Disappointed in FSBO advice
Letter to the Editor
By Inman News, Wednesday, July 6, 2011.Re: 'What to know when buying FSBO' (June 30)
Dear Editor:
I am very disappointed in the advice that you provide to readers in the piece titled "What to know when buying FSBO."
As an attorney and real estate agent, I realize that (the writer, Tara-Nicholle Nelson, has) additional insight. However, I find your article may be influenced by the fact that (she has worked as a) real estate agent.
First, if the for-sale-by-owner home is priced outside the market or (the owner is) unwilling to negotiate, then don't make an offer.
Second, the buyer is the party that submits the offer and the terms of the offer (usually on a preprinted contract form approved by the state board of Realtors). Therefore, requesting the seller pay the buyer's attorney fees is likely to make a seller reject the offer because the buyer is the party setting the terms of the contract.
Third, you do make a good point about the seller providing accurate disclosures, but that can be resolved by having the FSBO seller perform a home inspection before placing the home on the market, and following the golden rule of selling a home: DISCLOSE EVERYTHING.
A buyer of a FSBO should request a copy of the home inspection the seller performed within 48 hours of an accepted offer to determine if the sale should go forward. The buyer should pay to have (another) inspection performed.
Lastly, one positive that you did not mention in a FSBO transaction is that there is one less person involved in the relaying of messages, which can speed up a transaction and decrease the muffling of messages.
Jim Davis
Portland, Ore.
Dear Editor:
This piece seems skewed to make the reader think they should never consider doing a real estate transaction without an agent.
The writer states that a buyer should ask for a discount on fair market value if the seller isn't using a Realtor. I'm sorry, but fair market value is fair market value, regardless of who is listing the house.
Commissions are built into the listing price or selling price negotiated by a Realtor, which inflates market values. But, the FSBO seller can't be expected to adjust pricing based on this model. If I'm going to do my own work, why shouldn't I reap the benefits of the Realtor-commission-adjusted "market value"?
To say that the involvement of the Realtor somehow makes the transaction more valuable is nonsense. However, I do concede I may be willing and more able to sell below the commission-adjusted "market value."
Furthermore, most for-sale-by-owner sellers will hire attorneys and title companies to handle the contracts and paperwork (both of which would also be utilized by a Realtor), which is the bulk of the complexity involved in selling a home.
Realtors have no special access to any tools, forms or resources needed to complete a real estate transaction outside of that to which a homeowner has access.
Using a Realtor, in my opinion, is a convenience -- not a necessity. Most private owners are more than capable of selling a home themselves provided they're willing to do the legwork and research involved.
It seems this is an article written from the point of view of someone in "the industry" who thinks there is only one right way to complete a real estate transaction. At no time in the article does she mention, without using negative language, any of the pros (as asked in the reader's question) of selling a home yourself or buying from an owner.
Selling a home yourself or buying a FSBO home without agents involved can save both parties a great deal of money, period. Consider a home that sells for $100,000. There can be $7,500 worth of commissions combined on the sale. If you add in closing costs to the transaction, the $100,000 sale can cost both parties as much as $10,000 to $12,000 combined.
Selling your home yourself and buying without an agent can easily cut these costs in half or more.
I liken this to doing your own home improvements: a bit of elbow grease goes a long way. But, as with do-it-yourself projects, if you are not comfortable with or unwilling to learn the process, then by all means hire a professional.
Chris Eaton
Mayfield Heights, Ohio
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Submitted by Missy L'Hoste on July 6, 2011 - 1:57pm.
To the objections to the article regarding FSBO advice:
Even the real estate agent/ real estate attorney should have a local professional when negotiating the purchase of property if they are not familiar with state law. Judging from the comments of Jim in Oregon, it seems he has forgotten that real estate laws vary from localities and states. While what you speak of may be common practice in your state, here in Virginia, you would not get common disclosures that you would in other states.
I have purchased property in other states, and would never do so without an agent with a license in that state, even though I am a licensed agent. There are just too many things that can be assumed, that you may not be aware of... And the seller by law may not have to Disclose. I had a 1st time buyer schedule an appointment to see one of my listings last week. He arrived with his father. They asked questions that immediately told me they were trying their best to do it alone. I am sure somewhere down the line they were told that they could save money without an agent. I have sent him buyer agency information, but he is very adamant that he does not need an agent, and seemed very skeptical that it would not cost him a dime... And I will not speak for every locality, but here... It really would not have cost him anything! the buyer agent rarely costs the buyer. The seller already has a contract for how much they are paying and that is rarely negotiated, so the only thing that will happen is that the listing agent gets a big check and does not have to disclose some info that the buyer may have gotten had he been represented . As a buyer agent, I can give advice that can help with the process. This particular is in dangerous water. Whoever told him he
should save the money and do it without representation, shame! You did not do him a service. I even purchase a one year home warranty for my clients... I do wish him well, and I hope that he reads the emails I sent with certain info about disclosers and representation. If you are buying a house, why risk making a big mistake... Just have a buyer representative. If you are selling, you do have a choice, but the FSBOs I see usually end up being listed anyway.
Buying without an agent "CAN" cut costs.... But at what possible cost? If you are buying or selling real estate, hire a professional. And they are not all created equal either, so do your homework and get some one who knows the area. In the area I practice, there is hardly a buyer that was even born in the area, and most are from other states.
Missy Abrams L'Hoste, REALTOR
William E Wood and Associates
1208 E Little Creek Road
Norfolk, Virginia 23518
www.RealEstateByMissy.com
757-537-6802
Submitted by Lilly Hughes on July 6, 2011 - 8:16pm.
Texas is a non-disclosure state. You can't get Sold prices publicly; how is a FSBO supposed to arrive at a suitable price for his property?
I would no more suggest someone buy and sell real estate without a real estate professional than I would suggest that they represent themselves in a court of law without a lawyer.
I could go on and on with reasons why both a buyer and a seller need professional real estate representation. At least they are suggesting the use of a title company.
Submitted by Jim Davis on July 7, 2011 - 12:12am.
I am perplexed by the arguments being used to dis FSBO sellers, and the reasons real estate agents feel they are the gate keepers to a successful transaction.
First, Ms. L'Hoste (from Virginia) appears to be arguing that the main reason a buyer should work with a real estate agent is because disclosures vary from state to state. This is true, but a simple Google search of the Code of Virginia required disclosures for residential real estate transactions sets out what needs to be disclosed in § 55-519 (Required disclosures). Though she suggests a buyer is receiving a deal because she purchases them a home warranty, the math does not add up. A basic home warranty package can be purchased for under $400. Whereas the commission she charges, which the seller has added onto the sales prices, increased the purchase price by thousands of dollars.
Second, Ms. Hughes states that a buyer is unable to obtain sold prices publicly in Texas. However, the website Zillow provides that information at the touch of a button. Furthermore, if Texas is a non-disclosure state as Ms. Hughes suggests, then it does not matter if you use a real estate agent, only that you hire very good home inspectors. Finally, she argues that a FSBO cannot determine a suitable price. Well as with most things for sale, a suitable price is one that sells the property.
Lastly, I hope no one considers any of these comments as legal advice, but rather to realize real estate agents can be helpful if you do not feel comfortable doing some basic research. However, if you do a little bit of elbow grease, as suggested by Chris Eaton, a buyer or seller can save thousands of dollars.
Submitted by Missy L'Hoste on July 7, 2011 - 6:01am.
Jim,
Since the buyer does not have to pay the commission (and the sellers here have already typically added it to their asking price since most transactions involve at least one agent), and I buy a home warranty... And guidance on the home inspections... And negotiations... It is a lot more than just the disclosures.. Or non disclosures in the state of Virginia. If they choose not to have representation, that is their choice of course. I can also google how to do change my oil, replace an engine, or laws in court, but I won't be attempting to do that any time soon. Reading some of the laws and codes and knowing what is referred to as "customary" And understanding what can happen... Why would anyone try to do something that they do not specialize in? There will always be do-it-yourselfers. And then there are those that decide it is safer and easier to have help. However, where I practice... The buyer does not pay... Or rarely... So why wouldnt you have a buyer rep?
Missy Abrams L'Hoste, REALTOR
William E Wood and Associates
1208 E Little Creek Road
Norfolk, Virginia 23518
www.RealEstateByMissy.com
757-537-6802
Submitted by Brooks Mone on July 11, 2011 - 11:39am.
In response to the Chris Eaton letter to the Editor, the points are well written and on the surface look like logical answers to the age old question of; do I sell with a Realtor or do I TRY to save money and sell it on my own? It is possible for a homeowner to sell their own home, it happens in a few select cases.
Market value IS market value. The simplest definition of market value is: the highest price a buyer will pay for a home VS the lowest price a seller will let the home go for. It is a matter of perspective from that point forward.
What the real issue is NET VS GROSS. For simplicity sake our example is going use a conventional or cash transaction, there is very little difference in the two types of deals from a seller’s prospective. The buyer and seller agree on the purchase price (gross) of $100,000 (market value of the home). We will assume the commission is going to be 7% to the seller. After the seller pays commissions the seller can expect to (NET) $93,000 minus closing cost and associated fees. After all is said and done the TRUE market value of the home is $93,000.
In the same example if the seller is a FSBO, a buyer should understand the seller is paying themselves or forgoing the 7% fee. So the top market value (net to seller) IS 93,000. This $93,000 is considered by most buyer to be the sellers new GROSS and will offer the seller a price lower than the $93,000. A FSBO buyer naturally wants to negotiate up to the $93,000 value by making an initial offer, for this example, 10% less than the $93,000 which is $83,700. After negotiations, the buyer and seller usually agree to a price close to $85,000. Using a Realtor does prove more valuable...$8,000 more valuable.
When it comes to special tools and access to resources, I completely disagree with Chris Eaton. A Realtor does have specialized tools, resources and training. This is evident by:
• FSBO’s trying to buy their way onto the local Multiple Listing Services.
• Multitudes of articles written about using a Realtor to help establish an initial selling price for a seller considering going FSBO or using a Realtor to look over a contract for a FSBO seller. Just because a Realtor works on a commission doesn’t mean they are a free service.
• Realtors and there companies appear at the top of Google searches when people are looking for homes in their local market. A Realtor give a seller much better exposure and access to buyers than a seller can produce on their own.
• In a down market more and more people are seeking the service of a Realtor to get then top dollar for their homes. The reason is a Realtor protects a homeowner’s interests and equity. Buyers also seek the services of a Realtor for the same reasons.
• Realtors have specialized requirement for continuous professional development, mandated by state to insure the public is getting the best possible service from a Realtor.
• The forms a person can download from the internet are usually NOT state specific. For the most part additional requirements and clauses are inserted in readymade, Lawyer designed contract used by a local Realtor and approved by their governing boards.
• As much as a FSBO wants to believe that advertising their home on a couple of websites equals the web presence a Realtor generates is wishful thinking at best. In general these FSBO websites are billboards in the wilderness. Mostly attracting Realtors, bargain hunters and curious on-lookers.
• Selling a home is not a one size fits all situation. The availability of information on the internet and through the myriad of television show about how easy it is to sell a home has generated a false sense of empowerment to potential FSBOs. Not all of the advice these websites or TV programs giving are accurate, localized or specific to an individual seller’s home and their local market.
• Local Realtors have direct knowledge of how to market to the local community. As much as the world has gone global because of the internet, knowing the local landscape enables a Realtor to speak and market directly to the largest pool of potential buyers available to purchase a home in a particular community.
• Realtors are trained, experienced and skilled negotiators that understand the current local market conditions and trends, real estate contracts, financing options, absorption rates and seasonality of the sale. By using these and other problem solving skill a Realtor is able to advise their clients in the best course of action that could affect the next 30yrs of their lives.
• National Association of Realtors statistics have proven a FSBO on average sells their home at a 15% or more loss.
• National Association of Realtors statistics also prove over 90% of all FSBOs will list their home with a Realtor. (Check with a local Realtor to see what the averages are in your area).
• National Association of Realtors statistics prove 98% of all real estate transactions involve a Realtor.
Realtors are a professional service provider. Much the same as a lawyer, anyone can represent themselves in a court of law, and some people do. Access to legal documents, case studies and procedures can be found in any library or on the internet. Just because someone has read and studied legal information, it doesn’t make them a Lawyer. Simply because a person has seen it on TV or read erroneous information on the internet about selling a home, doesn’t make them a Realtor.
A Realtor is an extremely valuable partner when selling or buying a home. They are more than just some person that has taken a class and passed a few test to become state licensed to assist people in selling their home. An individual may sell a home 2 or 3 times in a lifetime, a good Realtor sells that many and more homes in a month. Because of the tools, training and specialized knowledge a Realtor possesses, he or she is able to positively affect the outcome of a sale and create a win-win situation for the buyer and seller.
Selling a home without representation as a FSBO is a choice. There is no law, rule or requirement forcing someone to use a Realtor. It is like going to Las Vegas in these 2 ways:
• First, it’s a gamble. Everybody goes there hoping to be the one that hits it big(or sell their home), and almost everybody doesn’t.
• Second, if a person doesn’t know when to stop it will cost them more than they are willing to spend.
The point is, nobody likes to be viewed as a fool or taken advantage of, and in a world of almost instant access to everything including information a person can feel empowered with limited research. Information cannot replace experience and wisdom. Like the old adage goes…” a little information can get you in a lot of trouble.” If you can do something on your own, more power to you. My best wish is that this information will help someone to be better informed about the value of a professional service, including the services of a professional Realtor.
Brooks Mone – Fayetteville, NY
Submitted by Brian Rayl on January 28, 2012 - 12:51am.
I know this is old, but I wanted to add my 2 cents anyways.
Jim writes: Second, Ms. Hughes states that a buyer is unable to obtain sold prices publicly in Texas. However, the website Zillow provides that information at the touch of a button. Furthermore, if Texas is a non-disclosure state as Ms. Hughes suggests, then it does not matter if you use a real estate agent, only that you hire very good home inspectors. Finally, she argues that a FSBO cannot determine a suitable price. Well as with most things for sale, a suitable price is one that sells the property.
My answer to Jim - Zillow does not provide SOLD prices. It provides the last LISTING price of the home in question or the TAX VALUE. How many homes do you think sell at the listing price or at Tax Value? The answer is very, very, very few. If you look at the information on the Zestimate for the Dallas TX area, you will see that only about a quarter of the homes are within 5% accurate. Less than 50% are within 10% of the actual sales price. If you are trying to sell a $200,000 home and depend on Zillow for your pricing, you are going to be $20,000 off of market price over half of the time.
You can read the article on my blog here:
http://brianrayl.com/blog/how-accurate-is-zillows-zestimate-home-value-i...
You also don't understand the meaning of "non-disclosure". Non-Disclosure in Texas means that the intimate details of the real estate transaction (sales price, closing costs, and other stipulations) are not disclosed. It does NOT mean that condition of the home is not disclosed. On the contrary, there is a 5 page seller disclosure that we use in Texas and that is the BASIC disclosure. There are other disclosures related to home owner associations, short sales, and other less common instances. The largest disclosure that I have had is 10 pages. If ANY of those disclosures had not been made, the seller could have been sued.
Where is your FSBO savings then?
By the way, have you heard that ForSaleByOwner founder sold his home with a real estate agent after not being able to sell it himself? And the agent got him more money than he was asking on his own. You can read about that here: http://brianrayl.com/blog/for-sale-by-owner-ceo-sells-home-with-real-est...
Submitted by Brian Rayl on January 28, 2012 - 12:52am.
My comment about Zillow not providing actual sales prices applies to the Texas market, not in general. Sorry if there was any confusion when reading that last comment.