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7 reasons most FSBOs crash and burn

We’ve all heard the mythical reasons FSBOs think they can sell their house without a real estate agent. But few can, and many fail because trying to sell a home without a real estate agent can be a lot tougher than they realize.
A 2017 Zillow study showed that about 36 percent of FSBOs try to sell their homes sans agent, but many hit roadblocks and eventually hire an agent. Only about 11 percent of sellers successfully complete the deal.
Zillow research shows that sellers think they:

Can save money (57 percent)
Will save time (36 percent)
Know their home better than any agent could (27 percent)
For-sale-by-owners have good intentions, but their knowledge is weak. They simply don’t know what they don’t know. Here are seven reasons FSBOs tend to be unsuccessful — and eventually hire a real estate agent.

1. FSBOs struggle to price their home correctly
FSBOs tend to rely on a home evaluation based on the sale price of a neighbor’s home or the amount of money they put into renovations.
As professionals who are well-versed in the market, agents know that just because you spend $10,000 updating something does not mean you will get $10,000 more for the home when it sells.
Do-it-yourself home sellers also fail to recognize that an updated home is worth more than a home with no updates.
I have lost count of how many times I’ve encountered homeowners with 10-year-old carpet and Formica countertops who think their home is worth the same as the neighbor who has hardwood and granite.
Pricing a home right is an art form that many real estate agents spend years mastering, and even then it’s something that many will hone their entire career. The odds of a FSBO hitting it right on the money the first time are slim, which means there are likely price reductions in his or her future.
2. Emotional attachment is a barrier
Selling a home is an emotional transaction for the owner. Most FSBOs have a hard time separating their personal feelings from the business transaction.
Think about it. How do your clients react when you bring them a low offer. They’re insulted, right? Now imagine FSBOs who just received an offer way under asking price. Or someone tells them their house smells musty or like pets. As agents, we can be a buffer and use the situation constructively. A FSBO cannot because they are in the line of fire.
3. Marketing is a huge undertaking
FSBOs are usually given a packet with guidelines for marketing. However, if you don’t have experience marketing, efforts often end in an epic fail.
Agents hone their marketing efforts as time evolves, and they tailor make marketing campaigns to appeal to the right buyer for a home. It’s not a skill learned overnight. Yard signs, friends, family and social media will only go so far. Also, if a FSBO is not offering a fee for a buyer’s agent, marketing attempts are even more moot.
In the end, most DIY sellers hit obstacles along the way that are out of their comfort zone, or they eventually realize they don’t know what they don’t know (as with any area of expertise). There’s a lot more to selling a home than meets the eye, and most listing agents earn their keep by dodging bullets and avoiding common obstacles that a novice home seller would not be able to avoid.
4. They have to show their own home. Most of my buyer clients feel restricted when a homeowner is lurking during a showing.
For-sale-by-owners have no other way to show the home other than to be present unless they allow buyer’s agents to show their home through a non-MLS lockbox. This makes potential buyers uneasy. They often feel like they cannot ask real questions for fear of insulting the owner.
5. They set themselves up for legal liability
I have had FSBOs ask me how to write clauses in a contract. I have had others ask me how to fill out a property disclosure or if they needed one at all.
I always refer them to an attorney. I explain that if they become my client, I will handle the items on their behalf. But for me to answer their questions without a formal agreement, I would be practicing law without a license.
As Chris Rediger points out in his Inman article about why FSBOs are a bad idea: Everyone makes mistakes. A seller (or buyer) who doesn’t have the representation of a licensed agent pays for those mistakes. Attorneys can close a real estate transaction, but they don’t carry errors and omissions (E&O) insurance. So if homeowner Sandy lists “hardwood floors” as a feature and the buyer discovers it’s just a wood veneer, chances are Sandy is going to pay for that mistake. An agent would have either caught the mistake or covered it with E&O insurance. Let’s face it: this is a litigious society, so what homeowner wants to be a target for lawsuits?
6. Scams are real
As Rediger also points out, scams are a real concern for FSBOs, or at least, they should be. With headlines about Zillow scams and even Realtors falling prey to wire fraud schemes, how can an untrained homeowner be sure?
Common scams include fraudulent appraisal and loan documentation papers, overseas buyer deposits, fake third-party purchases and phishing for personal information. There’s little recourse for FSBOs aside from hiring an attorney.
7. FSBOs sell for less
As a result of all of these issues FSBOs are unequipped to face, their homes tend to sell for less.
According to the 2017 National Association of Realtors Profile of Home Buyers and Sellers, FSBOs accounted for 8 percent of 2016 home sales, and the typical home sold for $190,000 compared to the $249,000 and agent-assisted home sale drew.And as for FSBOs thinking it’s all worth it in the end because they saved that 6 percent commission, research says otherwise.
A 2017 analysis released by automated valuation model (AVM) provider Collateral Analytics found that homeowners will net about the same proceeds whether they sell on their own or through a real estate agent.
The study attributed this to the fact that agents often fetch higher sales prices for homes than comparable FSBO listings, which are enough to offset the commission fee agents charge for their services. So in the end, homeowners who sell with an agent net about the same proceeds, if not more, and have far fewer headaches than those who try to do it themselves.

by: Missy Yost, real estate agent in SC

How to Save for a House and a Wedding at the Same Time

If you and your partner are planning a wedding and purchasing a home together, there are large expenses to take into consideration as you save up for both milestones. Couples are spending an average of $33,391 on their wedding, and first-time homebuyers are spending $18,000 on average for a home down payment ($10,512 with FHA loans).

With the average engagement period of 14 months, young couples may feel pressured to save up for both big-ticket events in a short period of time. Here are a few financial planning tips so you and your partner can strategically save for the wedding and home you both have always dreamed of:

1. Choose a Priority
With two large costs looming on the horizon, you and your partner need to sit down and decide if one takes priority over the other. If it’s the house, then plan for a smaller wedding or a nuptial celebration later on down the road.

“I’ve worked with a lot of couples who have saved for both, and it’s because one partner wants the wedding and the other partner wants the house,” says Kristin Carleton, a financial advisor with Towne Investment Group. “When you have one partner who really plans for the house and the other who is planning for the wedding, you end up trying to do both at the same time.

“You generally have to make a choice,” Carleton adds. “It’s very difficult to save for a big wedding and a large down payment at the same time.”

2. Set a Budget
First and foremost, you and your partner need to sit down and set a realistic budget for both the wedding and the house, so you know the exact amount you need to save.

“Part of that process should be talking to a mortgage broker or banker to find out what program you can fit into and how much of a down payment you want to put down on a house,” says Carleton.

Inquire with your mortgage broker on what terms you and your partner qualify for in a mortgage loan—for example, whether you need to put down 20 percent, or if you can put down 5 percent because you qualify for a first-time homebuyer program.

If family members are helping out with the wedding costs or down payment, be clear with them and communicate the amount of money that you will need.

3. Factor in Personal Finances
Once you have set your wedding and house budgets, organize your personal financial budget. Figure out how much you and your partner should spend and save each month, along with where you can make sacrifices.

Make sure that you are able to pay for your necessities (such as rent, utility bills and groceries), and consider what you can live without. This may mean no more happy hours with friends, Friday night dates or romantic weekend getaways until after the wedding and the move.

4. Open Savings Accounts
To stay organized, open two different savings accounts: one for the wedding and the other for your down payment.

“Otherwise, you are hiring the florist for the wedding and you go way over budget because you see an account with $20,000,” says Carleton. “I suggest that couples set up a direct deposit program straight from their paychecks before they have a chance to spend it.”

Separate accounts will ensure that you and your partner are saving money consistently from month to month. Unlike a down payment, which is a one-time expense, a wedding requires lots of smaller expenses that add up quickly—everything from the dress to the catering fees to the wedding rings. Giving your wedding its own savings account allows you to keep an eye on how much you’ve spent so far.

5. Adjust Your Timeline
Your budget is going to determine your timeline for your wedding date and house purchase. Be realistic and break your goal down month by month to figure out a workable timeline. Don’t set a high number and expect to get to it without a reasonable plan. For example, if you need to save $60,000 and you can put away $2,000 a month, it will take two-and-a-half years to hit your goal. Carleton also advises factoring in several additional months of saving, just in case hidden expenses pop up along the way.

6. Hold Yourself Accountable
After planning out your budget and timeline, you both need to keep each other on track.

“This is a really good exercise for couples to start communicating frequently,” says Carleton. In other words, it’s perfect practice for marriage.

“It’s a good way to set goals and see how you do working towards a big goal,” Carleton adds.

Additionally, budgeting apps like Mint and computer programs like Quicken are easy-to-use tools that can keep you on track toward your financial goal.

“The last thing I would say in terms of keeping people accountable is to make sure that you are on the same page,” says Carleton. “I think it’s important that each person gets spending money built into the budget. Spend it with no questions asked, and make sure your budget is realistic.”

By Marissa Hermanson,  a wedding and lifestyle writer

5 Tips to Help You Find a Starter Home

First-time homebuyers might well wonder: Where are all the starter houses? They’re right to ask, because starter homes are becoming increasingly scarce in many housing markets. Housing inventory is low and home prices are soaring.

What’s a first-time buyer to do?       Here are five tips for finding a starter home:

Be realistic about today’s market. Sellers clearly have an advantage in the current market. Inventory is low, which keeps pushing home prices to record levels, according to the National Association of REALTORS® (NAR). Buyer competition is fierce, as homes in the lower price ranges fly off the market.

Unfortunately, that leaves many first-time buyers––especially those with tight budgets––on the sidelines. If you’re searching for your first home, be realistic about what you can afford and what amenities come with that budget. (Hint: You may have to forgo top-of-the-line appliances and shiny quartz countertops.)

A starter home isn’t necessarily your forever home. Be prepared to make some compromises to get your foot in the homeownership door.

Adjust your wish list. Buyers shopping for their first home need to be open-minded about the location, size and condition of the home they want to buy, says Tim Deihl, associate broker with Gibson Sotheby’s International Realty in Boston.

For many buyers, a classic starter home, which traditionally doesn’t have many amenities, is more achievable.

“If your first home is the place you’re going to have your family, maybe build an addition and stay there forever; that’s one set of criteria. If your starter home will be a financial launch pad into a larger, better home, that’s a different approach,” Deihl says.

Another strategy: Look for an older home in a well-established neighborhood. Resales typically cost less than brand-new homes, says Bradley Hunter, chief economist for, a home improvement matching service based in Golden, Colo.

Older homes typically need more maintenance and repairs, which offset some of the savings; however, Hunter says, buyers who choose a used home might be able to do repairs and renovations over time, pacing themselves to make the cost manageable.

Hire the right real estate agent.  (HarperTateHomes!)  When you’re up against stiff competition, working with an experienced real estate agent who knows the local market is key.

Look for an agent who specializes in the neighborhoods you’re interested in. Savvy agents should be able to answer your questions about neighborhood amenities, local schools and nearby home values.

A good agent shines when it comes to negotiating the deal and writing a strong offer letter backed with solid data. Your agent can suggest certain strategies to win in a competitive market, such as limiting contingencies or writing a personal letter.

Ask friends and relatives to recommend agents they have used and were happy with. Also, interview two or three different agents. Find out how they prefer to communicate with clients and how often you’ll get updates. Finally, research the agents you’re considering online to see what past clients have said about their work.

Rethink location. If you’re thinking about starting a family in the future, don’t focus too much on your home’s location, size and school district just yet, Deihl says. Resetting those parameters can make it easier to buy a first home.

“Buyers may be in a position where schools won’t impact them for six or seven years,” Deihl says. “That’s a good opportunity to buy in the city, make some money and roll that into a community where they want to be longer-term with the kids.”

Buyers who sacrifice location for affordability can find themselves in a neighborhood far from major job centers with a long daily commute and expensive transportation costs. Sometimes that trade-off makes sense, but not always.

“You have to look at how much you make and how much you can afford to spend for gas,” Coneway says. “You might actually be better off buying a house that’s closer to town so you have more cash flow for property taxes, insurance and living expenses.”

Make a strong offer. When a well-priced starter house comes on the market, the quest to buy it can be “super competitive,” Deihl says.

One way to strengthen an offer is to present a loan preapproval that includes everything but a title search, appraisal and hazard insurance, says Jay Dacey, a mortgage broker at Metropolitan Financial Mortgage Co. in Minneapolis.

A strategic phone call might help, too.   “We call the listing agent and say, ‘Mr. and Mrs. Jones submitted an offer on your property. Not only are they preapproved, but they’ve gone through the underwriting approval process with our bank,’” Dacey says. “That makes the offer stronger.”

Other ways to entice sellers: Offer above asking price (if you can afford to), keep repair requests to a minimum, make a larger down payment or give them more time to move after closing.

By Deborah Kearns, RISMedia’s Housecall