Most people will consider the purchase and sale of a home the biggest financial transaction they will ever make. Because the process of selling a home can be time consuming and complex, many people will leave this up to a realtor to work out. There are many aspects of selling that a person must think about, including the legal and financial ramifications.
Sellers need to keep in mind that buyers feel the need to be protected and counseled by an authority. It will also be the biggest financial transaction that they ever make. This is why most buyers will shy away from dealing directly with a seller. It will be much more costly and frustrating to deal with a for sale by owner.
There is great appeal to have homeowners sell the home themselves, avoiding the commission that a realtor will earn. Many people think that it is very easy to sell a home. They often compare it to selling anything else, but the temptation to save a lot of money drives people to do a for sale by owner without knowing the actual costs and other issues that will arise. If you are thinking about for sale by owner, think about this: according to national statistics, only 8% of all homes in the for sale by owner category are successful. And on average, these sales net 1% less than if they would have paid an agent to handle the whole thing.
Those who wish to go this route will need to stay close to their home for weeks or months to be able to be ready on a moment’s notice to show the home to prospective buyers. The sellers need to be accessible during normal work hours and they need to realize they will be showing the home to those who do not qualify to buy it or those just looking for a bargain.
The Pitfalls of For Sale By Owner
1. Bargain hunters know that you are not paying a sales commission so they will deduct that amount from their purchase offer. Since a homeowner is probably not an expert in negotiating, the homeowner could be getting into more trouble than it is worth trying to sell the home themselves. The property could get tied up in escrow and could get slammed with an endless amount of negotiations.
2. A seller showing the house themselves will have to let strangers in their home. They have no way to meet the potential buyers in advance. And buyers don’t want anyone looking over their shoulders while they look at the home—especially not the owner. They want to be free to talk and inspect the cabinets, floors, etc. Real estate agents letting a person in your home are responsible for those who they let in, so you are protected that way.
3. Sellers can never be sure if a buyer is qualified to purchase the home. Why waste time and effort showing the house to a person who cannot afford it? Agents could easily weed out the non-qualifiers.
4. Emotions can run high with the seller. If there is a lot of attachment to the house, a seller displaying their emotions to buyers will often turn them off of buying the house. Emotions can also make negotiations very difficult.
5. If the seller is determining the price of the home, they may miscalculate the value because they are putting in emotional value on top of the market value. Buyers will instantly recognize this and not even bother to make an offer. And when you have a wrong price, your home could be sitting on the market for months without offers. On the other hand, a seller can get much less than the home is worth just because they are inexperienced at selling homes and knowing how to value the home on the current market.
Real estate negotiations can be very intimidating because there are so many complexities. And since purchase agreements are binding on sellers but not buyers, this can get sellers into a lot of trouble. Buyers have the choice to buy or not, but sellers cannot back out once an agreement is signed.
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