Since 2013, there has been an increase in sellers pre-selling properties and listing them on the Multiple Listing Services (MLS). Core Logic reported that in 2013, 53% of real estate transactions conducted in the US were not listed on the MLS. Most sellers do not have a real estate license and are not allowed to use the MLS, the standard listing portal for a licensed real estate agent. Although buyer’s agents are willing to work with For Sale by Owner (FSBO) listings, they are not allowed to give any advice to the seller or access marketing.
Sellers who want to list a FSBO may be losing tens of thousands of dollars in actual market value on a property, especially if they list properties without an up-to-date appraisal or current market research. Often a seller will list a FSBO based on the sales price of a neighbor’s home, which may or may not be the best option for a comparable property. A local real estate agent continually lists properties in their regional sales area and is best suited to offer a market comparison in the neighborhoods they cover. Remember, tax assessments, while readily available, are not the best tool for gauging the true market value of a property at any given time.
One nuance about FSBO sales that should give sellers pause is the fact that an experienced buyer’s agent may have the upper hand in a FSBO real estate transaction. Why? The seller may not be familiar with state laws and fiduciary codes and/or the ramifications of contractual issues that arise during negotiations. Even with an attorney creating a real estate contract on a property, the final outcome of a For Sale By Owner (FSBO) real estate sale can be delayed due to a variety of issues. Experienced REALTORS know how to circumvent these obstacles quickly and keep a property transaction on track.
FSBO does not equal the advertising potential of a REALTOR
Working with a professional REALTOR is worth the commission under these circumstances. An FSBO has limited opportunity for marketing, and becomes more dependent on real estate portal websites like Zillow.com. With an experienced agent, the advertising penetration of a property is much higher. For example, I list my properties for sale in Williamsburg, Virginia on four MLS websites. This gives my sellers a wide area of coverage so other agents can see the listing and buyers on the MLS can see it too. My MLS listings are also republished on Realtor.com, which is owned by the National Association of Realtors and is also a trusted website in the industry.
My broker, Coldwell Banker Traditions, also has a listing mechanism on their local website, where my clients’ properties receive excellent visibility. Not all REALTORS list properties as extensively on the Web, so check with individual realtors and ask them for specific information about the advertising provided for client listings through MLS and other places on the Web.
There are other disadvantages to listing properties without an agent. If the owner misses a visit to a potential buyer, he may lose the opportunity to sell a property outright. For sales of real estate in my territory, Southeast Virginia, an owner cannot use legal forms created by the Virginia Association of Realtors (VAR), unless he is licensed. Real estate forms are formally VAR registered and sanctioned for exclusive use by members. This puts the seller at another distinct disadvantage in the transaction. Having to create legal forms all over again is not only time consuming, but can also add to the costs of a lawyer.
In addition to some of the more obvious advantages of listing with a licensed real estate agent, there is also a common misconception that using a real estate attorney will save money instead of paying agent commissions. The seller still has to pay the buyer’s agent’s fee (which varies by state and the type of real estate transaction). All FSBO sales contracts must be created and finalized with an attorney. The sales process involves the buyer reading the contract and making changes. The attorney reviews the contract properly and presents it at closing. Lawyers in Virginia charge much more to create an original contract (in my experience) than the commission on the seller’s side, in most cases. Sellers wishing to go it alone should seriously consider that attorney’s fees may be more expensive and largely unpredictable, depending on the number of legal forms required, length of negotiations, and additional contract requirements.
Sellers need to forego the FSBO and be smart in a real estate market that is definitely on the move in many regions of the US. Prices tend to rise in the 2014 market and inventories are low in many markets. Therefore, sellers need expert advice on pricing real estate at current market value now, more than ever. In addition to the potential loss of proceeds from the sale of the home, the seller can easily be faced with legal and contractual issues that may not be resolved quickly. Worse yet, these issues may be resolved too late to meet the time limits of certain loans such as FHA and USDA. If the seller does not know what he is doing and the terms are not taken into account, this can cause the buyer to lose the loan. In turn, the property loses a good buyer and valuable time on the market.
Be prudent and do not engage in risky business: listing a property outside of the MLS or without an authorized agent. It is best to have representation from a licensed agent for a variety of reasons. The main reasons are: the seller will have expert advice, will most likely sell the property sooner, and the property will be priced at fair market. Say no to FSBO. Instead, find a capable real estate professional in your region for peace of mind.