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Everything You Need To Know About The "For Sale By Owner Concept" Works

Written by Posted On Thursday, 21 July 2016 08:18


If you’re planning to sell your property, chances are you may have heard of FSBO or the “For Sale By Owner” concept. You’ve probably heard that if you go FSBO, you’ll realize a higher net return on the sale of your property. Most likely, you’ve also heard that you’ll save up a significant amount of money on out-of-pocket expenses. You will also be assured that FSBO is doable. Guess what? Everything you’ve heard about the For Sale By Owner concept works!


Improve the Net Returns on the Sale of Your Property


In a For Sale By Owner approach, you basically remove the middle man from the real estate transaction. The middle man of course, is the real estate agent.


For most property owners, hiring a real estate agent to sell their home or unit is the natural thing to do. After all, real estate agents are professionals. Buying and selling property is what they do for a living.


They know the real estate sales process like the back of their hand. Negotiation for the real estate agent comes as natural as breathing because they’ve been on both sides of the transaction. Some have even been in the middle as buyers or sellers of their own property.


As you know when you hire a professional to do a job, the service comes with a fee. In the case of a real estate agent, this fee is in the form of a commission.


The amount of the real estate agent’s commission is calculated as a percentage of the final price of your property.  When qualifying your real estate agent, he or she can only give you an estimate of the commission because the amount will change depending on the sale price of your property.


One thing to keep in mind is that since 2014 Australia has deregulated real estate in all its states. This means, there is no ceiling to the amount of commission a real estate agent can charge against the sale of your property. There is an inverse relationship between demand and the commission rate.


Generally the higher the demand, the lower the commission rate because the real estate agent views your property as being situated in an area where a quick sale is highly probable. If demand is low, agents charge a higher commission rate because any incremental increase in property value will not significantly improve their earnings.


If your property is located in Sydney, expect the commission rate to be lower. But if your property is located in Tasmania, the commission rate would be higher.


On average however, real estate agent commissions in Australia range from 2% to 3% of the final sale price of the property.


In addition to commissions, there are out-of-pocket expenses that you will incur. These include:


  • Marketing and Advertising

  • Documentation

  • Auction expenses

  • Open House expenses


These are traditionally the domain of the agent. Unmitigated, you could end up spending hundreds or thousands of dollars for every month your house remains on the market.


By going through the For Sale By Owner concept, not only do you save up on commission costs but you are in complete control of all related expenses. Collectively, you can greatly improve the net return on the sale of your property.


Increase the Probability of Your Property Being Sold


Real estate agents are professionals; many will work to get your property sold at the price you want when you want.


But they will never be exclusive to your property. Even if you have an agent sign an “Exclusivity Agreement”, it only means you have assigned the sale of the property to them. The real estate agent as a licensed professional will look for and handle the properties of other clients.


Thus, their time is not focused 100% on the sale of your property.


In an FSBO approach, you can dedicate your time solely on the sale of your property. There is no rule in Australia that states the property owner has to hire an agent to sell his or her property.


A significant portion of your time will be spent on marketing and promotion. If you have no experience in marketing and promotion, here are a few valuable tips for you to consider:


  1. Read up on the real estate market; trends, developments and pricing in your area. Come up with the final price for your property.


  1. Hire the following professionals:


  • Photographer; to take high resolution images

  • Home Stylist; to fix up your home for the photographs

  • Graphics Designer; to design your marketing materials


  1. Set up online accounts at existing FSBO websites. There are FSBO websites that offer free services but you will be tasked to update and upload images and content.


  1. Post in social media. Find out if your area has a community website in Facebook or another high-traffic social media network. If so, ask to join in and have your ad posted. Make sure to link the page to your FSBO account.


  1. Post in online real estate listing services. The cost of these services range from $300 to $4,000 depending on the location of your property.


  1. Advertise in publications with high circulation. A local newspaper ad will set you back $35. However, advertising in a national publication may cost you up to $1,200.


Without the agent’s commission, you can also be more flexible with pricing. You have a margin of 2% to 3% to navigate when negotiating with prospective buyers.


Protect Your Interest


There is no reason why you cannot successfully sell your property by yourself. The real estate agent’s advantage is his or her listing but the Internet and social media have rendered these inconsequential.


Simply by listing your property at an FSBO website and an online listing service, your property can be viewed literally by thousands of prospective buyers every day!


And do not forget traditional marketing strategies. Studies have shown that while online marketing strategies are more efficient, combining it with traditional marketing increases the probability of a sale by 15%.


Most of all, the For Sale By Owner concept ensures that your interest is protected. You work only for the sale of your property.  

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