If you are in the market for your ideal home, it is likely that you will be dealing with a real estate agent who will give you a tour of the house, negotiate the price, and follow-up to see if you are interested. You may also be enlisting the help of an agent to deal with the complex paperwork and procedures involved in buying a property.
But there is a growing trend in the property market where the real estate agent is removed from the equation and homeowners take it upon themselves to sell their property on their own – a trend called “for sale by owner” or FSBO.
So, why are some homeowners taking the FSBO route? And is buying a home directly from the owner the right strategy for you? Let’s dig deeper.
What drives home sellers toward FSBO?
There are several reasons why homeowners turn toward the “for sale by owner” approach when it comes to selling their properties. Here are some of them:
1. Raise net return on their property
There are several benefits to enlisting the help of a real estate agent – they are experts on their field and updated on recent market trends and legislation changes, and they have extensive experience in the home sales process.
But their services often come at a steep price. Real estate agents are paid a commission that on average range from 2% to 3% of final sales price of the property. So, if the home sells for $600,000, slightly above CoreLogic’s national median house price, homeowners will be forking out between $12,000 and $18,000 on commissions for their agent.
Going the FSBO route eliminates this cost, thereby increasing net return on their property.
2. Managing marketing expenses
Agent’s commissions are not the only expenses home sellers are concerned about. They also need great advertising to entice potential buyers. A good real estate agent can help create a strong marketing strategy get the property off the market quickly. However, these can easily cost from several hundreds to thousands of dollars.
Some home sellers manage these expenses by taking over the marketing process on their own. After all, there are several FSBO websites available where they can advertise their properties for a few hundred dollars or even for free.
3. More control over the transaction
Selling the property on their own provides homeowners with more transparency and control over the transaction. It allows them to know exactly how many enquiries their home has received or the number of attendees at their open house. They can also receive buyer feedback firsthand. Taking over the process themselves can also lead to a faster sale since homeowners are focused on selling only their property, unlike real estate agents who handle several listings.
What are the benefits of buying a home for sale by owner?
If you are considering purchasing a home directly from its owner, you can expect several advantages. These include:
1. Direct communication with the seller
One of the biggest advantages of buying an FSBO home is that you can communicate directly with the homeowner. This can give you more room to negotiate the sales price. It also allows you to relate your concerns and objections directly with the seller.
Meeting the owner face-to-face also humanises the transaction and may allow both parties to build a connection. This can result in a win-win situation for you and the seller.
2. Getting detailed information about the home
Having settled there for several years, no one knows more about the property than the owner. They can give you additional information about the home – like certain features you may have missed during your tour including what the neighbours are like, what lifestyle amenities are accessible, and what they like most about living in the neighbourhood.
What are the drawbacks of buying a home for sale by owner?
However, certain issues may also arise if owners are directly involved in the sale of their property. These include:
1. Lack of market knowledge
Not all homeowners have sufficient understanding of the housing market or the processes involved in selling their properties. This lack of industry knowledge can pose a big issue, especially if the seller has an inflated idea of how much the property is worth. A lot of experience is also needed for the seamless completion of paperwork and other legal requirements and if the seller is not prepared to handle these, it may cause delays and costly legal errors.
2. Emotions can run high
A home is place where a lot of memories are created and selling it can be an emotionally charged process. Some home sellers may not be able to keep their objectivity during the process, which is something you as a buyer may have to deal with. They may overprice their properties and refuse to budge, they may reject an offer without thorough consideration because they are offended, or they may resent a feedback even if it is constructive. In these situations, a real estate agent could have been a great help as they can take the emotion out of the process and prevent owners from making these costly mistakes.
It is important to spend time doing research and mapping out your strategy if you decide on purchasing a home via the FSBO route. Buying a home directly from the owner has its share of benefits and advantages, but one thing to remember is that you and the seller have one thing in common – you both want to get the best value out of the property.