For Sale By Owner: Proceed with Caution

There are essentially two options available to home owners seeking to sell their property:

1.     Real Estate Agent Assisted Sale

• Traditional, full service agency agreement
• “Unbundled” or discount brokerage/agent service

2.     For Sale By Owner (FSBO) Sale

• Do-It-Yourself Sales
  • Traditional print/newspaper ads
  • Online advertising
  • Facebook
  • Kijiji
  • CraigsList
• FSBO “Plus” – Flat Fee service companies will, for a fee, provide basic information, forms, signage and access to their website, or in some cases, to the Multiple Listing Service (MLS)
  • PropertyGuys
  • ComFree
  • HomeAtEase

How Common Are FSBO Transactions?

According to statistics from the National Association of Realtors’ Profile of Home Buyers and Sellers 2011 (which is based on US real estate data), the traditional full-service real estate agency method remains, by far, the most common method of home sale:

• 87% sold with the assistance of a Real Estate Agent
• 5% sold privately to someone already known to them
• 8% for sale by owner

Why Try FSBO?

The primary reason sellers are interested in the FSBO method is cost. According to the Durham Region Association of Realtors, in May of 2016, the average selling price for a home in the Durham Region was $531,051.00. Accounting for the typical real estate commission (when there is a listing or seller’s agent and a co-operating or buyer’s agent) of 5%, you can expect to pay real estate commission of $26,552.55 (which is actually  $30,004.38 when you factor in HST).

FSBO—Proceed With Caution

Who wouldn’t like to keep an extra $30,000 in their pocket? And if you visit the Flat Fee company websites, you’ll find an abundance of satisfied customers who testify that the process was so easy! FSBO seems like a no-brainer, particularly in such a hot real estate market. Our firm has assisted many buyers and sellers over the years who bought and sold privately. Some transactions went very smoothly for our clients, while others ran into difficulties. Our years of experience have taught us that eager FSBO sellers should proceed with extreme caution- even the Flat Fee service websites warn that the FSBO method is not for everyone.

Some Factors to Consider Before Choosing FSBO:

• Do You Have The Time? Many of us have heard of the seller who got an offer on their home before the sign was even on the front lawn. Unfortunately, the majority of sellers are not so fortunate. Keep in mind that as a FSBO seller, you must create the advertising content, field phone calls, text messages and emails from prospective buyers (and nosy neighbours and “tire-kickers”) and make yourself available for showings. Selling FSBO can be a big time commitment, during which time you will also be juggling work and family responsibilities.
• What’s Your Privacy Worth? Will you be comfortable advertising your home telephone number? How about your cell phone number or your email address? You should also be prepared to field phone calls, text messages and emails long after the property has sold.
• Consider Your Safety. Many prospective buyers work during the day, and will want to arrange a showing at night or on the weekend. Remember that prospective buyers are, for the most part, strangers. Would you casually invite strangers to tour your house?
• How Are Your Marketing Skills? It is a rare home that truly sells itself. Although the marketing of real estate is often criticized (describing a 400 ft²  condo as “cozy” might be a bit of a stretch), a  successful FSBO seller will need to know how to accentuate the positive characteristics of their house. A quick review of property descriptions on the common FSBO websites will show that there is a noticeable difference between a well written property description and one that is poorly written.
• Determining The Listing Price. Choosing a listing price is both an art and a science and requires a combination of:
  • market knowledge (the science) What have similar homes sold for recently in your neighbourhood? Focus on the “sold for” price and not the “listed for” price.
  •  marketing knowledge and strategy (the art)
• How Are Your Negotiating Skills? Some people are born negotiators, and some people are…not. Even those with superb negotiating skills can find it difficult to negotiate the sale price of their property because of the emotional attachment most of us feel to our homes.
• Liability and Risk. Congratulations! If you’ve reached this part of this blog posting, you’re probably confident in your selling skills and excited that FSBO is right for you. Assuming that you have great negotiating skills, and that you and the buyer can come to an agreement on the essential terms of the sale transaction, how are your contract drafting skills? Do you understand the difference between a chattel and a fixture? How about a representation and a warranty? Do you know if there are any easements or rights-of-way affecting your property? Are you familiar with the seller’s duty to disclosed known property defects or issues to prospective buyers? Real Estate Agents, and Lawyers, are required to carry errors and omissions insurance because of the inherent risk and liability of their industries. The buyer and the seller are often in complete agreement about the terms of the contract…until they aren’t and suddenly, ambiguities in the Agreement of Purchase and Sale become a battle ground.

For some sellers, in some circumstances, FSBO transactions can be a successful method for home owners to sell their home and walk away from their sale with more money in their pocket. However, when you consider that for most Canadians, our home is our biggest single investment, prospective FSBO sellers (or buyers) should not jump into this process without careful thought and consideration.

(Published 2016-06-10)