Common Problems FSBO Owners Face…
(knowing in advance could help you avoid them)
When a FSBO owner sells their home, it typically takes over a month to get the buyers to sign the purchase agreement. Sometimes they don't sign the contract at all until the day of closing, feeling apprehensive because of not having professional guidance. When a realtor sells a property, the purchase contract is usually signed by both parties in 1 to 3 days.
There are risks that arise from a FSBO buyer being apprehensive to sign:
Everyone experiences some degree of “buyer’s remorse” after committing to make any large purchase or sale. It’s human nature. That sudden burst of fear that feels like a kick in the gut, after agreeing to any large purchase or sale, and it can linger three days to three months depending on the individual.
People tend to act abruptly on this fear. Some will cancel their offer just to make that gut-wrenching feeling go away; even if they know it’s a smart buy. Most don’t really understand that buyer’s remorse is something that is expected to happen to everyone, and then subside, so they misconstrue it as a sign not to buy.
Many regret cancelling months later, but that doesn’t help the seller who wasted time and lost other prospects and now has to start all over.
An experienced Realtor gets the contract signed and executed right away, to lower the odds of buyers remorse killing the deal. I always warn my buyers in advance about buyer remorse, so they won’t panic when it happens. Buyers that sign a Realtor’s contract understand that after their home inspection period ends, they will risk losing their deposit on the home if they cancel for no valid reason caused by the home or the seller.
Sellers also go through a remorse phase when their emotions kick in; realizing they are leaving the home where cherished memories are from. When I have an emotional seller, I like to make an unbranded version of the videos of their home I made for marketing for them as a keepsake.
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United Realty Group
Jupiter, Palm Beach Gardens
and Surrounding Areas
The buyer arrives to the closing table and the closer asks for proof of homeowners insurance, an HOA acceptance certificate, and other documents required to close and the buyer says “No one told me I needed to have these things because I didn’t have an agent.”
Now the buyer and seller have to find a place to live because it will usually take 2-weeks or more to get the HOA acceptance certificate and or other items that may be required depending on the town requirements.
This once happened to sellers who had their furniture on a moving truck heading to their new home in which the purchase closing was scheduled immediately following the sale closing. However, since the sale closing was cancelled, the purchase closing had to be cancelled too, because the down payment was coming from the monies from the expected sale closing. The sellers had to spend thousands to put their furniture in storage and stay at a hotel until the closing could be rescheduled, then re-hire the movers again.
All Realtors must carry “errors & omissions insurance” to protect themselves from lawsuits due to misrepresentations or errors causing any harm to their buyers or sellers. FSBO owners are liable for errors and misrepresentations too, and they must be very careful in their actions or they can get sued directly by the buyer.
A few examples of possible FSBO lawsuits:
* The owner advertised the home to have hardwood floors and it was actually laminated or artificial wood.
* The owner knew about a home defect or environmental hazard and did not disclose it to the buyer.
* The owner did not provide a “lead paint disclosure” to the buyer
* The owner (or previous owner) did not get a variance for adding a 2nd kitchen or a permit for updates.
There is a long list of reasons realtors are sued, so you have to be sure that all information you convey verbally and in writing is accurate because having no E&O insurance means it’s all on you.
Many lawsuits seem frivolous, but some lawyers that get paid by the hour seem to encourage them. I was once being sued for selling a 1-family home as a 2-family home. Another realtor found out that my buyer was an investor with mega-millions to buy homes with, so he tried to take my client from me by telling him I sold him a 1-family as a 2-family. I was served by the court with the motion papers. So I got a letter from the town confirming that it was a legal 2-family home and sent the letter to the attorney suing me. Instead of the lawyer calling the town himself to find out if it was a legal 2-family, he chose to make money off the lawsuit first by charging the client $300 per hour until I proved him wrong.
Most FSBO’s take longer to sell because of less exposure, less showing traffic, and inaccurate pricing. When buyers see that the home is on the market for 60 to 90 days, they wonder what is wrong with the home instead of what is right with the home. They also tend to believe that a stale listing will probably accept a low offer too.
FSBO owners typically do not know how to customize a contract and write addendums to the contract to protect their interests. Just about every correction or change along the way requires an addendum signed by both parties to be sure the contract continues to be valid. If you do not know contract law, and do not have access to a realtor that does, I strongly recommend that you hire a real estate attorney to write the sales contract and all addendums for your FSBO.
If a buyer does not perform by the terms of the contract, or cancels for no valid reason after the cancellation period expires, the FSBO seller will not have The National Association of Realtors get involved to help the seller claim the deposit. If the buyer is willing to sign a release to voluntarily let the seller keep his/her deposit, that is good, but if the buyer wants their deposit back, and the FSBO owner wants to claim the deposit in accordance with the contract terms, there could be legal expenses to dispute this if a realtor was not used.
FSBO shoppers are usually bargain-hunters, flippers, investors and hagglers who see having no representation as a weakness; as opposed to serious buyers who expect to pay a fair and reasonable price for their home.
8 out of 10 FSBO’s (on average) end up listing with an agent. If you are one of the 2 out of 10 that make it through the sale, Congratulations on your hard work and success!
Maybe you should consider a career in real estate?
I hope this blog is helpful…
Please let me know..
Don’t worry, I do not solicit :)
United Realty Group
Jupiter & Palm Beach Gardens Specialist
561-714-0931 www.RealTerrific.com RealTerrific@Gmail.com
For Sale By Owner (FSBO) Statistics
· FSBOs accounted for 8% of home sales in 2016. The typical FSBO home sold for $190,000 compared to $249,000 for agent-assisted home sales.
· FSBO methods used to market home:
· Yard sign: 35%
· Friends, relatives, or neighbors: 24%
· Online classified advertisements: 11%
· Open house: 15%
· For-sale-by-owner websites: 8%
· Social networking websites (e.g. Facebook, Twitter, etc.): 13%
· Multiple Listing Service (MLS) website: 26%
· Print newspaper advertisement: 5%
· Direct mail (flyers, postcards, etc.): 4%
· Video: 2%
· None: Did not actively market home: 28%
· Most difficult tasks for FSBO sellers:
· Getting the right price: 15%
· Understanding and performing paperwork: 12%
· Selling within the planned length of time: 13%
· Preparing/fixing up home for sale: 9%
· Having enough time to devote to all aspects of the sale: 3%