FSBO – homeowners who (foolishly) decide to forego the expertise and steady hand of a real estate agent in favor of “saving on commission.”.

As a real estate agent, you either love it, or you hate it (you probably hate it). Granted, the idea of saving money is appealing to anyone selling a property – and it’s often the reason they’ll jump right into an area they know very little about. But, this puts them at risk of losing money, time, and a nasty legal battle in the process, should things go wrong.

And more often than not, they will go wrong if someone doesn’t know what they’re doing.

On the other hand, an experienced real estate agent can communicate their value to a potential seller, helping them realize that listing a home as a FSBO (for sale by owner) is time-consuming. It can also render a seller as a target of scams, result in fetching a lower asking price, or be subjected to the conflicting information that plagues the interwebs such as any run-of-the-mill price estimators I’ve covered before. Frankly, it’s hard to discern what is more vexing: the loss of potential business to an amateur, or the fact that these sellers end up losing money and time as a result.

As an agent, I’m sure you’re well aware of this lose-lose situation. I’m also sure you know people who still insist on going the FSBO route (which is all the more disrespectful because they’re acquainted with YOU, an actual agent.)

Therefore, we’re happy to provide you a nice reminder of why agents, as licensed professionals, are better for the job. Feel free to share this with any FSBOers you encounter.

Liability

We all make mistakes, and FSBO sellers do more than most. If someone is selling their property and fail to have a licensed agent on each side, they may end up paying for some pretty costly mistakes.

Agents know their stuff. They’re trained to identify mistakes, or at least make sure mistakes are covered by Errors and Omissions insurance.

We live in a very litigious world, and no one wants to be the target for a lawsuit…right?

In fact, did you know that if your house is built before 1992, the Lead-Based Paint Hazard Reduction Act of 1992 requires you to (courtesy of Real Estate Find Law):

  • Tell the buyers about any lead-based paint or related hazards in the house
  • Give buyers 10 days to test the house for lead
  • Provide buyers with a Environmental Protection Agency (EPA) pamphlet entitled Protect Your Family from Lead in Your Home
  • Include warnings set forth in the law in the sale contract
  • Obtain signed statements from all parties involved verifying compliance with all legal requirements
  • Keep the signed acknowledgments for three years as proof that you followed the law

Honestly, this is just a snippet of the endless info that someone is accountable for knowing, or else risk legal ramifications. That’s to say nothing of the litany of disclosures they must provide or even the incessant amount of legal documents involved throughout the whole process. In short, a real estate agent works tirelessly on a client’s behalf, ensuring that they don’t stumble on to the wrong side of a lawsuit.   

Paperwork

According to the National Association of Realtors’ Profile of Home Buyers, the most difficult task for FSBOs is understanding all that paperwork (and there’s a lot of it).

Depending on the state you live in, there will be varying amounts of paperwork you’re required to not only complete, but understand. Of course, there are generic contracts that can be downloaded online. But, if someone has never sold a property before, will they really have any idea what they mean? Would they know how to customize such an important contract?

What’s more, before a property is ever listed, you need to gather all the paperwork related, such as:

  • The Title report
  • A copy of the deed
  • The sale agreement from when the property was purchased
  • All of the property’s tax information
  • Homeowner’s insurance paperwork
  • Survey reports
  • Mortgage loan information
  • Let’s not forget about the home warranty either, to top off the endless list of documents.

Additionally, if the property is being rented out, the seller is also going to need to gather up a copy of the lease agreement and proof of the tenant’s security deposit.

FSBOs Sell for Less

To say nothing of the lack of experience involved,  the average person barely has the time needed to give the whole process its due diligence. A seller would need to slate time to research market reports, (plus research to decipher that research), determine the market value, and develop (if necessary) the marketing skills necessary to sell the house.

And frankly, more likely than not most owners can’t lay claim to these qualifications.

That’s why FSBOs tend to sell for less than if they were sold by an experienced agent. According to reports, FSBOs lost around 16 percent of the listing price, selling for significantly lower than agent assisted homes.

The Future of FSBOs

The good news is that according to the National Association of Realtors, FSBOs are at an all-time low at just 8 percent.

Considering it is less expensive and somewhat easier to market a home today versus pre-internet days, we’re still seeing a decline in FSBO sales. According to this piece by Forbes, this fact “runs contrary to trends experienced in other vertical markets, such as investing, travel and tax preparation, which have all experienced significant do-it-yourself growth bolstered by web services.”

To put it simply: if a seller uses a real estate agent, even if it’s just to upload the listing to the MLS for advertising purposes, NAR includes that client within their pool of sellers labeled as “engaged in agent-assisted sales” – which is clearly an oversimplification of the term “agent-assisted.”

Should Agents Be Worried?

As an agent, there’s no need to worry. Given the downward trend of FSBOs, along with the stipulations for selling, insufficient exposure to potential buyers – and all that paperwork – FSBOs is not set to overtake the usefulness of agents anytime soon.

After all, you’re an expert for a reason!

Raymon Lacy

Raymon Lacy

A San Francisco native and UC Berkeley grad, Raymon recently made the move to Sunny San Diego. When he's not being a Marketing Magician, you can find him exploring San Diego or nose-deep in anything that relates to tech, sports, video games, fantasy, music, beaches or craft beers. (And lists. He really likes lists)