Since 2013, there has been an increase in sellers of pre-sale properties and listing them on Multiple Listing Services (MLS). Core Logic reports that in 2013, 53% of real estate transactions made in the US were not listed on MLS. Most sellers do not hold real estate licenses, and are not allowed to use MLS – the standard listing portal for licensed real estate agents. While buyer agents are willing to work with For Sale by Owner (FSBO) listings, they are not permitted to provide sellers with advice or access to marketing.
Sellers seeking to list an FSBO may lose tens of thousands of dollars in real estate market value, especially if they list properties without up-to-date valuations or up-to-date market research. Often sellers will list the FSBO based on the selling price of a neighbor’s house, which may or may not be the best choice for comparable properties. Local real estate agents list properties continuously in their regional sales area and are best suited to offer market comparisons in the neighborhoods they cover. Remember, tax assessments, while readily available, are not the best tool for measuring the true market value of a property at any given point in time.
One of the nuances about the FSBO sale that should give sellers pause is the fact that an experienced buyer’s agent may have an upper hand on FSBO real estate deals. Why? The seller may be unfamiliar with state laws and fiduciary codes and/or the consequences of contractual issues that arise during negotiations. Even with a lawyer making a real estate contract on a property, the final outcome of a For Sale By Owner (FSBO) real estate sale may be delayed due to various issues. Experienced REALTORS know how to avoid these obstacles quickly and keep property deals on track.
FSBO Not Equal to REALTOR’s Advertising Potential
Working with a professional REALTOR is worth the commission in this situation. FSBO has limited opportunities for marketing, becoming more dependent on real estate web portal sites like Zillow.com. With experienced agents, ad penetration for a property is much greater. For example, I list my property for sale in Williamsburg, Virginia on four MLS websites. This gives my sellers and a wide coverage area so other agents can see the listings and buyers on MLS can see them too. My MLS list is also republished on Realtor.com, which is owned by the National Association of Realtors and is also the leading website in the industry.
My broker, Coldwell Banker Tradition, also has a listing mechanism on its locally based website, where my client properties receive excellent visibility. Not all REALTORS list these properties extensively on the Web, so check with individual real estate agents and ask them for specific information about advertising provided to client listings via MLS and elsewhere on the Web.
There are other downsides to registering a property without an agent. If the owner happens to miss a show with a potential buyer, he or she may lose the opportunity to sell the property altogether. For real estate sales in my area of Southeast Virginia, owners are not permitted to use legal forms produced by the Virginia Association for Realtors (VAR), unless they have a permit. The real estate form is officially copyrighted by VAR and approved for use by membership only. This puts the seller at a distinct disadvantage in the transaction. Having to create new legal forms is not only time consuming, but can increase costs for an attorney.
In addition to some of the more obvious advantages of registering with a licensed real estate agent, there is also a common misconception that using a real estate attorney will save you money compared to paying agent commissions. The seller still has to pay the buyer’s agent fee (which varies by state and type of real estate transaction). All FSBO sales contracts must be drawn up and finalized with a lawyer. The selling process involves the buyer reading the contract and making changes. Lawyers revise contracts appropriately and present at closing. Lawyers in Virginia charge far more to make the original contract (in my experience) than commission on the seller’s side – in most cases. Sellers looking to do it themselves should seriously consider attorney fees which may be more expensive, and largely unpredictable, depending on the number of legal forms required, the length of negotiations, and additional contract terms.
Sellers should forgo the FSBO and be smart in the real estate market which is sure to be moving in many parts of the US Prices are likely to be higher in the 2014 market and supplies low in many markets. So sellers should have expert advice on real estate prices at current market values now – more than ever. In addition to the potential loss of profits from the sale of a home, sellers can easily face legal and contractual issues that may not be resolved quickly. Worse, these things can be completed too late to comply with certain loan deadlines such as the FHA and USDA. If the seller doesn’t know what they are doing and the term is not paid attention to, this can cause the buyer to lose the loan. In turn, the property loses a good buyer and valuable time in the market.
Be wise and don’t get involved in risky business – register property from MLS or without a licensed agent. It is best to have a representative from a licensed agency for many reasons. The main reasons are: the seller will have expert advice, will most likely sell the property faster and the property will command a fair market price. Say no to FSBO. Instead, seek out a capable real estate professional in your area for peace of mind.
