For sale by owner: listing outside of MLS is a risky business
Since 2013, there has been an increase in pre-sale property sellers and Multiple Listing Services (MLS) listings. Core Logic reported that in 2013, 53% of real estate transactions made in the US were not listed on the MLS. Most sellers do not have a real estate license and are not allowed to use the MLS, the standard listing portal for a licensed real estate agent. Although buyer agents are willing to work with Listings for Sale by Owner (FSBO), they are not allowed to give the seller any advice or access to marketing.
Sellers looking to list an FSBO may be losing tens of thousands of dollars in real market value on a property, especially if they are listing properties without an updated appraisal or current market research. Often times, a seller will list an FSBO based on the sale price of a neighbor’s home, which may or may not be the best option for a comparable property. A local real estate agent continually lists properties in their regional sales area and is best suited to offer a market comparison in the neighborhoods they cover. Remember, tax assessments, while readily available, are not the best tool for measuring the true market value of a property at any given time.
One nuance about FSBO sales that should give sellers pause is the fact that an experienced buyer’s agent may have the upper hand in an FSBO real estate transaction. Why? The seller may not be familiar with state laws and fiduciary codes and / or the ramifications of contract issues that arise during negotiations. Even with an attorney creating a real estate contract on a property, the bottom line of a real estate sale for sale by owner (FSBO) can be delayed by a variety of issues. Experienced REALTORS know how to get around these hurdles quickly and keep a property transaction on track.
FSBO is not equal to the advertising potential of a REALTOR
Working with a professional REALTOR is worth the commission in these circumstances. An FSBO has limited marketing opportunity, becoming more reliant on the websites of real estate portals such as Zillow.com. With an experienced agent, the penetration of a property’s advertising is much higher. For example, I list my properties for sale in Williamsburg, Virginia, on four MLS websites. This gives my sellers a wide coverage area so that other agents can see the listing and buyers in the MLS can see it too. My MLS listings are also republished on Realtor.com, which is owned by the National Association of Realtors and is also a reputable website in the industry.
My broker, Coldwell Banker Traditions, also has a listing mechanism on their local website, where my clients’ properties receive excellent visibility. Not all REALTORS list properties that extensively on the Web, so check with individual Realtors and ask them for specific information about the advertising provided for client listings through MLS and other places on the Web.
There are other downsides to listing properties without an agent. If the owner misses a visit with a potential buyer, they may miss the opportunity to sell a property entirely. For real estate sales in my territory, Southeastern Virginia, an owner cannot use legal forms created by the Virginia Association of Realtors (VAR), unless they have a license. Real estate forms are formally copyrighted by the VAR and authorized for use by members only. This places the seller at another clear disadvantage in the transaction. Having to create legal forms all over again is not only time consuming, but can also add to the costs of an attorney.
In addition to some of the more obvious advantages of listing with a licensed real estate agent, there is also a common misconception that using a real estate attorney will save money compared to paying agent fees. The seller still has to pay the buyers’ agent fees (which varies by state and type of real estate transaction). All FSBO sales contracts must be created and finalized with an attorney. The sale process involves the buyer reading the contract and making changes. The attorney reviews the contract properly and introduces himself at closing. Lawyers in Virginia charge a lot more to create an original contract (in my experience) than commission from the seller’s side, in most cases. Sellers who want to go it alone should seriously consider that attorney fees can be more expensive and largely unpredictable, depending on the number of legal forms required, the length of the negotiations, and the additional requirements of the contract.
Sellers should forgo the FSBO and be smart in a real estate market that is definitely on the move in many regions of the US Prices are trending up in the 2014 market and inventories are low in many markets. Therefore, sellers should count on expert advice on pricing real estate at current market value now, more than ever. In addition to the possible loss of profits from the sale of the home, the seller can easily run into legal and contractual problems that may not be resolved quickly. Worse, these issues can be resolved too late to meet the time limits of certain loans like the FHA and USDA. If the seller does not know what they are doing and deadlines are not respected, this can cause the buyer to lose a loan. In turn, the property loses a good buyer and valuable time on the market.
Be wise and do not get involved in risky business: listing a property outside of the MLS or without a licensed agent. It is best to have representation from an authorized agent for a variety of reasons. The main reasons are: the seller will have the advice of an expert, it is most likely that he will sell the property earlier and the property will be priced at a fair market price. Say no to FSBO. Instead, find a trained real estate professional in your region for peace of mind.