This was posted on Twitter by someone trying to sell his home himself:
"If I can't line up a buyer by May month-end, I'll raise the price and get a Realtor involved. Hope I don't have to do THAT."
He posted that in the morning on April 27th. Then, a little over 24 hours later on April 28th, he posted this:
"Got a buyer for my condo. They want me to hold the mortgage. Any advice?"
This is an intelligent, technologically savvy home owner in Arizona who wants to sell a home without using a real estate agent.
Why? We can only guess, of course, but it appears he's trying to keep from paying the commission. But he's willing to sell the home for a lower price to do so. In addition, he's found a "buyer" who now wants him to hold the mortgage.
What would you say to this home owner? Why should he get a REALTOR® now and not later?
I know your responses may be longer than might be appropriate in a comment, so I invite you to write your responses as your own posts and link them here in the comments.
Maybe I'll forward this to him when we have a few responses. I mean, he did ask for some advice.
Jeff Turner aka respres
JT,
Holding paper won`t accomplish much if the buyer defaults down the road.
I don`t consider this a victory for the FSBO~.
Heck, I have 3 homes of my own we`re looking to sell.
I get every Tom, Dick and Jojo looking for me to hold worthless paper.
I`m trying to sell my homes, not become JP Morgan.
Wow - that is sad - a lot of liability - hiring a Realtor would have been a huge prevenative measure for issues like this.
"Got a buyer for my condo. They want me to hold the mortgage. Any advice?"
This is the big concern, Jeff. Arizona has no usury laws but real estate loans are heavily regulated. if he screws up TILA, it could cost him all the interest paid to him.
Jeff- He obviously sound intelligent to do this on his own. Im surprised he is asking for advice. Sounds like he has nothing to worry about, but what do I know im only a Realtor.
He probably won't even run a credit check on the buyer!
Tina in Virginia
Parked :)
Very cool looking blog Jeff!
I think he should go to real estate school first, pass the state exam, learn about disclosures and legal documents, take a mortgage loan course, list and sell a few homes, and then sell his own by himself.
The first comment of 'get an Attorney' is the best. The request to hold the mortgage is because the new buyer has no credit or poor credit and can't go through the financing process. The Seller will end up with his original house and his original mortgage on top of what every he is trying to purchase in the near future. And I can't imagine that he will be allowed to purchase his new residence without the 'successful sale' of his current residence....
Very poor business judgement on all levels.
I would say he's off to a good start with the "Any advice?" question.... he's just asking the wrong folks. Answering the very question, and the 1,000 others he hasn't asked yet and doesn't even know to ask, is exactly why he needs an agent.
Finding a "buyer" is the easiest thing in the world... it's all about price. Taking that buyer from contract to closing is where we earn our fee.
Technologically savvy - sure Intelligent - give me a break!
When the buyer defaults on the loan, is he ready to go throught the eviction and foreclosure process? Maybe he can open his own REO department.
Caveat emptor -"let the buyer beware." In this case, it goes for the seller, as well.
The new buyer asked this seller to hold the paper for a reason. There is a 80% chance this new buyer will default on the current mortgage. Hopefully he has a great real estate attorney otherwise he is in for trouble. If he sees the light in time he will hire a qualified real estate professional.
Keep us posted on what he decides to do Jeff, thanks.
Eddy
I applaud Mr. Seller for his efforts (and success) in finding a Buyer without having to "raise the price and get a Realtor involved," but it seems to be that he doesn't have all the answers he needs or he wouldn't be asking for advice. Maybe you can ask him if he's willing to pay a flat rate fee or a percentage so that you can "handle all the details" for him...that way, you can earn his trust and if the deal goes south, you'll be first one in. Seems to me like he might have had a not-so-great relationship with an agent in the past...which we can all agree, can and do happen frequently.
When faced with a similar issue in the past, I offered a flat rate (which was really a modified commission) and was able to help the Seller AND the Buyer when they couldn't work out their contract.
If your feeling less than generous with that approach, you could always try "Lots of people file for divorce by themselves, but those who have a desire to protect their assets and want to minimize their liabilities often are more successful when they have professionals who are dealing with law and similar issues on a daily basis."
Or, how about, "I am sure you can purchase the parts and take an on-line course to learn how to change out the breaks in your car, Mr. Seller, but how willing would you be to drive it afterwards?"
Just a few ideas...hope they help!
Who's he asking? Surely not a real estate practitioners.
Lenn... you are correct. He was asking his followers on Twitter. I was not one of his followers at the time. I am now. I found these comments while doing some Twitter searches.
Never ceases to amazing me how people with little to no experience buying or selling houses seem to "wing it" as though they at Home Depot free seminar learning how to tile a bathroom floor. When your dealing with hundreds of thousands of dollars you'd think they would take it lil more seriously then posing some dumbass question on a friggin blog, preying to get the right answer. Just to save $10K?? Yet most people spend more time choosing a dog groomer then they do finding a professional to represent their biggest investment. Please help me understand this.
Let me understand this, you are not representing the sellers and they are asking you for advice? This owner has insinuated that homes sold by Realtors are overpriced. That shows you how little he/she already knows. I would not touch this one with a ten foot pole. My advice to the seller/s, don't reinvent the wheel, always deal with professionals.
Tom, I'm not a REALTOR® and they did not ask ME specifically for any advice.
I'm asking hypothetically, What would you say to this home owner? Why should he get a REALTOR® now and not later?
Jeff - I have often wanted to create a response to this whole For Sale By Owner Question and your blog inspired me to do so. I think the #1 value we as REALTOR's bring to the table is our experience in handling many different real estate transactions over time. I like to equate the idea of selling a house to the idea of building one. Sure, you can build your own home. You might even be good at a few things, but not all of them! Same thing goes for selling a house. Here's a blog I put together on The Top 10 things a For Sale By Owner Seller should consider when going it alone
I'd tell the intelligent techno savvy seller that he is amazingly accurate and correct, providing he had his home priced several apples and oranges below what comparable homes sold for in the MLS!(The comps used from the MLS include the apples and oranges for the brokerage fee, so if this seller was truly intelligent, he knew his asking price needed to be lower than that of the comps (since his didn't include the brokerage fee).
He was so intelligent that he knew both he and the buyer couldn't save the same fee, that is why he had his condo priced lower! Therefore, he can in fact raise his asking price, and it will be the correct price, which will be the same as what comps sold for on the MLS. A REALTOR should be able to sell it quickly, since it is still properly priced.
(Posted tongue in cheek...)
Mr FSBO hasn't found a buyer. Sounds like a renter possibly a rent with an option to .....maybe continue renting. FSBO needs to continue looking for a real buyer. No need to get into the real net averages of a FSBO vs Agent listing. All FSBO's need to go through the pain of selling their own home.
Even as a licensed Broker, I refuse to sell my own properties. Too challenging re: emotional attachment etc. I understand the value of listing with full commissions/payouts.
Improves traffic and more importantly, the bottom line. Wish you well.
P.s. the paper he may holding might come in handy in the bathroom when supplies are low
I wouldn't say anything. He didn't ask for my advice. And if he did, he certainly did offer to pay me for my expertise. ;-)
If I felt compelled to say something, I would suggest he find someone who knows the ins and outs of owner financing, like a Realtor or an attorney.
Good story for FSBOs. I went to a seminar when I was brand new on buyer agency. The teacher was one of those guru types that goes around the country giving seminars. He has sold millions upon millions as a Realtor but is one the types that makes far more money collecting from new agents who attend seminars. Anyhow....he mentioned selling his last house. Casually he sai "...and when I asked my Realtor what the terms were...." Someone stopped him dead in his tracks. The new agent said "YOU use a Realtor? WHY?" He said "You better BELIEVE I use a Realtor! If I didn't believe that Realtor's were of value I wouldn't BE HERE. This is far to big a transaction not to be done by a third party. I would NEVER trust myself to sell my own house." 2.5 years later - i realize he was absolutely right. Everytime I dealt with and agent selling his/her own property - nothing but TROUBLE. They were too close to see the trees from the forest. I would NEVER sell my own house. I've seen too much.
Btw, I'm pulling up a chair, putting up my feet and getting myself a bowl of popcorn. Maybe a snack for the pups too. This is far too entertaining to just leave.
Gee.....sounds to me like he needs to hire a Realtor to give him advice, lol...He needs to call an attorney. I wouldn't offer up any advice to someone I am not representing. Leaves too many doors open, so why risk it.
Jeff,
The home owners who will seek competent counsel when needed should do all right in selling their own home, for the other's...hire a real estate professional. I sold my home myself before I became a licensed agent and the deal went smooth without any issues...it can be done.
Jeff- I will echo what many others have said. Seek out legal counsel and work to make sure the buyer is qualified to actually purchase and pay for the property.
Best,
Scott
At this point he needs a good real estate lawyer... possibly a mortgage broker to qualify the prospect for him. He'll probably end up with an agent after he finds out (after spending a bunch of money figuring out that this prospect is hopeless) that this "buyer" isn't ready to be taken seriously.
BTW, in this situation it might be better to do a lease purchase with an above market rent to help with the down payment at the end of the lease period. (mileage and local laws may vary)
There are a lot of buyers if the seller will take paper. In this market where there are a lot of homes foreclosing we get calls from people who want to tie up another home before they foreclose the first one - huh? A seller that sells by himself likely is not euipped to know when to run from a situation like that.
Well personally I wish him the best! Some people pull it off. It only requires a few things
Knowing Arizona Contract law, Disclosure law, Agency Law, Title and Escrow procedures, Mortgage structures and all the different kinds of potential mortgages and many other things. In Arizona as many other states our state constitution allows a Realtor to represent a client in any Real Estate transaction, in effect to act as a specific "Lawyer" for real estate transactions.
If he doesn't sell, will he need to Short Sale? If so is he up on what that takes? Does he know his legal obligations and the buyers obligations. Will he know if he is in a breach situation or if the buyer is, what to do?
If his desire is to reduce commissions perhaps he should at least allow Agents to show the home for an agreed upon fee structure. I have sold dozens of For sale By Owners this way to my interested buyers.
So I wish him good luck, maybe he does have what it takes, its a tough market for those of us with experience.
All sellers have four choices, don't sell it, sell it yourself, list with any old Realtor, or hire an experienced one.Is it just me, or does anyone else get sick of repeating the same things over and over. The property is not going to sell for more, just because they're now using a REALTOR. The comparable sales they're using to price their property, were most likely sold by a REALTOR. That sale price included a commission. So why would this property be any different?
I just feel like beating my head against a wall sometimes.
Actually Jeff, my question was rhetorical.
I don't give FSBOs or BUBBAs the time of day. It's a mutual agreement.
I think FSBOs become prey to people with bad credit, Noah's Ark and anything else that may be "unrentable". I would say he needs a lawyer if he wants to go this route at this point! I do know people who successfully collect down payments, foreclose when needed and do rehabs when the property "turns over".
This is a sticky situation. He needs to treat this almost like a suped up lease option. He needs to investigate credit, see what kind of animals they have (that will destroy the property), etc.
Thank you for your post and I hope that the together we can all help people realize that when it comes to selling or purchasing their largest investment, they should not do it alone.
Here's a primer I have been meaning to do for awhile. It was in my head mostly for the people who are doing a lease option or OWC and getting foreclosed on. Problem is, most of these are scams. If they buyer found you, probably a scammer. If the seller is doing this, probably a scammer.
I am simply amazed at the comments when this was an excellent opportunity to write our own posts :)
Caveat Emptor (or maybe let them eat cake) and have a most wonderful day!
I like the very first comment from Sherry above. :)
Excellent Renee...
You actually got it :)
TLW...ROAR!
:curtsy: :curtsy:
Bottom line, stop trying to operate on yourself or be your own legal counsel, or fix your own car when you don't know what your doing. The foolish hype got you into the mess and then they aren't there to help you out of it. This is like the guy who cheats on his girlfriend then when the other girl dumps him he wants to go back to the first one. I say this not to be harsh,but to educate so that the people telling people how great FSBO is will stop giving bad advice.
Kudos for the FSBO to try and get free advice. Heck why not. If everyone spends a few hours and gives him all the free hand holding that he wants, heck why not.
What I see is common with FSBOs. They don't get that you need 5 interested parties to get one real offer. They get all excited and think they are practically done.
Here is an oldie but goody blog post, one of my favorite. It should answer every concern he has with going FSBO. And from somebody that used to offer FSBO services, it is an insider's look.
Go FSBO! Save $20,000! Agent Tells All!
Also make sure he buys a Kodak v570 on ebay!
Frank
Ive listed Fsbo's who do just that- Raise the price and call a realtor to make his x amount of profit. In real estate most fsbos and sellers all they care about is their bottom line. But he's seeking advice about holding a mortgage and now he needs professional help because he's in over his head! Too late to hire a pro?
Cape Cod Realtor
I smiled when I read this blog.
The first thing the Seller did was seek advice as soon as an offer was received.
Surely this indicates that the Owner is not equipped to sell his/her property without a professional Realtor.
I think when the market is slow you need an agent and when the market is fast you really need an agent to get the best offers.
In a middle market to try for a while on your own isn't a terrible idea. Statistics have shown that Realtors get more $$ for the seller even considering the commission
As for taking back a mortgage, you need a huge amount of information and a good lawyer.
All the best!
I think when the market is slow you need an agent and when the market is fast you really need an agent to get the best offers.
In a middle market to try for a while on your own isn't a terrible idea. Statistics have shown that Realtors get more $$ for the seller even considering the commission
As for taking back a mortgage, you need a huge amount of information and a good lawyer.
All the best!
If you don't want to pay a realtor, pay a lawyer. My advice ends there. Spend your time on paying clients, not converting people who don't respect/value our time.
As a Realtor in AZ, I say have him give me a call ;)
I work a lot with FSBO's and find that most of them have had a bad experience with a former Realtor. However, with over 100,000 licensed real estate agents in AZ alone, I would say don't judge us all by 1 bad experience. I would suggest learning from the past and knowing exactly whayt you are looking for as well as what you will not tolerate and deal with those items up front.
Jeff
I have been reading the responses and most are very good. I guess this tech savvy person will find his answer on the Internet.
I hate to see his new ad after the first buyers never shows for closing!
When all else fails sell it yourself right?
Sounds like he might get in the mortgage collection business as well as perhaps meeting some folks at the courthouse later on down the road.
I would WORRY of the reasons the buyer wants the seller to hold the mortgage. This doesn't sounds good at all. Not only does this guy does need a Realtor and a lawyer. He needs the sense GOD gives.
Ah yes...the "curse" of having to hire a realtor...been there, heard that ! The speech I use is this....times have changed...and it is very important that the property appraise for the asking price so that a buyer can get financing. If you, Mr. Seller, have priced your property at more than the appraised value....you are looking for a cash buyer...if you have $X in cash would yours be the house you would purchase ? Probably not.
We can all understand the need to save some money however the chances of selling this home on his own are very slim in the first place. I always say I can save you lots of money by getting your home sold for top dollar in the shortest amount of time. If you go "for sale by owner" the buyer expects to share in the savings and you miss out on a large portion of the market that I would expose you to. The less buyers that see your home, the lower chance you have of getting top dollar.
Perhaps the FSBO seller knew the price at which to market his home because he had it professionally appraised. Sounds like he was less after professional advice about carrying paper than personal experiences from others who may have done this. He should definitely contact his attorney for advice. Assuming he had done his homework and priced the property for the market, and has exposed it to a wide pool of buyers, there will be others. Of of the sellers that we recently worked with was very worried that her house wouldn't sell quick enough for her to move south for a new job. Fortunately, she got the property appraised, priced it close to the appraisal and receive wide exposure. Her buyers ended up being cash buyers and the closing date is set. Less than 1 month on the market - spent about $500 to advertise and will pay her attorney about $800 to close. She did not use a flat fee listing, but did educate herself about the process.
When he gets the heads off his 68 Chevy and he wants to know what angle he should cut the valves. And the advice he gets actually causes the engine to overheat and crack the block and warps the heads I wonder who he will sue because he was doing brain surgery with a butter knife and readers digest as a manual. My point is paying a professional now so you do not have to pay an attorney to cover or repair what you thought you knew. Last, I remember we all had to pass a bunch of classes to get a Real Estate license. He will sleep better and have a lot less stress if he gets a professional now...IMHO
Instead of looking for advise through a post, he should do a little homework on a good realtor and find is money is well spent.
I wish him well and good luck!
Fear. Understanding fear helps to alleviate the pain associated with the greeting some of us recieve when a FSBO answers the door. I actually refer to this in my blog when I discuss my high conversion rate of FSBO's. When folks feel they should know something and don't they're often defesive in the presence of that who do. I think it's natural.
I wonder if the FSBO has E&O insurance! :;
If FSBOs knew that many relocatees (even tho using the internet for research) need a Realtor to show them and compare all the neighborhoods and help them interpret data (afterall, we know that some homes may be more photogenic than others or the agent knows what photos NOT to include)...they might call a Realtor sooner!
funny, FSBO always thinks they know everything we know, so they think we are only here to sell and collect commission.
He should hire a real good attorney and ask him the question and see if the atty answers his question for free!
Well Gee,
Here is my FREE advice: "HIRE A REALTOR" :)
If this guy is so green that he's even thinking of carrying the note for his buyer, he really needs help. Personally I don't give advice anymore for free. Anyone who does cheapens the profession. I spend a lot of money and time to know what I know and to gain my experience, why would I just offer it for free, I'm not a fool.
Hopefully he does the SMART thing.
To each his own! Some FSBOs do o.k... others run into problems... but then so do we at times. We all have to live by our decisions and hopefully we can make the right ones.
Having said that, I found the post both interesting and amusing. Thanks for putting it up.
I love this post--it made me chuckle and yes I will write a post! thanks for the suggestion
Well , thats what we face ever day in our area. People saying they would raise the price. Probaly he's just testing what other realtor has to say, and he doesn't understand what involved when holding a mortgage.
what about when someone doesn't pay.
My neighbor just went FSBO, after asking me for a CMA and for advice on what to do before he lists. Then there's a sign out there. I may have a good buyer for him. So I called to ask if he would compensate me X if I brought him a buyer (X is half my "normal" rate). He replied: X-1%. No more.
I do have a good buyer for him, so I agreed and brought the buyer through--he did not buy.
The FSBO sign then went up. If he would ask me THAT question--or any question--at this point, I'm prepared to offer him answers on a fee-basis. I don't work for free.
Jeff,
I'd tell him that Cheap Advise is Seldom Good and Good Advise is Seldom Cheap. Take that into consideration with any suggestions he receives from someone online.
Interesting that to some folks HAVING to call a realtor is a sad fate they would rather not endure...it's all about the money....and my answer to any FSBO is there is a reason why the state requires a license and continuing education for this profession...you don't pull your own teeth, do your own....fill in the blank...why experiment with one of your largest assets ?
Unfortunately, asking the seller to come into your office for your advice and then asking him to pay for it won't work. There are too many of our peers ready to give it to him for free. So instead, offer him your services as a sellers agent to help qualify the next prospective buyer. I can't stress it enough, this is the market to teach the public that we should get paid for our services. The FSBO hasn't seen the value of hiring one of us. Stop giving away your services.
Just hire the Realtor. They make life SO much simpler.
Mr. FSBO;
Have your buyer bring you an offer in writing. Take it to your lawyer. The short answer to your question is it depends on the amount of downpayment and the buyers credit rating. Your lawyer will advise you.
Lawyer, Lawyer, Lawyer!
On at least 5 different occasions I have had to go in and clean up the mess my Seller created by doing a FISBO (for sale by owner) "Owner Contract" "Carry Paper" etc. In a nut shell, this is what happened.
The FISBO Buyer quit making payments within the first few months. The Buyer moved out, put tenants in, collected the tenants rents, did not use those rents to make the mortgage payment they pocketed it instead. It took the seller's 9-12 months to get the house back while not collecting a dime. The Buyer, however, was collecting rent the whole time. After the foreclosure process, the Seller had to get the tenants out and then had to fix the $$$$$$ of damage.
Of course Pam "Realtor" was called duringthe middle of these messes to "Advise" what to do.... (Now they want a professional!). I helped and guided them in cleaning up this contractual mess with the understanding that I would be listing them afterward. I was able to get 2 of them to do deed in lieu of foreclosure, that saved some time & money.
I listed them, they sold.... no more problems. All 5 of these are loyal clients to this day and have given me a great number of excellent referrals.
Moral: It more often than not, saves money, time and anquish to use a Professional to sell your property. Hire an Real Estate Professional....
I know your right but sometimes these folks believe they can do it without a pro. And lets face it and soon as they call we jump at the chance to help them all in the name of "future business & referals"
RBB
I am so amazed how people always want something for nothing. Either they pay a Realtor, an Attorney or they Pay anyway:)))
FSBO's always think of jumping up the price to pay us but I dont know about you but in my market everyone wants to much for the homes
I can't believe what lengths people will stoop to to avoid using a realtor!
Thanks for the chuckle. I love the comment from the agent that said if he is not going to hire a realtor he better hire a lawyer.
You have to realize we are there to provide a service... if you are invited to do so. In the meantime, I would give limited info because if you are giving it away for free, the FSBO will never see the worth in hiring an expert.
Please let us know if you forward this post to him, would love to see his response!
I think this is why my Broker warns me away from courting FSBO as clients
Carol NovaStar
What do we know...all we do is put a sign in the ground and pick up a check at closing...nothing in between...no disclosures, no checking in the middle night checking for frozen pipes, no putting it on a dozen or more websites, no negotiating, no showing it to people, no pre-qualifying buyers, no arranging for inspections, no setting up title work, no ... well, you get the idea...
We just put a sign in the ground and pick up a check.
Dave Culbertson, Broker/Owner, Real Living Home Team, Mount Vernon, OH
Lawyer and real estate agent. One is great, two are priceless.
Lawyer and real estate agent. One is great, two are priceless.
There's a reason people ask you to hold the mortgage and it is usually a credit issue. Then he has to worry if the mortgage will be called.
Hmm, it makes total sense to me. I don't want to pay for reliable or accurate advice so I post on-line where every Tom, Dick and Harry can weigh in with "advice." Well, the saying "you get what you pay for" is true. I can't wait for his next post saying that "I used forms from Office Depot or a stationary store" followed by "I don't know which forms to use" followed by "the guy moved in, made the first payment and then refused to pay." Being a lawyer and a Realtor, I don't really care what route the guy takes. But, to get your advice from online forums without knowing their background, training, experience, qualifications, etc. is simply foolish. There is an old saying - "When you represent yourself, you have a fool for a client." Yes, send him that comment.
We picked up a FSBO that had been on the market for over 6 months. We had him paint a couple of rooms, clean the place up a bit. Then we raised the price $10k and sold it in two weeks. He netted out more after paying us than he would if he had got full list price on his own.
I recently responded to a new home buyer who just entered contract in a co-op building and is at the point where if he used an agent to purchase he wouldn't be asking for help at this point. Not using an agent is totally fine, but you should at least consult one if you have never bought or sold before. Going in alone is just a little bit careless and foolish with so much money on the line.
Jeff,
This show the intelligence of that the Social Media has created on one end. On the other end, it show the need for a communication to exist between the Real Estate community and prospective clients.
Open the MLS up to the consumer on a low level. Create transparency in the industry and services that meet these new expectations. The area, service, brokerage, agent, that greets and meets this new environment will become a leader in the marketplace and success will follow.
There will always be a court jester or fool in our crowd. He just gets the leftovers.
Maverick Rules!
This is the kind of advice that we get PAID for!
Hopefully by the time I write this, he has already sold by himself...? Perhaps he can see if any agent would offer any advise to him and send him an invoice by the hour. I say $500 an hour to give him some seller consultation.
He needs an attorney if he can get his own property sold and doesn't need to buy. Then hire an attorney - one that specializes in real estate and pray the buyer has an agent.
So basically this guy wants something for nothing. He would not retain a realtor but now he's reaching out for sage advice from business professionals. Free advice is like a free lunch - there is none.
It sounds like he needs a Realtor and an attorney... but it sounds like he only wants FREEadvice. It's a slippery slope!
I am a newbie to AR and I am an investor not a realtor, but I always hire a Realtor to sell my properties, well worth the cost. But what do I know, I only make a living in real estate. You get what you pay for. That guy might get more than he paid for: a very expense lesson.
Interesting in my 23years experience in real estate how I have come to find much of the real estate market stuck in a conventional rut. Taking the extra mile will benefit all parties down the road. Most agents are in fact self promoter's of an out of date system that hasn't been reformed since the eighties. With that said, when executing any FSBO contract have a financial adviser, attorney review. A 20% carry should be welcoming, put the deal through..not to mention there are financial institutions that will purchase this note if correctly notarized and recorded for a percent on the dollar.
News from For Sale by Owner Center.com <!-- Begin #content --> <!-- Begin #main -->
Thursday, September 06, 2007
<!-- Begin .post -->Will Mortgage Credit Crunch and Impending Foreclosures Cause Increase in Homes For Sale by Owner?
We happen to think that the number of FSBO listings will increase over the next few years due to a few reasons. We think this increase will be fueled by a “need” not a “desire” to sell FSBO.
Here are some of the scenarios where homeowners will attempt to sell their homes for sale by owner.
- Homeowners with little or no equity will be facing foreclosure. They may need to ell FSBO because they don’t have at least 10% equity in their homes to pay the real estate agent commissions and they don’t want to incur the possible tax liability of a real estate short sale.
- Homeowners with adjusting sub-prime loans that don’t qualify for the new FHASecure refinance. After the first adjustment of their ARM mortgages these individuals realize they cannot afford the home and cannot refinance. They will tend to try and sell FSBO again due to a lack of equity.
- Tightening underwriting standards may cause sellers to sell by owner to protect net proceeds from sell. Appraisals will come in short or get cut by some lenders. Some of these sellers may try to sell FSBO after the initial transaction cancels, eliminating the real estate commission they can drop the price but maintain their net proceeds.
These are just some quick thoughts as to common scenarios that will cause home sellers to consider selling their homes for sale by owner. What do you think?
Labels: fhasecure, for sale by owner, fsbo, mortgage, sell by owner
posted by Jessie B at 2:16 PM 1 comments links to this post
Friday, May 25, 2007
<!-- Begin .post -->Record 103 Million Home Sold... FSBO
According to an article in USA Today, a 40 acre Hamptons, NY ocean view property has been sold "For Sale by Owner", saving the owners well over 5 million in real estate commissions*.
The buyer of the property was Mr. Ron Baron of the Baron Funds investments and the seller was Adelaide de Menil, heiress to the Schlumberger oil fortune.
Of course, this is not your typical home buyer & seller but it does show that "for sale by owner" sales happen in every price range, every day.
Last year, the NAR reported in its 2006 Home buyers & Home sellers Survey that 12% of all homes sold last year were "FSBO" while another 8% were sold as FSBO with an MLS-only (often called "flat-fee mls only" posting).
These "for sale by owner" transactions represents over 20% of all 6.478 million** homes or about 1.29 million homes with a median price of $221K*** for a estimated total equity savings of $17,105,540,000,000!
Real estate commissions are based on the sales price of a home but what most home sellers don't look at is the actual cost of the real estate commission based on their homes actual equity.
Since many homeowners have purchased or recently cashed-out refinanced their homes to high loan to values, they will often see that more of their equity is spent on real estate agent commissions then they will earn from actually owning and selling their home!
Here is a real estate commission calculator that can help determine your net cost of selling a home with a real estate agent or if you should be selling FSBO.
View USA Today article
Interestingly, I know Mrs. de Menil, and have for at least thirty years. I don't know Mr. Baron, although the chances are that he and Mrs. de Menil are acquaintances if not social friends.
This USA Today story is a bit misleading, although I'm sure it's unintentional. Here's why:
Like many very wealthy people, Mrs. de Menil uses attorneys and her selected real estate brokers to assist her in transacting business. She pays them a fee directly to represent her.
You can bet this was not a deal made and cut between her and the buyer as is inferred.
Most of my real estate income over the years has come from clients like Mrs. de Menil who pay me directly for advice and for negotiating their real estate business.
When we as a Industry, decide to police our fellow REALTORs and ask that they conduct business as committed full time agents, this kind of problem will disappear. The truth is that we REALTORS are viewed to be as lowly as the used car salesman. I have to admit, I know too many in the business that this description fits, giving us all a bad rep. If we clean ourselves up, the rest will be history! FSBO's are right! A big part of our agent community aren't worth the commissions paid. Once we rid ourselves of the "Country Clubbers" our reputations will soar.
If he is selling on his own he needs to figure the rest out on his own.
Is he serious???? Really, is he? He should have gotten a realtor first, then he wouldn't be in any sort of mess...
Jeff,
What I would like to see, is, how you would response to this person. I know how I would respond and it would short and sweet, that's what Realtors are for:)
Peggy
I was hoping a REALTOR® would write their own post that both answered his quesition, illustrated just how hard what he was trying to accomplish would be and attracted other's like him to contact them. That never happened.
Hmmm...
Sounds to me like you've just issued a challenge :)
TLW...ROAR!
We are in a new era of tech-savvy marketing! Isn't it wonderful that this new medium makes information easy and fast for all parties to view and sift through?
Marketing is just one aspect of a real estate transaction. The sales and closing the transaction are other phases and equally important. One of the many caveats for the neophyte FSBO (for sale by owner) or first-time homebuyer is that the real estate transaction is unique to the parties, the home, the neighborhood, and the economy and planning or resourceful help may be required to successfully close a transaction with minimal stress to all parties.
Some transactions can occur without a hitch. Many, however (especially in this time of stringent credit and changing underwriting guidelines) can require the skill of an experienced realtor, financier or attorney who can handle the negotiations between a FSBO and a savvy investor to a first time homebuyer, as well as, the emotions or stress of the buyer obtaining financing, the coordination of other realty-related professionals, and the task management of other items that different situations require. In addition to using the expertise of an agent and the agent's broker and brokerage, the FSBO can benefit from seller representation by a Realtor because the Realtor should have E&O (errors and omissions) insurance coverage for that particular transaction.
If you assume that the tech savvy FSBO will undoubtedly attract many prospects, it would be understandable that he could easily find many prospects and or multiple offers. Would the FSBO be equipped to handle these situations and legal documents?
The FSBO may not realize that buyers may look online for home information but they often rely on Realtor expertise for neighborhood information, home pricing evaluation, contract negotiations, escrow closings and moving details. A first-time buyer may be enthusiastic but may not be equipped to complete the sale should unexpected events occur. In addition, if the buyer is looking at many different neighborhoods, cities, or homes for that matter, and it may be advantageous for an agent to point out the strengths of the FSBOs home compared to the other homes, neighborhoods, or cities the buyer or buyer's agent may be looking at so that the FSBO doesn't appear desparate to sell and can maintain his position on pricing or terms.
Perhaps this tech savvy FSBO can provide some tech marketing and negotiate the fee with a realtor to compensate him for some marketing efforts.
Ronda Ching Day
Realty Executives Oahu
This is funny. I keep getting emails from a FSBO condo seller and his last email read, "price lowered $7,000 now" or something along those lines. Hmmm, that's about equal to the commission he would have paid a Realtor had he listed it with one several months ago! Will they never learn? Good post and topic.