Homeowners may be tempted to try a For Sale By Owner, or FSBO, transaction. The reasons people choose to FSBO vary. A common belief is that in doing it yourself, the owner makes more money by not paying commission to a real estate professional. Other homeowners prefer greater control over the process or had bad experiences with real estate professionals in the past.
Before trying the For Sale By Owner route, make an informed decision about the process, legal obligations, and what real estate agents actually do.
Behind the scenes of a real estate sale
No matter which route you pursue, listing and successfully selling a home is not a simple task. Understand the basics of a real estate transaction before deciding between FSBO or securing a real estate agent.
To sell a home for maximum list price, there will be:
- A commitment of time to clean and maintain the property for showing appointments and open houses.
- Time and money spent marketing to potential buyers.
- Scheduling availability for home showings.
- Contract negotiations, which in good scenarios happen quickly, but may be complex.
- Opening an escrow account.
After a signed purchase agreement, the efforts continue. Most of the responsibility fall on the buyer side, but the seller still has the responsibility to maintain the property and make any negotiated repairs before close. There will be home inspection appointments and appraisals. You could be work with a real estate lawyer on contract terms or a title company to clear liens.
A contract could fall apart at any moment for reasons like the buyer is unable to secure financing, or the buyers are unable to sell their current home before closing. The home might go back to square one at any time.
The listing and negotiating phase happens at the same time you are trying to organize a move and potentially purchasing the next home.
Again, this is a basic overview. No two real estate transactions are the same. A sale may be complicated by external factors, such as by the buyer needing homeowner association approval.
Now, let's dive deeper into the ins-and-outs of the real estate transaction starting with what a homeowner will need to do to for a FSBO transaction.
The process as a For Sale By Owner
Every homeowner has a goal when selling their house. Usually, this relates to tapping into the home’s net equity. Owners expect capital gains from the home sale, even after deducting home repairs or marketing costs.
FSBOs will want to research any potential taxes resulting from the sale, especially in capital gains. A CPA or tax professional can advise about any looming tax bills and potential ways to write them off.
Before listing, an FSBO owner needs to prepare the home. Owners take weeks or months to conduct repairs, add a fresh coat of paint, stage the house, and update the landscaping. The time frame varies according to the repairs needed.
Once the home is ready, the owners must create a marketing plan. Attractive, quality photography will be essential to selling the home. Owners can take their own photos or hire a professional real estate photographer. The FSBO will need to secure signage and potentially make listing fliers.
The do-it-yourselfer marketing strategy must reach the highest number of qualified home buyers. You will need to pay you to have your home featured on real estate listing sites and the local MLS.
Not everyone who calls to see the home is actually a qualified buyer. The person could be a curious neighbor interested in seeing the home or an unsavory character trying to take advantage of the situation. This means the owner could spend time showing the home to someone who is unable or uninterested in purchasing it.
Once a potential buyer makes an offer, negotiations begin. It takes a cool head and patience to hammer out the details of a purchase agreement. Coming up with a contract would involve discussions with the buyer's agent and/or buyer’s attorney. Even if FSBOs use the documents from the Texas Real Estate Commission, they should consider having a licensed real estate attorney look at the purchase agreement and any documents before signing.
With a purchase agreement in hand, the buyer or seller must open an escrow account. If the buyer has an agent, the real estate agent likely opens the escrow account to hold the good faith check.
The buyer may want certain home inspections, which leads to repairs or concessions. This will require amendments to the original contract. If the buyer requires financing, the home will need to be appraised. Your schedule must accommodate these inspections and appraisals.
The process with a Real Estate Agent
Now let’s look at what tasks a real estate agent will handle for you during a real estate transaction.
A real estate agent is a licensed professional trained to handle property transactions. Their job is to smooth the process by ensuring proper disclosures, to market the property in compliance with state laws, and to provide advice to their clients. They act as a buffer between buyers and homeowners.
A listing agent begins by using their marketing expertise to make recommendations for positioning the home. These include recommendations for repairs and home staging. Since they work with multiple properties and with buyers on a regular basis, real estate agents have insight into highlighting your home's best features to attract buyers. They can make recommendations on quality contractors to do the necessary work.
The listing agent designs the marketing strategy for your home based on its neighborhood, price point, and potential buyer. They arrange and pay for the home’s marketing. They will take care of home photography or videography, ensure your property is included on the local MLS, and add it to any additional listing websites they feel relevant.
The real estate agent works with your schedule to handle all showing appointments and open houses. They qualify the buyers for the property. Agents aren’t interested in wasting time with peeping toms and nosy neighbors.
During negotiations, they are a neutral third party that communicates and advocates for your home selling goals. They advise their clients when submitting counter-offers and which concessions are considered reasonable. The agent has technology tools at their disposal, like document e-signature, to securely and efficiency along the process. Since they know Texas real estate law, they’ll verify all the paperwork is in order and review the purchase agreements.
The real estate agent will work with you and the buyer’s parties for inspection, appraisal, and any contract amendments. Should the property fall out of escrow, they will help quickly get the property back on the market.
Using a real estate professional removes some liability from the seller if the buyer comes back and says the transaction was not executed in good faith. They keep transaction paperwork and notes to show what really happened.
In exchange for their services, real estate agents earn the commission on the sale. Naturally, they want your home sale as profitable as possible, but good agents do this because they a positive experience benefiting the seller.
Advantages of the real estate agent
- Code of Ethics. If you had a poor experience with the real estate agent in the past, hopefully you reported it to the appropriate agency. Real estate agents are bound by a code of ethics. In Texas, if you believe a real estate agent has acted inappropriately, contact the TREC.
Most real estate agents are consummate professionals interested in representing your interests and delivering outstanding service.
- Market expertise. Maybe it's true that anyone can research today and find comparables on their property. However, always take comparables or any online estimates on your home's value with a grain of salt. Neighborhood real estate experts access more data and information than what’s shared online.
For example, local expert might know the home around the corner that sold for $15,000 above market value had major upgrades. Or, they know the home that sold under value was because owners needed to get out quickly.
It's not just pricing information that matters. Experienced real estate agents see trends. The market around the home might be heating up or slowing down. A new school could be attracting a lot of buyer interest.
- Sale price. One source claims that 48% of sellers who don't use a real estate agent will end up with a lower-than-expected closing price. A 2014 study from the National Association of Realtors found that FSBO listings typically were at a lower price than listings represented by a real estate professional. Having that neutral third part with local market experience helps price appropriately and close the sale with favorable terms.
- Scheduling. As part of the real estate agent’s responsibility, they handle property appointments and open houses. They play phone tag with all the buyer’s agents and vendors seeking access to your home.
- Networking. Real estate professionals foster a network of contacts to help you do everything from install new flower beds to making the move. Additionally, they may know specific real estate agents to pitch your property to because those agents have the right buyer contacts for the home. This helps land a buyer and close a deal quicker.
- Marketing. The real estate listing agent will handle all the property marketing, including listing on the appropriate websites, social media, and the materials.
- A listing agent is your advocate at every turn. They advise owners on a pricing strategy, take steps to promote it better, and work with owners through negotiations. They stay calm and collected when working through emotional decisions and celebrate with you over a successful close.
- Paper trail. Since real estate professionals deal with purchase agreements all the time, they are experienced with reading the paperwork. They know which clauses to look out for to be in compliance with the state and the city. They develop systems to keep the constant stream of “sign here!” organized.
The point of a real estate agent
A real estate agent is a service-oriented professional. Our mission is to support you during what can be a stressful and lengthy process.
In February, the average North Texas home was on the market 59 days. During that time, a real estate agent is taking some stress from you by handling the marketing, the listing appointments, and negotiations. Along the way, they’re giving you reassurance and advice.
At the Chicotsky Real Estate Group, we are always striving to go above and beyond with our service. No two homes are like. We leverage our generational and market knowledge to personalize our marketing and experience for your needs. Call our Fort Worth realtor today!