Q&A Series – Part 8
Q: What are the risks associated with selling a home privately?
– Stephan G.
A: Hi Stephan,
I’d categorize the risks of selling a home privately into two types: security and monetary.
This is an often overlooked aspect of selling a home privately. When you attempt to sell your own home you are completely responsible for showing it to people that you often cannot and do not know how to vet properly. Strangers are calling you, asking you very personal details about the home, and you are most likely revealing when you are and aren’t home. You are then potentially allowing these people into your home with no record of who they are. Like any other private transaction, you really need to think about the potential security risks of selling a home privately before doing so.
First, selling a home privately is a difficult task and really takes a certain type of person to accomplish the feat. In fact, less than 4% of For Sale By Owners (FSBO) that come to market actually sell. Looking at monetary risks, one of the main issues is that most private sellers do not have access to the data and aren’t experienced or knowledgeable enough about the market, its conditions, and what it takes to attract the right type of buyer. This problem often presents itself in the most crucial way possible: the listing price.
The Listing Price
Pricing is often a huge issue and a critical miss by most sellers. The seller feels that by saving on the commission they’ll come out on top. In my experience, I’ve found that most FSBOs tend to overprice their homes on the assumption that they’ll use the extra room over market value as a bargaining tool when offers come in. There are two issues at play here: 1) the seller is missing a large chunk of buyers by overpricing the home and putting it in a different price tier; and 2) buyers are savvy and are getting advice from trained professionals with access to more information, comparables, knowledge and experience than the seller. This often leads to the home staying on the market for longer than anticipated which attaches a negative stigma to the property (after 14 days on the market showings drastically reduce). Instead of netting that anticipated extra 4%-5%, you may be at risk of falling under market value or not selling the home at all.
Time, Convenience & Liability
Forget the listing price for a moment. Do you have the time to sell your own home? You have to be there for every single showing and you have to be available to answer every single phone call. If you aren’t, buyers aren’t likely to wait around until your shift is over or you’re free for 15 minutes on lunch to speak. 95% of buyers have hired a professional and they’ve already set up appointments on other homes for their buyer to see.
Another often overlooked piece of the puzzle is liability issues when selling a home privately. That small leak in the basement last winter that you didn’t think was a big deal could potentially be one if you don’t disclose it. In fact, there are quite a few pieces of key information you would owe buyers that you might not think are important that could ultimately come back onto you at some point in the process.
In the end, you need to see value when hiring a professional. If you interview a few realtors and you just can’t see the value they provide, then give it a shot yourself and see what happens. Just be ready to handle what’s coming your way.