Pitfalls of Selling Your Home Privately
Don’t get ripped off by real estate wholesalers!
There will always be people who think there is an advantage to selling their home privately to avoid paying real estate commissions. The industry jargon acronym is FSBO or “For Sale By Owner.”
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What does “selling privately” really mean?
Pay no commission? Sure, that’s true. (Savings that could cost you dearly!)
Not consulting and hiring a real estate professional to determine the true value of your home and to create a marketing strategy that will ensure you get the most money possible, in the least amount of time, and with minimal stress and worry.
Deciding to not hire someone to handle all the marketing, details, and negotiations.
Not being educated about current market conditions including most recent sales and your competition.
In today’s real estate market here is the number one risk of selling your own home.
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Negotiating with only one potential buyer.
This could be a friend, family member, or unsolicited inquiry. This person may convince you they are trying to helping you.
In most cases, they are helping themselves. They want to buy real estate under market value to advance their own financial position at your expense.
There are people who make a business from sniffing out homes that could be for sale
You have probably seen the ads or signs in your neighbourhood, online or in your mailbox.
“We buy ugly houses”
“Quick Cash for your home”
“Eliminate debt”
Often they will be tipped off by dumpsters, renovations, and exterior maintenance. Contractors will sometimes birddog these opportunities for a friend or for themselves.
These opportunists use fear and scarcity to attract people who might be in desperate or confusing situations. They are known as “house wholesalers”
Potential Sellers are approached with a “wholesale” or quick sale scenario. They offer the Seller the possibility of selling quickly. A price is determined and offered by the buyer. This price is usually well below market value. It does offer the Seller the convenience of getting the job done asap.
There may be some cases in which this solution may be best for the seller. In many cases, the sellers just need a little more information and guidance to make a more informed decision.
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Real-Life Case Study:
The following story happened last fall. It’s an excellent example of how you can seriously injure your financial position by not getting experienced professional help and selling your home privately.
Unbeknownst to our team, a past client was thinking of selling his home so he could downsize and reduce expenses.
The home was dated and had a lot of deferred maintenance. Our client began the process by ordering a dumpster and getting a few contractors to do repairs in preparation to sell the home.
One of the contractors had a friend who was a real estate agent. He told the seller this friend was looking for a home for his wife and himself and asked if the seller would agree to talk with the agent.
They met and the agent asked how much the seller wanted. Our client threw out the price of $300,000 and the agent quickly agreed. Nothing was put in writing.
In the following days, the agent ordered several inspections and quotations. The price gradually got reduced to $220,000 because of apparent deficiencies and the work required. At this point, our client was afraid the deal would fall apart and was ready to accept the $80,000 price reduction to get the house sold.
He was acting out of fear. He was vulnerable and was being pressured.
In the meantime, a relative who is also a client contacted Judi to ask for her guidance. She asked Judi to call the seller to see if she could help.
Judi offered to do a current market evaluation for the seller and arrived at a value of around $300,000. She also recommended aggressive pricing, staging, and marketing strategies to optimize the outcome for her client.
After standard decluttering, cleaning, and minor staging the house was listed on MLS for $279,000.
We also postponed the presentation of offers for several days to maximize market exposure.
The day after the property has listed an agent showed the property and asked to present a preemptive (bully) offer. The seller agreed to review the offer only after 12 booked showings were complete.
There were 7 offers on the property and it was sold for $357,500 firm within 24 hours of listing the property. In this case, the bully offer triggered an early review of offers and the buyer with the bully offer did not win the offer competition.
After the offer presentations and offer acceptance, there were an additional 17 showing requests submitted prior to the status of the listing being changed to “sold”. These requests were canceled.
There were a total of 29 people interested in this home. Not just one.
We took our client from panicking he might lose a deal at $220,000 and a chance to save himself a bit of commission to netting himself $102,000 more within in a few days. Over $100,000 more after he paid the commission he thought he was saving on the original deal.
One… Hundred… Thousand…. Dollars!!!
Money in our client’s pocket rather than in the pocket of the agent who ground him down to accepting $220,000.
Money that changed his life and helped him send his daughter to university and buy her a car.
This real estate agent almost bought this home for $220,000!
He was going to rob the seller of that $100,000!
There is a good chance the agent was going to renovate and flip this property. He did this without informing the consumer of the real market data.
This story would not be as negative if the agent had done a full and honest market evaluation and offered the seller a price that properly reflected that value.
Sure! Save the commission but those savings should be in the Seller’s pocket, not the buyers. Especially not if that Buyer is a Realtor!
It is ironic that the eventual buyer of the property is a renovation contractor who is flipping the property and will make a decent profit even though he paid $137,000 more than the original agent offered the seller
The agent would make money at the front end and the back end when he flipped the home.
He could have put it back on the market as is and made himself the $100,000!
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Top Reasons for NOT Selling Privately
Lack of market knowledge.
Pricing strategies that really work.
Working from fear and scarcity.
No or minimal exposure to the market.
Limited showings = Fewer offers
Working with one buyer and one offer with no benefit of multiple offers.
Susceptible to coercion during negotiation.
Working alone without professional guidance.
Pennywise. Pound foolish.
Save Commission. A false sense of savings.
No help staging and preparing your home to optimize sale price.
Lower sale price
Lower net proceeds (even after paying commission)
Exposure to litigation. Law suits.