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Selling a home without a real estate agent is one of the riskiest decisions anyone could ever make.

Would you drive your cars uninsured?

Would you build a new home without insurance?

Those are no-brainers to almost anyone.  It’s also the law in most cases.

Everyone should consider the sale or purchase of a home in the same way.

There are usually two main reasons sellers try to sell their homes on their own: To save a few percent on commission, and sometimes people just don’t want to trust a realtor.  With that being said, I figured it may be a good idea to ask others professionals in the housing and legal fields have to say on the subject.

“In some ways it’s a riskier than facing felony charges without an attorney,” says Dana Hogle, founder of The Hogle Firm in Mesa, AZ.

“I’ve had friends and acquaintances call me out of desperation because they either tried to sell or buy on their own, and they weren’t losing their homes or losing life savings, but they missed simple details of the contract that left them paying closing costs for both sides, loss of valuable appliances and house attachments, things like that.

“People think cutting out an agent is going to save them money, but in reality it creates a painful transaction, they net less profit, all with too much liability on the line.”

 

Everything to lose…nothing to gain

A FSBO raises more red flags than a room full of real estate agents could even hold up.  Before mentioning the obvious risks that involve any real estate transaction, there’s a glaring question mark that surfaces before any offer is even made.  Dallas Tanner, Chief Investment Officer and founder of Invitation Homes, the nation’s largest Single Family Residential REIT, explains the first question a buyer should think about “Anyone making the investment in a potential home should wonder, ‘why is this seller not using an agent?” says Tanner, a Mesa native who has practiced Real Estate since 2004.

“Usually they’ll answer by saying they want to save 3% commission that would typically go to a listing agent. But anyone who factors in all the risk, liability, and not to mention the lack of exposure by trying to sell without a realtor, they should easily conclude that it simply doesn’t make logical sense.”

Buyers be-weary FSBO’s

Depending on which real estate website or report you trust, FSBO properties sell on average 10-20% less than properties listed with a real estate agent. There are several reasons for this. 1-A FSBO will not get full exposure on the local MLS.  This is where thousands and thousands of other local agents search every day looking for new homes for their clients. 2-Even if a buying agent locates a FSBO, their instinct will be to steer clear of such a home. Like any smart consumer, the buyer’s agent already perceives a FSBO as a big warning sign  Agents may not admit this, but it’s an undeniable truth.  Right off the bat, the FSBO stigma eliminates thousands of buying agents from wanting to show your property.  All of these factors drive the price down.

This means at the end of the day, there was no savings or net gain by ‘avoiding’ the services of a professional realtor.  But time and cost is just one downfall. The process of escrow is an entirely new aspect.

“Once you’re in escrow, the negotiations only intensify during that time,” Tanner added.  “Who is providing the forms?  Do they understand how common addendum become during escrow? What if the appraisal comes in lower than contract?  What if the appraisal is $10-$15,000 higher?  There’s also more vulnerability if one party is working without a realtor, and the other side has one?”

Real Estate Agents = Insurance Policies

The primary reason all drivers and vehicles legally require insurance is mainly to protect all other drivers in the event of accidents.  If you or someone you know has ever been involved in an accident or injured by another at-fault driver, the consequences are devastating.  With no insurance company backing up the other driver, there is little to no chance of financial restitution.  Likewise, similar consequences exist in real estate transaction with no professional guidance or legal protection.  Typically, any Real Estate brokerage carries insurance called ‘E&O” (Errors & Omission).  This is to protect the agent and brokerage from having to come up with high out of pocket costs in the event of any liability is found with an agent.  It’s basically the same way doctors and surgeons protect themselves from malpractice lawsuits.  As a client, you legally and fully protect yourself from any such liability.

 

Still not convinced about hiring an agent?  Feel free to contact me by phone or e-mail, with no obligations at all.  There are always options and different ways to maximize the equity in your home.  Under many conditions, you can still protect yourself and your money by negotiating commission and other terms or costs.  We realize there are many options when it comes to real estate professionals.  Our goal is to help you understand your options in the most honest way possible.

Ben Stapley can be reached at ben@LRAphx.com or 480 295-9125