Selling your property as a For Sale By Owner (FSBO) can be an enticing prospect, driven by the desire to maximize your earnings from the sale – a goal every seller shares. It's no secret that a significant portion of a seller's expenses typically goes toward real estate agent commissions. So, naturally, you've considered taking matters into your own hands, especially if you have experience in buying and selling real estate. However, even for those with some real estate savvy, venturing into FSBO territory can raise questions about feasibility. In this blog, I'd like to discuss three common pitfalls that FSBO sellers often encounter. My intention is not to deter you from exploring the FSBO route, but rather to provide insight into areas where many sellers find themselves surprised or challenged in the process. Understanding these potential pitfalls can better prepare you for a successful FSBO experience while ensuring you make informed decisions along the way. Your financial goals are important, and I'm here to help you navigate the complexities of the real estate market, whether you choose to go FSBO or seek professional assistance.

FOR SALE BY OWNER

What Are the Common Pitfalls of For Sale by Owner?

Who Writes the Contract

When contemplating selling your home as a For Sale By Owner (FSBO), you might initially think it's a straightforward process – cleaning up your home, running Facebook ads, listing it on Zillow, and placing a sign in the yard. However, one critical question looms: how will the offer for your property be written up?

There are two distinct paths to navigate. Firstly, you'll need to decide whether you're willing to pay a commission to a buyer's agent. When potential buyers spot your home on platforms like Zillow or notice the yard sign, it's common for them to reach out to you directly. At that point, I, as a real estate agent, may contact you to inquire if you'll compensate a broker for bringing in the buyer. Some sellers readily agree, while others staunchly decline. It's worth noting that those who decline often do so with a degree of hostility, although a simple, professional response like "not at this time" is just as effective. Perhaps some sellers are simply guarded. Nevertheless, regardless of whether the buyer has an agent, maintaining professionalism in your interactions is essential. If you opt to pay a commission to the buyer's agent, they will be responsible for drafting and presenting the offer, streamlining the process for both parties involved in this significant transaction.

If you're not inclined to pay a commission to a buyer's agent or if a buyer approaches you without representation, I strongly recommend enlisting the services of a real estate attorney to draft the contract and oversee the transaction. To ensure a smooth and well-managed process, it's a good idea to reach out to several local real estate attorneys in advance. This will give you a clear understanding of their pricing for these services and the level of involvement they have in the transaction.

While it might be tempting to seek out a blank contract online or from a company that offers generic contracts, I advise against this route. Real estate transactions can be complex, and there are constantly evolving legal nuances and potential litigation issues to consider. Generic contracts may not be up-to-date or able to address local intricacies, leaving you vulnerable to complications down the line. The potential cost savings from using a generic contract simply aren't worth the risks and uncertainties that could arise throughout the transaction. Prioritizing professional guidance from a qualified real estate attorney is a prudent choice to safeguard your interests and ensure a successful FSBO experience.

Knowing Other Expenses

In the realm of real estate transactions, there's a multitude of expenses that extend beyond the seller's commission and the purchase price for the buyer. These costs encompass various elements such as doc stamps on the deed or transfer tax, title searches, municipal lien searches, addressing open permits (a more common occurrence than you might think), closing agent fees, potential repairs, and conditional repairs, especially with certain types of loans, and the list goes on. While I can provide insights into the typical norms in the State of Florida and the Sarasota area, it's essential to recognize that every state and locale has its unique set of practices and regulations, making it unwise to delve too deep into specifics about who should bear what costs.

When you engage an attorney to assist in drafting the contract, I recommend discussing the customary expenses for both the buyer and seller, so you can be mentally prepared for what lies ahead. It's vital to have this understanding to prevent the other party from asserting that certain expenses are "typical" when they may not be. Remember, virtually everything in a real estate transaction is negotiable, and clarity on expenses is crucial to a smooth and equitable deal.

One important point to note is that the seller is not responsible for covering any expenses directly related to the buyer's loan. These costs, such as appraisal fees, recording fees, and lender-related charges, are the buyer's responsibility. Additionally, specific loan conditions might necessitate repairs to the property, which can become a point of contention. For example, if the buyer secures an FHA loan and the appraiser identifies wood rot on the home, the expectation may be for the seller to address and rectify these issues. Understanding these distinctions can help you navigate the financial aspects of your real estate transaction with confidence and clarity.

Common Misconceptions

Real estate transactions can be emotionally charged experiences, and it's not uncommon for sellers to feel that their expectations haven't been met, leading to feelings of being taken advantage of or let down. In many cases, these sentiments stem from a simple misunderstanding of how things typically operate in the real estate process. Even if you've sold multiple homes in the past, if several years have passed or you're navigating a sale in a new city, you may encounter procedures and practices that differ from what you're accustomed to. It's crucial to approach each transaction with an open mind, recognize that local real estate norms can vary, and seek clarity and guidance from professionals to ensure a smooth and mutually beneficial experience. Effective communication and a willingness to adapt can alleviate many of the emotional challenges that often arise during real estate transactions, ultimately leading to successful outcomes for both buyers and sellers.

Scheduling Showings

Scheduling showings in the world of real estate can be a bit of a juggling act. Whether agents are showing one or two homes or a series of eight, predicting the precise timing can be a challenge. The duration of a buyer's visit can vary significantly – some move swiftly through properties, while others take their time to thoroughly explore. As a result, it's not always possible to adhere strictly to the schedule. It's important to be prepared for the occasional message from your agent, informing you of potential delays or arriving a little earlier than expected. Additionally, when a showing window is specified, such as from 2:00 to 2:30, it's worth noting that this doesn't necessarily mean the agent will arrive at 2:00 and depart at 2:30. They might show up at 2:25 and stay for 20 minutes, or they could even arrive five minutes ahead of schedule. Flexibility and understanding during the showing process can help ensure a smoother experience for both sellers and agents alike.

People are Emotional

Maintaining professionalism throughout the FSBO process is paramount. It's possible that you'll encounter buyer suggestions or requests that catch you off guard, trigger frustration, or leave you feeling worked up. In such moments, it's crucial to take a step back and allow your emotions to settle before responding. Reacting with anger or hostility can be detrimental and potentially harm your chances of securing a great buyer. Remember, as a FSBO seller, buyers may expect to negotiate more favorable terms or believe they can land an exceptional deal due to the perceived savings on commissions. It's important to approach these situations calmly and respond plainly, keeping the lines of communication open and positive. Burning bridges should always be avoided, as you never know when a potential buyer might turn out to be the perfect match for your property. By maintaining professionalism, you increase the likelihood of a successful and mutually beneficial transaction.

Disclose, Disclose, Disclose

It's important to understand that as a FSBO seller, you still have a legal obligation to disclose any known issues or concerns about your home. Simply relying on the notion that "buyers can hire an inspector to figure it out" is not a sufficient approach. Disclosure is not merely a real estate agent practice; it's a legal requirement that applies to all property transactions. Even if you haven't lived in the home or if there was damage from a previous storm, it's crucial to be upfront about any issues. Failing to disclose known problems can lead to complications and potential liabilities down the road, even if you're using an AS-IS contract. It's worth noting that disclosure laws vary from state to state, so it's essential to familiarize yourself with the specific requirements in your area. While Florida, for instance, may not mandate disclosure of deaths or homicides in a home, other states may have different regulations, making it vital to adhere to the rules and guidelines in your jurisdiction to ensure a legally sound and transparent transaction.

Fair Housing

It's crucial to understand that fair housing laws apply to all individuals involved in the real estate transaction, not just real estate agents. Discrimination based on factors such as race, color, national origin, religion, sex (including gender identity and sexual orientation), familial status, and disability is strictly prohibited. To ensure compliance with fair housing regulations, exercise extreme caution in your language, marketing strategies, and interactions related to the sale of your home. Avoid giving any impression of violating fair housing principles, whether in your communication or when considering showing requests. If you must decline a showing request, make sure to offer an alternative date and time to demonstrate your commitment to providing equal access to all potential buyers, thus upholding the principles of fair housing.

Don’t Be Surprised

Navigating the complexities of real estate transactions often involves a multitude of variables and uncertainties. While there may be many common practices and usual procedures, it's essential to remember that very few aspects of real estate are set in stone. When dealing with negotiations, whether upfront or during the contract phase, it's essential not to be taken aback by unexpected requests from the other party. Instead, maintain a composed demeanor and carefully evaluate the advantages and disadvantages of accommodating or countering the request. For instance, if a home doesn't appraise at the expected value, the buyer might propose a price reduction to match the appraised value. In such cases, consider proposing compromises like splitting the difference or exploring alternative solutions. On the other hand, if a buyer makes unusual requests close to closing, such as asking for credits or early move-in, it's perfectly acceptable to assert your position and decline if it doesn't align with your terms. By approaching these situations with a calm and pragmatic attitude, you can better navigate unexpected requests while safeguarding your interests in the real estate transaction.

Conclusion

I trust that these insights provide you with a solid foundation for your FSBO journey. Selling your home as a FSBO is entirely achievable, but it's crucial to maintain professionalism throughout the process. Be responsive and courteous, even in challenging situations when you might feel frustrated. Remember, maintaining professionalism not only reflects well on you but also enhances your chances of achieving a successful and stress-free sale. So, answer your phone promptly, and respond graciously even in trying moments, rather than letting emotions take the lead. Your commitment to professionalism will ultimately contribute to a smoother and more positive FSBO experience.