For Sale By Owner
You want to save money.
Better yet, both.
I get it. I want that too.
So when it comes time to sell your home, you decide to sell privately in order to save yourself that pesky commission. This sounds sensible and appealing.
It’s interesting what happens in people’s minds when they begin to imagine large amounts of money. Whether they imagine selling for a big price, or envision saving big commissions, it’s almost as if a switch is flipped, and they want more. More. MORE! Their decisions soon follow a predicable downward slope.
Maybe I can save some much-needed money soon becomes, Hey cool, I can determine my own price. That thought quickly becomes, I can determine as high a price as I want because it’s my house and no one can tell me what to do. This mentality quickly descends into My house is worth 50% more than anyone else’s because I changed the carpet ten years ago, and because I’m not willing to sell for less, and that’s the end of it. If they want it, they’re gonna have to pay. Heh heh. (Insert Grinch-like grin and the rubbing together of hands.)
This doesn’t just happen with private sellers. I’ve watched this happen with clients. Despite my highly researched, professional estimate of market value, they demanded I list their home above market value. I did it, and felt uncomfortable for the duration of the listing. I used to think I was treating people with respect by listing their home above market value because they asked me to. I realize now it is not a loving thing to do at all. By agreeing to list the house for more than what it’s worth, I sabotage the deal, and make it nearly impossible to get full market value.
How does overpricing sabotage the selling price? I’m so glad you asked!
I can tell you from experience that an overpriced listing will go through this cycle.
The data shows what market value is. The seller lists tens of thousands of dollars above market value. People look at the property, but no one puts in an offer. After a while, the listing becomes stale. The public begins to assume that there must be something wrong with the house because it has been for sale for so long. The seller begins experiencing anxiety, and lowers the price. Then lowers it again. And again. Eventually, months and months down the road, something has to give. Usually, due to personal deadlines and fear, the seller will give in to an offer that is well below market value.
In one case however, they were not so lucky, and the bank repossessed the house.
As a result there is no return on the investment for the Real Estate Agent who spends their own money(sometimes borrowed money) to advertise the property. I cannot think of any reason why I would want to spend my time and money again on a listing that will not sell.
I have heard some agents argue that an overpriced listing has value for them because they can still pick up buyers from the listing and make money off of the buyer’s. That is in fact true.
However, when I list a property my fiduciary duty is to be loyal to the seller. I desire to get the seller top dollar for their property. I know that if I list it over market value then that simply does not happen.
How to Keep This From Happening to You
Luckily, you can learn from the mistakes of many who have gone before you. I’m all for saving money. But don’t let greed cloud your judgment.
The biggest mistakes these sellers make is completely ignoring the factual data from their trained, professional real estate agent. They were determined to stick to a price simply because they wanted what they wanted. Whether it made sense or not. (I’d like to sprout wings and fly, but all the stubbornness in the world won’t make it a reality.)
Basically, getting rid of the “I’m the king of the castle” mentality will pretty much guarantee success in this and most ventures in life. Because sellers are not the only people or considerations in the equation.
Key points to remember:
- A buyer is not willing to pay more than market value (they research too, by the way)
- A buyer is fully aware that if you’re selling privately, you’re saving the commission – they expect to save that amount too, when they purchase. If you want to slide the commission portion back into the sales price, think again. Buyers can do math too.
- The bank will require an appraisal on a private sale. If the appraisal reveals the value to be less than asking price, they will not approve the mortgage.
I want you to save money and time too – and this is how: keeping the price real, and your greed at bay. It will save you the cost of lost value, and the time of trying to get more than you deserve.
Keep it real.
I’m saddened by an unfortunate experience with my clients.
And it happened because of the four difficulties that come from working with private sellers.
I share the story to encourage or equip agents when dealing with private sellers. Or perhaps to advise them to think again. I also share this story as a warning to sellers so they can experience success instead of loss.
Recently, a lovely young couple asked me to help them find a very specific kind of property. As soon as they described what they wanted, a property came to mind. It was a perfect fit. There was just one problem. It wasn’t listed.
I remembered though, that the owners had wanted to sell it in the past.
Allow me to stop here to tell you that I have helped my clients purchase for-sale-by-owner properties before. Every one of those experiences was painful either for me, my client, or everyone. So I wasn’t altogether excited about repeating the process. Still, the property was absolutely, completely, irresistibly perfect for my buyers. So I approached the owners. Perhaps they were still interested in selling.
What soon followed were four of the biggest, and most common, reasons that I, and many other agents, would rather avoid working with private sellers.
Five Reasons Agents Avoid Working with Private Sellers
Working for Free for Strangers
The thing about private sellers is that they don’t know what they don’t know. Like their house value for starters. How do they know any offer an agent would bring would be fair? The buyer’s agent often ends up educating, advising, and even assisting the seller without any compensation or even appreciation.
In one case, I advised a seller to get an appraisal. But I sure wasn’t about to do it. Conflict of interest much? In the interest of transparency and unbiased fairness, (and helping move things along for my buyers) I arranged and paid for an appraisal out of my own pocket.
Not only was I not compensated for the expense or even thanked for going the extra mile to be very clearly on the up-and-up, but I was treated with contempt for it. Unfortunately, this is a common thing with private sellers. Which brings me to the next point.
Being Treated Like a Slave
There’s the working for free mentioned above, and then there’s slavery.
For some reason, people think a buyer’s agent should work for free. This is especially true for private sellers.
One couple who had once upon a time listed their house, built in a 5-6% commission for the selling agent. When I approached them with a buyer, they fought with me about payment, insisting I should get nothing for brokering the deal.
Basically, they think they can bully agents. There’s no relationship – not a personal one, and most certainly not a professional one.
Being Treated Like a Murder Suspect
Private sellers tend to treat buyers’ agents like they’re selling mismatched knives out of a trunk.
I’ve stood on the front stoop in winter, without being invited in, and explained how my buyer wants to buy their house, only to be looked over with a raised eyebrow. Do they think I’m trying to trick them out of the deed to their house?
One time I presented my buyer’s conditions, one of which was a satisfactory water test. I even did the sellers a favor by furnishing them with the sample kit. Their response? Accusation.
“You’re just doing this for the buyer’s advantage!” they said.
But it’s a standard requirement from the bank. They won’t even fund a mortgage without a water test having been performed. Besides that, I’m not actually a selfish creep who’s out to get you. Everything I do, I do for the benefit of both parties. Thanks for the implication, though.
Look, I can understand why sellers would feel guarded and protective. Between all the door-to-door scams, robberies-by-phone, and fraudulent emails happening these days, a person needs to be careful.
But that’s what seller’s agents are for – to protect sellers from any creepy, horrible, out-to-get you agents who try to bring buyers for your house.
Directing a Soap Opera
The thing about dealing with people is that everyone is dealing with something. Maybe they’re selling because of a divorce, or illness, or even death. Maybe there was a job loss and the financial situation is critical. Maybe the couple just doesn’t agree on anything, including the price, or whether to sell at all.
Wading through those waters is generally the seller’s agent’s role, and we’re happy to come alongside.
When there’s no seller’s agent though, there is no buffer between the seller’s drama and us, the buyer’s agent. Suddenly we have to navigate the personal stuff on both sides of the boat. It’s tricky, it’s demanding, and actually it’s pretty doggone impossible, given the previous three points.
The Biggest Deal Killer of All
This one’s not specific to private sellers, but they sure can sport a streak of it. The biggest deal-killer? Greed. Too many deals have fallen through and houses lost because of plain, old fashioned greed.
In one case, my buyers had offered the private seller Thirty Five Thousand Dollars more than the appraised value of the place just because they wanted it so badly. The seller’s response? They wanted more. They wanted an additional Twenty Five Thousand Dollars.
Allow me to gaze into my crystal ball here for a minute and tell you what’s going to happen to them and anyone else who overestimates the value of their house and refuses to accept less.
Ah, yes. I see it. A cloud looms in the distance. The house stands alone and sad looking, its original owners pining for the money they will never, ever see. Oh, and there – I see the banker raising an eyebrow in confusion. He shakes his head and snickers at the idea of lending more than a property is worth.
As long as sellers insist on getting more than a fair, sensible, and realistic price for their properties, deals will continue to die at the feet.
Sadly, the young couple I represented fell victim to some of these private seller behaviors. My buyers were respectful, flexible with the seller’s schedule, accepting of the seller’s terms, and even generous with their offer but, as often happens, the deal fell through. They were unable to purchase their dream property.
The not surprising final outcome.
My buyers found a much more appealing home that offered them way more value for their dollar. They have moved in and enjoy their new space.
The seller listed their property and eventually sold it for less than the offer that my buyer wrote and they paid a full commission for the sale.
This tale might be fictional, but it’s based on several real, local people and events.
On things that actually, really happen around here.
Bill had been turned away from every brokerage in town. No one was willing to sell his house for him.
No agent, whether moral or shady, would touch it.
And it wasn’t because of the property; the home and yard were in great shape.
The problem wasn’t the location. Actually, it was a highly desirable place.
Buyers were searching for a property like his.
Still, no one would list it.
Why? Because Bill insisted on selling it for double its value.
What was worth $300,000 in the local market, he decided he would get $600,000. And he was completely dead serious.
So he left office after office, unable to find the agent who would invest their marketing dollars in such. No one was willing to torpedo their own reputation by listing such an impossibility.
Bill returned to his home and promptly stuck a sign in the yard. If no one would help him, he would do it himself.
Two things can happen at this point, and neither is a good thing.
- Bill could sell the house to an unsuspecting private buyer who doesn’t realize it’s a horrible deal. Because ‘hey, it’s a private sale, so it must be cheaper’. Umm, no.Either the buyers come up with cash for the inflated price and buy something without any promise of equity for years and years and years or, more likely, the bank looks at the deal, and refuses to fund the mortgage. Because paying double is insane.
- Or, most likely, and what happens most of the time, the property sits. And sits. And sits.
Because people aren’t stupid. No one will pay double. Or even 30% more than it’s worth.
Look, if this forewarns you about anything, let it be this.
- Beware: private sales aren’t always on the up and up.
- Buying without an agent to protect you is risky
- And, if you’re selling, for Pete’s sake, remember people aren’t idiots – not buyers, not agents – and be reasonable. People (and banks) will only pay what things are actually, legitimately worth. Anything more is flat out greed.
Have you ever purchased an over-priced home? Why?
The process of selling your home is fraught with pitfalls.
It is made up of endless legal loopholes, multiple financial hoops, and continuous face-to-face confrontation and negotiation with both buyers and their skilled agents.
I think when people imagine selling their home they picture meeting with a nice couple in their dining room, who is able to buy their home, agrees with the price, and makes a clean offer that goes through that very week. This kind of mental picture leads many to try selling privately. I’ve talked already about how going it alone has cost people a lot of money, or even caused them to lose their house.
Every agent dreams of the smooth easy transaction too. It is far from reality though. There are hundreds of stories of people losing thousands of dollars, being tricked, or even losing their house – all because of the complicated nature of real estate transactions.
There are serious dangers to going it alone.
So just what kind of protection you get from an agent then?
An agent guards your personal safety and privacy.
Every time you allow a showing, you open your house up to strangers. What they see in your home and how they use that information are not something you or your agent can know. But your agent is on your side, and will help you protect your privacy while people are looking through your home.
We can tell you what kinds of things to put away that might tell potential buyers too much about you, your motivation for selling, your schedule, your finances, and even your home and bank security information.
An agent negotiates in ways that you can’t.
You can tell a lot about a person just from their body language, facial expressions. The words they say – and don’t say – are big clues too. Do you think that you will be able to hide your motivation from the potential buyer?
Selling your home is a highly emotional thing. We become attached to our homes, and lose the ability to look at it impartially. To you, it is your home – the place where you’ve made memories. It is the place where you put in a lot of work, made loans, and worked hard to pay them off. Buyers however, will never view your home with the same sentimentality. This sets up an immediate communication barrier between you and any potential buyer. You’ll both value the place differently, and that alone can kill negotiations.
Also, homeowners are not usually able to hide their emotions while simultaneously being friendly, fishing for necessary information, and skillfully sharing just the right number of details with the buyer.
Now imagine if this homeowner is not negotiating with a pleasant couple, but rather the buyer’s agent. The owner is now up against a skilled professional who knows all the loopholes, is not emotionally involved, and can read the seller like a menu. The homeowner is now in a losing situation.
If the seller has an agent working on their behalf though, that agent brings not only the impartiality of an outside perspective, but also the highly developed skill of negotiation with even the toughest negotiating professional.
An agent is more available than you.
In our instant access, texting, fast food society, home buyers expect a high level of availability from sellers. Buyers expect sellers to accommodate their schedules. If sellers don’t respond quickly to showing requests, potential buyers move on to the next house. Can you leave work to go show your house at any moment?
Agents can. We leave in the middle of a wedding if we have to, because we’re dedicated to this. We’re full time, all in, and always there so you don’t have to be.
Real estate is tricky, and messing up can cost big time. That’s why real estate agents exist. The whole industry was set up to protect you from yourself and from others who know more about the ins and outs than you do.
… Are you protected?
You’ve advertised your house For Sale By Owner.
Soon after, a real estate agent lands on your doorstep saying they have a buyer for you.
All you have to do is lock yourself into a listing contract, and the buyer will appear.
If you’ve ever agreed to sign based on that promise, you’ve also probably noticed that the elusive buyer never shows. Perhaps they conveniently changed their mind. Maybe they never existed. Either way, you’re left empty handed, wondering if signing was the right thing to do.
Ever been there?
You’re not alone.
It’s an age-old tactic agents use to acquire listings. People easily fall for it, so the method continues to be used.
“But what if they really have a buyer? I don’t want to miss out!”
It’s true, they may have a buyer for you. I let my buyers choose if they want to include private sales in their search. There are a lot of good agents who go to such lengths to seek out a property for their buyers. And they should be compensated for their effort. (No one likes working for free)
But here’s the thing – YOU certainly don’t need to fork over the entire listing with full commission!
Two Ways to Protect Yourself
You Can Offer the Agent a Fee Agreement for Bringing a Buyer.
You want to sell, they want to be paid for working.
Both are great and make sense. Neither requires giving them the whole listing though.
Offering a set fee for bringing a buyer assures them you won’t swipe their contact (and paycheck) away from them if they do bring a buyer.
It also allows you to keep your private seller status, and saves you the cost of a full commission.
Sign for Only That Particular Client, or for a Specific Time
If the agent really has a buyer, they’ll be glad to be paid a commission for bringing their buyer. They did the work, and should be paid. They will gladly agree to a fee agreement.
If they balk, you can have a pretty good idea that they’re after the listing, not trying to bring a current, existing buyer.
*Please note that if you sell your house with the buyer’s agent that the buyer’s agent is representing the buyer and not representing you as a seller. You will still be legally responsible for your representation and documentation.
Tina’s personal thought. “If your goal is to sell and someone wants to buy it, then sell it. It does not make sense to turn away a sale in this market.” Negotiate a fee and start packing.
And, as always, if you know someone who is selling privately right now, share this with them!
Help them protect themselves, and save them a load of cash!
Recently I spoke with a woman who wanted to list her home with me. But there was a problem. She explained that they had attempted selling privately. “We have a dilemma – we already have someone interested in our house.”
I said, “That’s not a dilemma, that’s an opportunity!”
Then I did what many other agents don’t.
I told her to name those people as an exclusion in the listing contract.
That means if those people end up buying the house after all, my sellers don’t have to pay me. (Of course, if they want to hire me to write the offer instead of paying the lawyer to do the paperwork we could agree to a fee. Not a full commission. That would help me recover costs for investing time and money on their behalf.)
If you want to list, but have buyers possibly interested already, use this technique with your agent! List those interested buyers as exclusions. You worked hard to get them!
Many agents will not mention this to their clients.
Some agents will be angry that I even told you about this technique.
But you need to know. There is already provision for this in the contract.
If you, or your friends or family members have tried private selling, and are now thinking of listing with an agent, please share this with them! They need to know too! It could help them potentially save tens of thousands of dollars!