Top 5 FSBO objections and how to respond
MAIN IMAGE: Craig Hutchison, CEO of Engel & Völkers South Africa; Herschel Jawitz, CEO of Jawitz Properties.
‘I want to save on commission’ is one of the most common objections estate agents hear from owners that opt to sell their own homes. How can you overcome this? Property leaders share their advice on how to deal with this and four other common objections.
Diane Petersen* has lived in her house in Goodwood for more than 30 years. At 84 years she is still blessed with good health, but she finds the house too big as she lives alone and so she has decided that she wants to scale down. After being on a waiting list for two years, she has finally been offered a flat in her chosen retirement village but to be able to afford the deposit she needs to sell her home within three months. Diane is firmly set against using an estate agent as she wants to save the buyer the cost of paying a commission fee, but her house has been on the market for almost two months now and no-one has knocked on her door.
There are many Diane’s today. Times are tough and with sellers as well as buyers trying to save money, it could seem a logical option to try to sell your property by yourself and save on the commission on an estate agent. The truth is that it is important to know what your options are when it comes to selling as an unprofessional service could end up costing the seller a significant amount of money says Craig Hutchison, CEO of Engel & Völkers Southern Africa.
Here are five reasons why owners might want to sell privately with advice on how you could respond.
1) I don’t want to pay commission
People often think they can make more money if they don’t have to pay commission. “In theory, yes, but who is to say that the price a private seller achieves for a property is as high as an estate agent would achieve,” comments Herschel Jawitz, CEO of Jawitz Properties. He explains that a good estate agent not only has a larger and better pool of buyers that they can bring to the seller’s property but they also understand relative value between different properties as opposed to a private seller who is marketing their home in ‘isolation’ to the market. In addition, a good agent will be a good negotiator independent of a private seller’s emotion.
2) I know my house best
Selling emotion. Speaking of emotion, selling a home is an emotional experience. Sellers don’t realise it but they are selling emotion or in business language ‘goodwill’ says Jawitz. Buyers are buying bricks and mortar and are looking for value. “Emotion and value are generally not a good combination. Our experience is that when emotion gets in the way of a negotiation, the sale is almost always lost. A good estate agent will not take a low offer personally like a seller would,” he adds.
To renovate or not. It is also good to get an outside opinion when deciding what to renovate or fix and what to leave as is, continues Hutchison. “Agents should know what is critical when inspecting, they know what buyers look at and they are able to validate why some things have been fixed and why the rest hasn’t.”
Disclosure is another important issue. It is imperative for sellers to disclose all known defects of their home to their agents before placing their properties on the market. The agents are then obliged to disclose these defects to their potential purchasers. Failing in this, the seller could run the risk of a lawsuit or alternatively the sale could fall through.
There is a lot of administrative work involved – disclosure forms, inspection reports, mortgage documents, cancellation instructions, insurance policies, deeds and settlement statements. Having an expert to deal with this, will help the seller to work through these processes quickly and more efficiently. Agents do not only help and ease this process but can also provide the buyer with valuable information of the area such as schools, zoning and plenty more, explains Hutchison.
Jawitz reminds sellers that they need to make very sure they disclose all issues in a house such as damp and structural issues. A good estate agent will know what questions to ask the seller and ensure that the seller and agent both comply with the Consumer Protection Act.
To find out more about what estate agents should know about the Consumer Protection Act, read our recent series of four articles by legal expert John Gilchrist.
3) I can find out the market price
HomeTimes states that pricing a home according to the listing price of other homes on property search engines for homes in a suburb or street is a bad idea as it might never sell. This is because no two homes are exactly the same, every home is unique says Hutchison.
He shares the following example of a price setting situation.
A homeowner notices a For Sale sign for a house two streets down. He phones and finds out that they want R2 million. Three months later, he sees the SOLD sign and decides that at that value, he can also look at moving or upscaling. What he doesn’t know is that before the For Sale sign went up, the homeowners had two offers which fell through due to buyers not being able to obtain a bond, and when the contract was eventually signed, they received an offer for R1,6m which they accepted. The property also had a gourmet kitchen which his doesn’t and the loveliest sunroom as it faces just in the right direction.
“No report that one can buy will ever be able to give this information or insight. Agents will get a comparative market analysis done, purchase a property and suburb report and more importantly, after considering all factors, including where the suburb is heading, think like a buyer, seller and bank valuator, all at the same time. Ensuring the seller gets the best price, the buyer gets a solid investment for their future and both are guaranteed on a positive outcome as the banks are sure to find the value,” explains Hutchison.
Jawitz agrees that sales and transfer data does give a private seller an indicative valuation of the property but says these sources do not consider factors like the condition of the property or the position of the property. “Getting the price wrong from the start will potentially impact negatively on buyer activity at the time of initial listing when a buyer’s interest should be at its highest,” he adds.
Risks of overpricing. Hutchison says at any given time there are buyers looking for newly released properties, hence it is vital that property be priced correctly from the start. Statistics show that 81% of people will value their home more than what it is worth.
It is a human trait to attach emotion to things, but this emotion could end up taking the home’s value down even lower than what it should be and here is why:
- Buyers discard the idea of making an offer.
- Overpriced properties stay on the market for far too long, changing a want to sell to a must sell – causing a reduction in price and a panicked sale.
- Buyers are always looking and if a home was listed at price A, and after 3 months they still see the same property now listed at much lower, they might be inclined to think that if they wait the price will go even lower, or may attempt to put in a low offer in the hope that the sellers are desperate.
- Where a normal property would sell after 3 months on the market at 98% of the market value, overpriced homes tend to sell after 6 months and at 75% of the market value.
4) Finding a buyer on my own
Ask a homeowner how long did an agent take to sell your last home? and many will say ‘1 day or 1 week or even 1 month’ and often add “Easiest money they ever made”. But this is never the case says Hutchison. People don’t realise that there is a lot that happens behind the scenes even if a property sold after a week.
Three months is the average time for a property to be on the market, thereafter it starts to appear as stale stock. If a property stays on the market for too long and buyers monitor it, they might think there is something wrong.
Estate agents spend years building up an extensive database of all potential clients, so that by the time a property is on offer, they already know who is currently looking and are able to match buyers and sellers up quickly.
“Agents devote large amounts of their time to finding future clients and building a reputation. In fact, a large share of real estate sales is successful as the result of the contacts that have been built up over many years in the extensive database, all resulting from years spent on activities prior to a home being listed” Hutchison added.
5) Ask half the commission
Some sellers expect agents to ask a lower commission rate. What they don’t realise is the amount of work that an agent puts in when listing a home. Agent fees are made up out of time, including driving to appointments, time spent on the phone, meeting prospective buyers, promoting and showing the property and canvassing and distributing marketing material. “Consider all the ‘to-do’ items which comes with selling a property, and then sit and do the calculations to determine which service is best for you,” suggests Hutchison.
Most people don’t realise the amount of work estate agents put into selling a home. Source: freepik.com
A simplified, quick overview of the process of listing and selling a home is as follows:
- Research the home’s value & determine the price.
- Conduct an official ‘listing’ process.
- Think like a buyer – write the property’s description, take the photos as to make it most appealing, get all the figures together, including the property assessment disclosure.
- Start to plan the adverts & marketing avenues.
- Keep the activities going to ensure all opportunities are utilised that are available.
- Allow time for calls and answering the questions from prospective buyers.
- If there’s a viewing interest, co-ordinate diaries in order to ensure a buyer can come to view. Note that if no screening process is done, you might end up even entertaining the local neighbours who are just curious to see the property.
- Once viewings have been conducted, it is time prepare the contract. Ensure that you have a legal binding agreement, ensuring that there are no loopholes for either parties as one incorrectly phrased clause could cost you hundreds of thousands.
- Even though a buyer might have indicated they wish to put in an offer, there are still negotiations which need to take place. These come in various forms, it can be in terms of value, extras, occupation, furniture or even conditions set.
- Once everyone is in agreement and the contract is signed, the buyer needs to obtain a bond with various institutions. If this is not done right, then it could cost the entire sale.
- All securities passed, legal council needs to be obtained to handle the transfer and transaction, documents need to be signed and deposits paid.
- If there are issues, it is back to the negotiation table and if not, it is time to start co-ordinating the occupation.
- After occupation, one needs to also allow for possible problems such as incorrect disclosure of property condition, which if it was not done correctly, will need to be resolved between all parties.
In addition, there are many negotiating factors for the agents to handle, aspects such as the listing price, financing, terms, date of occupation and the inclusion or exclusion of repairs, furnishing or equipment. Professionally trained agents are expert negotiators and will always attempt to negotiate the best deal. Negotiating without a professional agent could be costly and result in lost opportunities in a transaction.
Bond application. In today’s market where qualifying for a bond is not possible for everyone, it is very important that the prospective buyer is pre-qualified. This ensures that each person who enters the home is a qualified buyer and that time isn’t wasted on clients who will not be able to qualify for a bond to purchase the home. A good agent will assist and educate the buyer on applying for a bond application so that this can be done as soon as possible.
Calculate the cost
So, what it boils down to is this:
DIY: (Total number of hours spent on all the above) x (seller’s hourly salary rate) + advertising fees
Agent: Based on the industry standard, 4.5%-7.5% of property sales price
Package option: Flat rate depending on services obtained + ((time spent conducting own viewings & negotiations) x (seller’s own hourly salary rate))
Years ago, selling property was considered a hobby or part-time job and anyone was able to register and start selling. However, that changed in 2008 when it became mandatory for anyone who sells property to obtain a real estate qualification, which takes between 2-3 years to complete. Another requirement is that all estate agents must be in possession of a valid Fidelity Fund Certificate (FFC) issued by the EAAB (Estates Agency Affairs Board).
“What this means is that qualified and registered estate agents have years of experience, knowledge and support behind them and without a doubt, know their areas and how to do their job very well. They have already identified any potential problems and solutions with the property in advance and understand the seller’s mind-set, they know the ins and outs and have the expertise, and negotiating skills needed to provide reassurance to the buyers, that they are making the right decision,” ends Hutchison.
(* Fictional case study.)