The First Lie of Real Estate

The first lie of real estate is always told by the seller.

Once you accept this little truth, you begin to understand the plight of the FSBO. He simply does not live in the real world. From the first lie, which is always an exaggeration of the home's square footage, he wanders into the pricing jungle. Here is the typical safari, led by the hunter who has no guide:

The decision is made tosell the home without agent representation - the seller gets into this mental state by theorizing the best possible scenario for a positive outcome. He reinforces this dream state over and over and ultimately it becomes real to him. He honestly believes that he can sell his 2200 square foot home for $135.00 per square feet in a neighborhood that has never topped $110.00. Along the way, he enhances the dream with FSBO declarations:

· he will save paying a 6% or more commission
· he will save paying at least half a commission, i.e. 3%
· he will/will not discount his price by some $ amount of the commission
. if "will" he is a motivated seller
. if "will not"he is not a motivated seller
· he will not be coerced into any major repairs or improvements
· no agent can market the superior qualities of his home better than he can
· he doesn't want to get involved with legal paperwork (presumably there will be a magical metamorphosis of the deeds to get his name off the records and someone else's name on them).
· there are a few items that an agent would object to that he doesn't want to fix
· somebody down the street sold their home themselves for more money than an agent quoted
· he wants to pick and choose who he lets into his house
· when he does get an interested buyer, he will call an attorney and get a real contract
· Advertising can't cost that much
· If he doesn't find a buyer, he will join a FSBO website
and finally the ultimate FSBO fantasy...
. People will get out of their car in traffic, walk up to his unreadable "For Sale" sign, write down the information, then get back into their car and find his home

So, let's explore the first lie. The seller tells a buyer that the home is 2700 square feet. He believes this to be true. In fact, it is true, if the 400 square feet of the garage and 300 square feet of below grade windowless finished basement space are included. But buyers don't live in the garage or the basement. So basements and garages are not part of the primary pricing square footage that would be quoted by an appraiser. So the question for the FSBO is, "how much heated and cooled above grade square footage does this house have?"

If it is 2100 square feet, in a neighborhood where similar homes sell for approximately $100.00 per square foot for heated/cooled above grade space, then a reasonable asking price for this home is $210,000 plus $5000.00 more to leave some negotiation room. What if there is a nice little office off the kitchen that is 9x9. Then 810 square feet is $8100. So he can raise your price by that amount. But conversely, if he doesn't have this extra room and his neighbor did, then he really can't justify the additional dollars for his home.

If seller gets to the end of this process with a bad assumption at the beginning, then you never get to closing. Get it? This is the final resting place for most FSBO's. The appraiser knows there is no agent, has no pre-appraisal package prepared by a savvy agent who might have built in the additional dollars by designating a detailed list of improvements, and so he/she strikes the $8100. A month or two have gone by, and the seller gets to renegotiate his contract or give it up. Few FSBO's, however, get this far in the process. They bog down with "it was like that when we bought it." and never get to first base. By the time they figure it out, they've been on the market for months, and missed a prime selling opportunity.

What does a full service agent bring to the table?

A reality check regarding price, condition, and current competition. The FSBO seller absolutely does not know how his house fits into the current market parameters. Those parameters change from month to month.
A buffer that keeps the situation under control between buyer and seller. The need for this is rarely appreciated by the seller
Management of a complex and detailed process with dozens of checkpoints and time lines that the seller is not familiar with. - in Georgia, substantial legal language has been added to the 2007 Purchase and Sales Contract
Organization of all documents and words that convey precise meanings and timings
A sense of urgency and compelling stipulations to enforce that urgency
Contract forms that have been tested and updated repeatedly to reflect local market parameters
A well-defined set of marketing platforms that the seller does not have access to nor can he afford
Infrastructure support to fix problems or develop alternate strategies quickly
Resources for alternative financing - many buyers who seek out FSBO's will need non-conventional funds
Knowledge of appraisal valuation guidelines in the language of an appraiser and how to get the end result you need

The 2nd lie of real estate is told by the FSBO seller if and after closing. It is the selling price of the home. What he fails to share is how much he paid in seller concessions, including closing costs, repairs, termite and other warranties, as well as any commissions paid to selling agents. These numbers are hidden and mislead many a neighboring FSBO into overpricing his own home or failing to accept a good offer.



Copyright © 2007, Gena Maria Beach. Drake Realty All rights reserved.