In my time in real estate, I have observed that real estate buyers and sellers hold on to REAL ESTATE MYTHS and choose to believe these myths much like religious beliefs. Individuals who hold fast to these beliefs will not be side-tracked with facts.
The choice to believe REAL ESTATE MYTHOLOGY can devastate your family financial present and future.
My number one real estate mythology that I love to hate is the favorite myth of every person (including builders) selling their real estate themselves. Yes, this myth is for you, the “For Sale by Owner [FSBO].” The truth is, every FSBO transaction I have ever personally known of; someone came out of the transaction in a bad to very bad conclusion. No real estate buyer I have ever known has bought real estate unless the buyer “believed” they were getting a good deal. Psychology 101, human beings tend to make decisions based on their own best interest.
The overwhelming majority of FSBO sellers I have dealt with take an approach to pricing their home that is reckless and often comically irresponsible. Sellers completely forget their experience as a buyer. A number of years ago, the National association of Realtors [NAR] cited a nation-wide study concluding that, on overage, FSBO sellers sold their homes 18% lower than comparable homes sold with a Realtor involved in the transaction. This study was done before the nation-wide credit crunch in 2008. since that time, every real estate market I am aware of has “flipped” to a buyers market.
A buyers market occurs when there are more unsold homes on the market than there are willing and qualified buyers to buy these homes. There is also a much larger percentage of these unsold homes that are corporate owned [bank owned] or short sale [per-foreclosure] homes. This means much, much more competition. Competition means there must be a marketing plan. The vast majority of the time, FSBO sellers have no marketing plan.
In today’s real estate market, 90% of real estate buyers begin their search online. around 10% of calls come from the yard sign. On this page, I am not even going into the difficulties of qualifying buyers, inspection repairs, qualifying your house to appraise for a government loan [FHA,VA USDA], connecting your buyers with lenders inspectors and title companies that solve problems instead of creating problems. Instead, my desire is to educate the FSBO seller of the REAL ESTATE MYTH that they WILL save money selling the home FSBO.
What I can guarantee “almost” 100% of the time is that in any market you can sell your home FSBO. That is the good news. The bad news is that after factoring in all the costs associated with attracting a buyer [at a lower contract price] , the cost of inspections and repairs, government loan requirements and repeating the process because the fist deal fell through; you have paid MUCH more that the Realtor fees you thought you were saving.
Now for my next REAL ESTATE MYTHOLOGY. Running neck-and-neck with the above myth is the belief by a large number of buyers (usually first time buyers) is the belief that if they go through the listing Realtor to buy a house, they will get a better deal than using their own buyers agent (in Oklahoma we call them Buyer Brokers).
Real Estate commissions are not playing games when it comes to disclosure laws. Listing Realtors are required to disclose the nature of all relationships to all parties, who is compensating them and all factors involved in the transaction. While it is possible for the listing broker to handle both sides of the transaction and and to handle both sides for a reduced amount; usually, only your less experienced brokers will do this more than once. Broker compensation and fees are between the seller and the listing broker. Unless the listing broker and seller agree otherwise, the compensation to a selling broker [Realtor representing the buyer] is at the discretion of the listing broker.
If you call a listing broker, their fist question to you should be:” are you working with a real estate broker?” If the listing broker does not ask you that question, it is usually a sign of inexperience. The listing broker may say everything they are required to say on the Multi-Listing System [MLS]. However, the MLS discloses these factors to other Realtors with MLS privileges. The MLS made available to the public, by whatever means, usually does not include disclosures about the property and Realtor relationship disclosures. I can tell you from experience that asking that question to callers can save time, gas, headache and heartache. I can also tell you that even though I disclose all things I am required to disclose on the MLS, I never ever forget that buyers cannot see the parts of the MLS where critical factors affecting buyer decisions. Many more articles about these factors will come in the future in this blog as well as companion sites. I will also have RSS feeds to further punctuate the facts.