When you are looking for a home in the Sequim or Port Angeles area, should you also look at the For-Sale-By-Owner, also known as the FSBO. There are several big hurdles for buyers when it comes to hunting for a FSBO.
The first big challenge for a buyer is finding the FSBO. Buyers are using online MLS sites, and FSBOs do not show up on MLS sites (with some minor exceptions). Even for the buyers who use Zillow or Trulia, those IDX data feeds are also coming from the local MLS, so if a FSBO is not listed by an agent and put in the local MLS, it doesn’t show up as a listing for sale in Zillow or Trulia. It will still show up as all properties do in Zillow, because Zillow is now including every home in America, whether it is listed or not. But that is no help to buyers. Sometimes you can’t tell if a home on Zillow or Trulia is for sale, or if it is just part of the massive database.
The FSBO Search
Buyers are searching in a number of ways from different sites, and one of the ways they often search is by using a search engine. To be found in the search engines, one must have high search engine ranking, and that happens through good organic search engine optimization (SEO). FSBOs lose out here, too. It takes years and a lot of expertise to build high search engine ranking for listings and real estate information, and FSBOs do not have that. Even the FSBO sites where they can pay to post their property do not have good ranking, so buyers simply don’t find those homes when they are seaching. You can be on the Internet and still be invisible, and that’s what is happening with FSBOs. FSBOs suffer from being invisible to buyers.
The second big challenge for a buyer is knowing how to determine fair market value. Buyers are skeptical of FSBOs and their prices, especially if they are from outside the area. They wonder how the FSBO came up with the listing price, and they would like comps. Apart from the fact that a buyer is not going to trust a FSBO’s promise that the price is FMV (fair market value), neither the FSBO nor the buyer have access to the local MLS data on comparable sales. This is no small dilemma. How do you compare sales if you can’t search the database of similar properties that have sold in the past few months? The public county auditor’s files are not programmed to be searched for the purpose of preparing a comparative market analysis (CMA). If a FSBO cannot satisfy a buyer, this could be the end of their negotiations. Imagine how awkward that discussion on price can go without a third party objectively negotiating.
The FSBO Negotiation
The third big challenge for a buyer is negotiating the price and terms. What if one of parties is experienced but the other is not? That could be a one-sided disaster. What if they are both experts in negotiating? That is extremely unlikely, but if they were, they still don’t have access to all the comps in the MLS, so they are going to have trouble figuring out what the true FMV is. They could hire an appraiser, but three appraisers will come up with three different numbers.
The fourth big challenge for a buyer is handling the contracts and the legal requirements. In this era of complicated contracts and legal liabilities, transactions hang by a hair until closing, and that’s assuming you do everything exactly right. Do one thing wrong, phrase something slightly incorrect in a financing addendum or in an inspection response form, and the buyer’s loan underwriter will disqualify the loan. There are a thousand traps for the unwary FSBO and their buyer.
The fifth big challenge for a buyer is working through the due diligence. There are a number of inspections and numerous issues that must be checked out during the pending of the contract and prior to the deadlines in the contracts, which are prior to closing. All of these inspections must be done right, and the buyer must be satisfied (and his lender must be satisfied). If a problem or a potential problem comes up as the result of one of the inspections, there are specific legal requirements and good and bad ways to handle it. Agents learn all these things from a lot of education and from years in the school of hard knocks. A buyer of a FSBO takes great risk trying to learn by himself in the middle of his own transaction.
Last Updated on September 22, 2019 by Chuck Marunde
