For Sale By Owner Pitfalls
1. Owners can't list their home in the MLS.
Owners are not permitted to list their home in the multiple listing service (MLS). Only licensed agents and brokers have access to this industry membership organization. Homes sold directly by their owners are also often shut out of many home search engines and websites. An aggressive owner can put a for sale sign in his or her front yard and advertise in local newspapers, but the home won't receive a fraction of the exposure as it would through the MLS.
2. Agents don't typically show FSBOs.
Limited marketing makes it hard for agents to even find about FSBOs. If by chance an agent does become aware of an unrepresented home, he is likely to avoid showing the home. Generally the buyer's agent gets a percentage of the commission the seller pays a listing agent. Without a listing agreement there is no guarantee that the buyer's agent will be compensated for the services provided to a buyer of a For Sale By Owner home. Even if a FSBO owner offers to pay the commission for the buyer's agents, experienced agents may be hesitant to go through that process without the seller being represented. This means the potential buyers for FSBO are often unrepresented and unqualified.
3. Owners tend to inaccurately price their home.
Homeowners may use poor methods to determine their home's value and sales price. Sometimes, to avoid paying a real estate commission, sellers decide to sell their home For Sale By Owner. Sometimes owners put their house well below market value, selling it for tens of thousands below a fair asking price. In the long run, it could cost much more to sell by owner, than to hire a competent real estate agent. On the flip side, some owners list their home much higher than it is actually worth. Some sellers feel like a higher price is a starting point for negotiations, but this could not be farther from the truth. When buyers feel a home is overpriced, they will not make a lower offer; generally they will make no offer at all and move on to a correctly priced home.
4. Buyers Can Feel Intimidated.
Buyers tend to spend less time in a home if the owner is present during the showing. They don't feel comfortable discussing their likes and dislikes if the owner can hear their comments. Homebuyers may also be hesitant to make an offer directly to owners. Having an agent on each side creates a comfortable buffer between both the seller and buyer.
5. FSBOs are likely to stumble into legal trouble.
Real estate transactions are fraught with potential liability for unwary sellers, particularly in states that have extensive disclosure requirements. An owner who overlooks even one required form or legally mandated disclosure could face a protracted and expensive buyer lawsuit after the transaction closes.