I am looking for an investment property right now, and I met two “For Sale by Owners” this week (we call them Fizzbos in the trade, from FSBO). Both were very nice couples. Both have properties that have been on the market for over six months. And both properties, not surprisingly, are overpriced.
The two properties show quite well. One is newer; one is older. Both are very clean.
One was built in the 1970s and needs new windows and a new furnace. The finishes are original. The owner told me they’d purchased the home from the landlord (they were tenants) and had not done anything to it since 2004. The windows were installed in 1998 (I checked the date by looking at the aluminum strip inside the sill). According to its tag, so was the furnace. Both will need replacing soon. That’s about a $ 15-20K cost. The electrical panel is original, and it looked to me like some of the wiring, which was messy and very old, should be checked by an electrician.
Along the same street, there have been several recent sales. Three involve similar townhouses, in terms of size, but in each case, they had updated finishes (like granite counters and stainless steel appliances, new light fixtures and so on) and/or finished basements, newer windows etc. But the owner has priced it in the same range as those.
The owner told me they received an offer soon after they listed the property, and another recent one, a few weeks ago. The first offer was for much more than the second but because they had just listed the property, they thought the offer should be higher and turned it down. Big mistake.
When the owner told me what the second offer was for, I was shocked. The second offer was what I would consider fair value for the property, based on the comparables. Therefore, the first offer must have been very strong, and proves the old adage that the first offer is usually the best.
The owner realizes now that they should have accepted the first offer, but still thinks the second offer was too low. I think by the time the owner realizes their mistake, the property will be even more stale-dated and that much harder to sell. (I told the owner what I thought the property was worth; it turns a second agent gave exactly the same number. The owner disagrees.) I’ll be interested to see when the property does sell, how much it goes for, whenever that will be.
The second property is only a few years old and was really quite beautiful.
The problem is that so are all the other executive townhouses in the same complex and they’ve sold for less than this one’s adjusted list price. The recent solds have finished basements (this one doesn’t) and hardwood floors (this one has carpet). When you adjust for those two things alone, the unit is overpriced by about $20K or more. And it has another issue; no inside access to the garage. You have to park the car inside and then walk out and through the front door.
It’s been sitting now, since August, without any offers. There has been no marketing, and only one Open House. The owner has had some personal matters to attend to that took priority and says they are not in a hurry to sell. The owner said (and we hear this a lot): “we don’t want to give it away.”
In both cases, the owners have unreasonable expectations. By trying to save money on real estate commissions, and going it alone, they’ve overpriced their homes and have failed to market them appropriately. And in the case of the first property, two good offers (one that was better than good) were rejected. I don’t even think the owners knew how to counter.
It’s important that people who decide to sell their own homes understand that it’s a path filled with pitfalls for the unwary. Setting aside the legal issues around contracts and disclosure, just pricing a home requires expert advice. If you get that wrong, your property can sit unsold for months. Knowing when an offer should be countered requires objective advice. Marketing takes effort and involves resources you may not have. And negotiating is best left to those whose job it is to provide you with realistic feedback and advice rather than pipe dreams.
It’s our job to make sure that you get the best possible price for your home, while keeping in mind what’s reasonable, practical and feasible in current market conditions. Most people think their homes are worth more than they are. From what I’ve seen, most FSBOs have no-one to tell them otherwise. They find out the hard way, when their home is on the market.
I liked both these couples, and I really hope they sell their homes. But I wish they’d decided to go with the services of a realtor before they embarked on what has turned out to be a disappointing and frustrating experience for both of them. “It’s been a learning experience,” the first owner said. I can only imagine.