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  • Reasons Why For Sale By Owners’ Is A Bad Investment Idea

    February 18, 2017 | Blog Real Estate
  • For Sale By Owner

    The real estate industry is an industry that involves the complexity buying and selling land, buildings along with its natural resources. In short, it’s a vast and comprehensive industry and the thought of asking yourself this responsibility is a, without a doubt, a bad business idea, unless you are a realtor. Professional real estate agents or realtors are individuals with proper training and great wealth of experience when it comes to real estate.

    They deal with every transaction avoiding possible issues that may come along the way and solve them if at all they were to occur. They take control of real estate business from home inspections to financing making the process worthwhile, profitable and efficient in the fastest way possible.The reasons why property owners aspiring to sell their land should invest in a realtor is because;

    - A realtor has education, training, and experience

    - Real estate agents are buffers

    - Have a lot of neighborhood knowledge

    - For your price guidance

    - They have great wealth in market conditions and information

    - Over the years, they have developed a professional clientele networking in real estate

    - Have excellent negation skills and professional confidentiality

    - Have the capability of handling a lot of paperwork

    - Develop relationships for future business

    Selling your property also referred to the market as For Sale By Owners’ (FSBO) is, without doubt, a bad investment idea because;

    (A) You end up losing a lot of money; many people prefer FSBOs to avoid commission fees to realtors. However, most homeowners end up going at a loss because they lack the current sales data. This causes them to blindly set their properties at higher or lower prices which result in weak sales and high investment losses. This is because sales data is not available to the public but which many realtors are well-versed in.

    In most cases, the commission fee is usually small, and they can negotiate the contract terms with the property owner to adjust the figures to the best possible price without having to face a hefty commission fee. Also, the agent helps in guiding the client to make the right choices for the business financial procedures.

    (B) Scams can happen; scams are common in real estate industry where fraudsters take advantage of the less knowledgeable FSBO sellers and exploit them through false papers such as loan documents and appraisals. Realtors are capable in identifying such scams by going through relevant documentation and proper investigation of buyers.

    (C) The paperwork requires skills, training, and attention; in 2015, the National Association of Realtors showed that understanding paperwork proves to be the most challenging tasks for FSBOs. The average real estate files have a thickness of about 1-3 inches where omission of tiny details could cost the FSBOs thousands.

    There are a lot of documents involved in property financings such as sales contract, occupancy agreements, sales agreement, etc. that require experience and training to adequately handle these documents for both the buyer’s and the seller’s sake. Realtors have the proper skill set to combat this daunting paperwork.

    (D) There are too many people to deal with; for the buyer to sell his or her property, negotiations must be held with the following people

    - The buyer with the best possible deal

    - The buyer’s agent representing the interest of the buyer

    - The buyer’s attorney

    - Home inspection companies from the buyer which are bound to find problems in your house

    - The appraiser, if there are questions of value

    - The bank, for further financial transactions such as a short sale

    In most instances, the FSBOs lack the required negotiation skills and end up blowing off the transaction process. Realtors, on the other hand, are top negotiators who remove the emotional aspect of a business transaction because of their professionalism. Good agents present their client’s case in the best light safeguarding confidential information from potential competitors.

    (E) Most FSBOs lack the time; the process of selling property is expansively ranging from high precision and workload during paper work to the extensive negotiations from all the required parties. Sometimes, this process is a full-time commitment which many FSBOs don’t have. As a result, the process of selling their home takes a long time, and bad investments may come across.

    (F) FSBOs spend a lot of time in the market without success; FSBOs spend a lot of time before selling their property. Agents, on the other hand, have established an elaborate network of potential land buyers. They also have a reputation for efficiency in giving clients a list of references with the required background information for wise selection of these possible buyers.

    (G) Poor marketing strategies; FSBOs lack the proper marketing resources and experiences to market their homes. On the other hand, agents have elaborate online and physical marketing strategies. Most FSBOs rely on yard signs and friends of families to market their homes, and very few take advantage of the social media.

    (H) FSBOs lack proper representation; there are a lot of many legal and professional questions that arise during real estate. Most of FSBOs lack the proper information to tackle such questions. However, agents are very informed and represent the client’s interests to the possible buyers. The representation by an agent is very important in case other problems arise during the process of selling your home such as home inspections.

    (I) Liability is on the seller; the process of selling your property comes at a risk. Therefore, in a case of losses, the FSBOs are liable to their mistakes. On the other hand, having an agent means transferring the liabilities and risks involved. Realtors are professionals, and the possibilities of risks are minimal compared to FSBOs.

    (J) Inspections are problematic; before selling your home, sellers must ensure proper repairs are done. These repairs are costly, and most are unnecessary. Nevertheless, most buyers’ inspections are quite demanding. Inspections procedures and negotiation processes can be dealt with ease by professional realtors.

    In conclusion, most FSBOs lack the proper skill set to handle access and maximally utilize resources that realtors have. I would comfortably say that For Sale By Owners’ is a bad investment idea.