by owner" (FSBO). It's a fair question as FSBO has a lot of allure. But before you decide to DIY the sale of your house, know what you're getting yourself into.

There are a surprising number of reasons why FSBO fail. Let's take a look at some of the common reasons homeowners choose to sell by owner. Then we'll get into seven pitfalls that make selling a house by owner unsuccessful.

Reasons Why People Opt to List FSBO

People look into how to sell by owner for many reasons. They may feel like it's a great way to avoid paying commission to an agent. Or they may feel they know how to handle the process best.

Typically, the reasons for selling FSBO aren't strong enough to justify not using an agent. And they're likely not going to make the process any easier.

Are you considering using these three points as reasons for listing your house FSBO? If so, you may want to rethink them.

1. Saving Money on Commission

This is the top reason people embark on how to sell their home by owner. Often, real estate agents can earn a 4-6% commission on the sale of a house. If you're selling your home for $250,000, your agent takes home $10,000-15,000.

It's tempting to want to keep that extra money for yourself. After all, it's your home. If you can do the work of selling it yourself, why pay for an agent?

But knowing how to negotiate a house for sale by owner is tricky. Agents know the market in your area. They know the most popular design trends and how to make a house appealing to a wide range of buyers.

And believe it or not, you may have to pay a commission even if you don't use an agent. If your buyer is using an agent, sometimes the seller is required to split those commission fees. And if you're not using an agent, you may not notice those kinds of agreements in the contract you sign.

2. Already Knowing a Buyer

This is another reasonable cause for listing your house as FSBO. You've got a friend, coworker, or family member who has decided your house is the one. So if you already know someone who'll buy, why use an agent?

For one, until you sign the paperwork, that buyer isn't locked into purchasing your home. They may have given you their word or even shaken on it. But they can still back out at any time, leaving you scrambling to find another buyer.

It also still requires you to know how to price your home for sale by owner. That can be hard if you're unfamiliar with the market. Your buyer may expect a lower price because they know you; they may want you to cut them a deal.

If you struggle to negotiate the right price, you'll end up losing money on the deal. So even if you have a buyer in mind, it's wise to get in touch with an agent who can help you navigate the sale.

3. Being in Control of the Process

Having complete control and autonomy as you sell is another appealing reason to go the FSBO route. Some people want to make sure they're getting everything they can out of their house. They may feel like an agent would try to undersell them or suggest too many costly changes.

But being in control of the entire selling process requires a hefty amount of knowledge and experience. You need to know everything from market value to what to write on your for sale by owner sign.

Have you considered what you need to do before listing your house? Renovations, updates, and proper staging can boost your home's value. But it takes time and energy to understand what kinds of changes will be more beneficial.

Do you know how to list your home? Where to list it? What about facilitating showings?

Are you prepared to answer questions about your home's foundation and construction? About its history and appliances? You'll need to be able to answer whatever questions your potential buyers throw at you.

And then, if someone is interested, you'll have to know how to negotiate and draw up contracts. You'll need to know what offers are too low and how to watch out for scams.

Selling a house on your own may seem more frugal or efficient. But it can actually be more time-consuming in the long run. You'll have to spend far more time doing research to figure out all the details.

Reasons Why FSBO Fail

Unfortunately, many FSBO listings are unsuccessful. Homeowners go into the process for the above-mentioned reasons and think it'll be a breeze. Then they discover how much work and time they need to commit to it.

But most of the time, homeowners don't understand why for sale by owner doesn't work. It seems great: take care of the whole process yourself and save on commission. You should be able to sell your house fast, right?

As we've seen, that's not necessarily the case. But you may think that those examples don't matter; you'll figure it all out, and it'll be fine. Before you commit to that plan, take into account these seven reasons why FSBO may not be the best way to list your home.

1. Overshooting or Undershooting Property Value

You may think your home is worth everything. You've spent 10-15 years there and things aren't that out-of-date. It's practically a new house, still.

And don't get us started on its sentimental value. Your kids may have learned to walk on that carpet in the living room. Your spouse may have carried you over that narrow threshold after your honeymoon.

Unfortunately, FSBO homes are often misvalued. Homeowners either think they're worth more than they are or they underprice them. This is usually because they don't research what other houses like theirs are selling for in the area.

Not to mention, buyers may not like the paint colors you've chosen. And all those white appliances that were kind of old five or six years ago are officially old now.

If you put money into fixing up your house, you want to make sure you don't go over what you'll earn back by selling. If you decide to sell your house as-is, that will influence the listing price, too. These are things that realtors and buying services understand in and out.

2. Not Knowing Where to Market

Do you simply list your house on a housing market site and let it do the work for you? Where do you spread the word that your house is for sale?

Homeowners often think that listing their home somewhere will bring in buyers on its own. But is that enough?

You may need to list your home on a few different sites. Those sites may require a listing fee. Spreading the word through sites like Facebook could be beneficial too.

But word of mouth might not be enough to land you a buyer. And even if you know where to market your house, knowing how is another story.

3. Not Knowing How to Market

Marketing a house is an art form with a lot that goes into it. You've got the photos, virtual tours, staging, and descriptions to think about, for one. Then you've also got to know which demographic you're selling to and what they're looking for.

A family of five has different needs and wants than an older couple without kids. Which are you targeting? The answer will determine how you describe your house and highlight its features.

Then comes writing the actual descriptions. These take time and multiple drafts to get right. You don't want to come across as desperate or pushy, nor do you want to seem uninterested or aloof.

A home buying service saves you all the hassle of having to market your own home by doing appraisals for you. Realtors, too, can put together eye-catching listings that draw in the right buyers.

4. Getting Bogged Down by Paperwork

There's a lot that goes into knowing how to do paperwork for sale by owner homes. It goes far beyond a simple contract.

First, you need to have your home professionally appraised and inspected. This means the foundation, the plumbing, the electrical, the roof, all of it. Is it up to your city's codes?

You'll need legitimate documentation for each of those evaluations. Those should include dates of inspection, quality and code validation, and comprehensive ratings.

Then, of course, there are offers to negotiate. You'll have to submit these in particular ways. If you reject or accept an offer, those are other for sale by owner documents that you need to know how to write.

You'll likely need a lawyer to review and weigh in on your documents before you submit them. That will cost you extra money that you may have been hoping to save.

5. Potential for Scams

Selling your house without a realtor may put you at a higher risk for scams, too. Investors or scammers look to take advantage of inexperienced sellers.

Keep an eye out for buyers who don't need to see your house before buying. They may be a little too upfront with their financial information. Or, they may try to convince you to accept a check for the downpayment.

There's little protection from these scams, particularly if you're selling on your own. Use a licensed agent or a professional buying service to avoid getting tricked.

6. Saying the Wrong Things (Or Not Knowing the Answers)

Showing your house and convincing a buyer to close the deal isn't as easy as it seems. It's not a matter of letting them walk around and deciding whether they like the layout.

Your buyers will have questions. And if you're in charge of providing the answers, you'll need to know them. All of them.

How much have homes sold for nearby? When were the appliances installed? Would you consider selling it furnished and, if so, how would that affect the price?

These aren't even the most technical questions. And they don't cover how you describe the home, either.

Have you thought about the words you'll use? "Cozy" may be appealing to you but not to your buyer. "Charming" may sound great but communicate age and upkeep.

You'll also need to have documentation to back up all your claims. Your buyer is allowed to ask to see current, verified documentation about each part of your house. As an FSBO seller, you've got to handle all of that.

7. Contract Liability

As an average homeowner, you may not know the ins and outs of drawing up a contract. But realtors are often covered by error and omission insurance. This means that they're protected if they make a mistake in a contract.

Unfortunately, selling FSBO homes doesn't offer the same protection. You've got to take extra care to make sure you've crossed all your T's. If not, you put yourself at a greater legal risk.

This is where extra costs can come into play. Buyers could exploit or sue you over an incorrect contract. Or, you'll have to pay fees to have an attorney look over your paperwork beforehand.

Sell Without the Hassle

Knowing why FSBO fail can keep you from making costly mistakes as you sell your home. Though it seems like an appealing choice, the costs typically outweigh the benefits.

Instead of FSBO, consider having your property evaluated by a home-buying service. To get started with your value estimation, click here.

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