Pronounced fiz-bo, the abbreviation “FSBO” means For Sale By Owner, and refers to a property brought to sale by its owner instead of going through the channels of hiring a professional Realtor.
As a member of the National Association of Realtors (NAR) licensed as a broker in the state of Hawaii I have to tell you I get nervous about FSBO properties. Without question, buying real estate is a significant financial investment and commitment. When navigating such a substantial transaction, your Realtor takes over the enormous details of the process and garners the team needed to effect the sale and legal transfer of the property.
Let’s understand the primary reason an owner may choose the alternate route of “FSBO“ over taking Realtor representation. The owner may assume they will see a greater return for not paying commission to Realtors by assuming they are equipped to manage their own sale with marketing, showings and contract negotiations. This however comes with unanticipated real and intangible costs. So let’s take a deeper look.
The seller undoubtedly has intimate knowledge of their property and, as a result, may believe they best understand its value. This is the first alert….sellers have an emotional attachment which oftentimes reflects as an inflated valuation of the property without the guidance, and leveling expertise of a market-aware Realtor who can provide fact-based data and market trends for the neighborhood. NAR research shows the most difficult task for FSBO sellers is pricing. Hence, For Sale By Owner properties, by NAR statistics, more often than not, are overpriced.
The consequence of overpricing and lack of market exposure relates, statistics show, into FSBO properties sitting far longer on the market than a property listed by a Realtor. The FSBO buying audience is very limited versus the market reach to a targeted audience that a Realtor can access. Most important, however, is the perception for the buyer when a seller hires the services of a Realtor. This conveys that an informed professional is party to accommodate the sale immediately removing any qualms or concerns the buyer may otherwise have about what may be considered an unqualified property.
As a buyer pursuing the purchase of a FSBO property, I would urge to contact your Realtor. Allow your Realtor the opportunity to introduce you as a potential buyer and thereby reflect your best interest.
Some FSBO sellers may offer a cooperation to an agent who brings the buyer, in which case the buyer would have representation in the sale. In this instance, oftentimes the buyers’ Realtor is directing the ship through the intricacies and details of the escrow process. Research tells us that understanding and performing paperwork is a significant issue with FSBO sellers as well as devoting the time necessary to accomplish this task without a Realtor. Not least, the seller is faced with the challenges of navigating negotiations and contingencies when engaging a buyer in a legally binding contract. The seller, without representation, may not be aware of all the legalities with disclosure and recourse by the buyer if seller fails to provide transparency on all aspects of the property. Therefore, when the seller is not represented, missing is the level of comfort I would want to see for my clients as buyers.
The negotiating process is very personal and oftentimes here sparks fly! Typically the sellers agent and the buyers agent will serve as buffers for the parties to come to an amicable and working agreement on price and terms for the sale. Both parties should enlist this protection gained only by having Realtor representation to educate and direct the process.
The point here is that making one of life’s most significant investments with the purchase or sale of property should be handled by licensed professionals.
My experience is that buyers are wary of entering in to a contract with a seller who is unwilling to hire a Realtor. It can often reflect the owners reluctance to negotiate, spell that they are overly-emotionally vested, and holding a perceived and set price which may not be an informed valuation, reflective of or realistic for the market. It truly can be read as a red flag for buyers. Where you see the For Sale By Owner sign, be forewarned, recognize that FSBO often signals and advertises the sellers position, “For Sellers Best Outcome.”