Selling one’s own home was more practical 30 years ago. The sales contract was only a few pages long, escrow paperwork only two pages, and no property disclosures or retrofitting were required.
A Sentient I Hear Often
“I’ve lived here for many years and every so often I see an ad or sign, “For Sale By Owner.” Is it possible for you to objectively tell me how wise or foolish selling one’s own property without a broker might be? I know the Palisades well, I have a lot of spare time, and I sure could save a lot of money by selling it myself.”
— A long-time homeowner
Way Back When
30 years ago, “Buyer Beware” was the norm, with nearly all sales being “as is” and very casual physical inspections done. There was only one type of loan available and one basic title insurance policy.
Homeowner’s insurance could be arranged by a phone call as late as the day before recording the sale. Most advertising was done through local newspapers, and homes were sold through numerous small real estate offices in the community.
How For Sale by Owner has Evolved
Today the sales contract is eight pages long, supplemented by five or six disclosure statements, and the escrow process involves another five or six disclosure statements and up to seven retrofitting requirements and certifications.
Home inspections may take three or more hours, involve 15-20 page reports, and then require extra forms to actively remove each type of contingency in the transaction. There are now more than 20 different types of financing packages available, title insurance has far more detailed clauses, and if insurance is not arranged early enough there may be serious problems with closing escrow on time.
Marketing today involves a far wider range of options, including Internet special features and numerous sites, specialized publications, and targeted direct-mail programs. Buyers represented by real estate agents buy over 70% of the homes sold on websites.
Buyers Aren’t Prepared for Everything
These buyers may do some of their own research on the Internet, reading ads and occasionally looking at Sunday open houses. But the process of negotiating a contract, entering escrow, knowing the questions to ask and the proper information to expect, is far more complex and risky for almost any buyer to undertake without an experienced real estate professional’s guidance.
I have known many prospective buyers who have been hesitant to contact an owner directly about his house for sale. The buyers often ask their agent to make the call, because they want their agent to represent them.
The Difficulty of the Deal
Could you really save money by selling it yourself? Buyers with or without agents who do look at a house “for sale by owner” expect to be able to save most of the 6% commission cost because no agents are involved. Therefore, they are likely to offer approximately 6% less to buy the home. This, of course, would take away most of the reason the owner tried to sell it himself in the first place!
Are you prepared to handle the vast assortment of seller and buyer emotional issues involved in the process? Do you have specialized skills in negotiating contracts and understanding numerous legal concepts? Are you ready to deal with possible insurance, mold, termite, retrofitting, and property investigation issues? Do you have the experience to help people resolve numerous practical problems that can unexpectedly come up during the course of escrow?
I recall one owner who sold his own home and thought he did well by saving the 6% commission. But he later discovered that he could have made much more money by using an agent because the buyer had gotten him to reduce his price by 5%, and he did not know that there was a more motivated buyer working with an agent who did not know about this home being available. That buyer paid over $100,000 more for a similar home a block away very soon after.
Even Realtors use Other Realtors
I have been hired by many clients with real estate licenses to help them buy and sell homes. They felt that I would do a better job in protecting their legal, emotional, and financial interests than they might have done.
Nationwide, only 18% of homes are sold directly by owners. On the Westside probably under 2% are sold by owners. There is a lot at risk with such an important asset as one’s home, and to try to save two or four percent may not be worth the risks to you.
However, if you would still like to consider that approach, please let me know and I’ll be glad to discuss some of the marketing, disclosures, and sales issues with you.
