FSBO – Colorado For Sale By Owners – Headache and Heartache

*Opinion

This Can Help You See If FSBO Is Right For You

For Sale By Owner, with the connection and tools provided by the Internet, is becoming more and more popular. Many homeowners are choosing to sell their homes by themselves, and honestly, I can’t blame anyone for considering this path. I mean, if we can DIY, might as well DIY, right?

But the path of the FSBO can be difficult, and in the end, if it doesn’t NET more profit, including the time and effort it requires that you lose, in my opinion, it isn’t worth it. Please, consider the following.

To Protect the Public

Colorado Real Estate Manual – Chapter 1: Real Estate Broker License Law

I. Reason for Its Enactment

The Colorado Real Estate Broker License Law was passed to protect the people of the State of Colorado.

The featured image of this post, above, also quoted directly above, is a picture of Chapter 1 page 1 of the Colorado Real Estate manual. In one sentence, it says a lot. The reason the State of Colorado, through the Division of Real Estate and the Department of Regulatory Agencies has created the licensing system for agents to help citizens buy and sell real estate is for the protection of the public. The State of Colorado wants us to be able to own property. So does the federal government. They also recognize that this is a purchase that can consume a lifetime of saving, working, and planning. Further, if you buy a property that was not as advertised, or attempt to sell one and get shafted by a flaky buyer or someone who can’t pay, it is believed that this can be a blow that is difficult, if not impossible to recover from. The stakes are just so high.

So, the state and federal government have put systems into place that they believe protects people and allows them to engage in the buying and selling of property. It’s almost as if they don’t recommend For Sale By Owner, because each state has its own department dedicated to helping me do what I do as a Realtor®. They have entrusted me and other state licensed agents to do our work in the interest of protecting the people of the State of Colorado. I take great pride in doing that duty. I have education requirements, a license and I am a known entity to the state of Colorado. They have licensed me as a person who is acting to protect the public as they buy and sell real estate. The state is aware of the size, scope and seriousness of buying and selling real estate, and they have acted to create the licensing process so that you, buyers and sellers of real estate, can do so in a way that protects you and your interests.

First and foremost, my duty is to act in accordance with what I learned in earning my license, and that process was created, very simply, for the protection of the public.

If you FSBO, you and those who may buy from you are still subject to the same laws, rules, and regulations. However, if no one is on the job who is licensed and bound to act in such a way that will protect the people of Colorado, well, they may be less likely to do so.


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The Element of Emotion

One of the most interesting things that I deal with as a Realtor® are peoples’ emotions. When their nest egg is on the line, people behave in all sorts of ways. It is a big deal. So, if you are FSBO’ing, and you have a disagreement with a potential buyer, it can turn sour quite quickly. If it’s a handshake agreement, if there isn’t earnest money down, if you can’t come to terms on a certain part of the deal, it can die more from the emotional distress than dollars or sense.

Having professional, licensed representation during this process helps because Realtors® can analyze and deal with the details from an arm’s length. I care for my clients deeply, and I advocate for them with zeal and gusto. If things don’t go the way they wanted them to, if they are facing situations that are difficult, I take great pride in being able to calmly and clearly lay out the options as I see them, and have them direct me as to what action to take.

Sometimes, I just need to give them a chance to calm down. I help them take a breath, or a night, and sit with the problem. Since they have me, they don’t have to worry about saying something that will totally alienate the people on the other side of the deal. They can say it to me. Then, I can clarify what they really want, and what they really mean. Emotions often cause us to act in ways that are out of character, reactionary, even illogical. Real estate agents act as an important buffer during negotiations.

Often, my job is to ask them, even as steam is coming out of their ears and they are in a bit of a rage, “Is this worth losing the home that you want to live in?” or “Is this worth not selling your home now and being prevented from making this move that you want to make?” And I can do that dispassionately, because my interest is in getting them what they want. If the thing that caused their high emotional distress is that bad, fine. I’ll do what I can do to solve it, or I’ll let them kill the deal. But, I play an important role in helping them think about it, framing it for what it is and explaining the consequences of different potential actions and outcomes, because that’s what a good agent does. We see what our clients don’t see, and know things they may not know.

I communicate with the Realtor® on the other side of the deal. I let them know what our bottom line is, and see if we can work out agreements. Oftentimes, what seems upsetting and terrible during the transaction doesn’t turn out to be so terrible after the deal is done. If things are terrible enough that my clients won’t be happy with the deal, I do what I can to fix it, massage it, or terminate it.

Is it really a dealbreaker?

Because communication is of the utmost importance to me, I try to make sure that I understand all the final eventualities that could occur, and see if my clients expectations fit into any of those. If they do, and a little hiccup comes along that seems to sour the deal a bit, I believe it is best to have a professional to help keep our eyes on the big picture.

Likewise, if the people on the other side of the deal become unsatisfied, their Realtor® is there to work with them, communicate with them, and help explain what is happening and why, and then see if they want to continue.

It’s really too easy to get upset because a negotiation isn’t going well, or a seller won’t fix this, or a buyer won’t pay that, and just throw up the hands, say “Screw it!” and bail.

Realtors® are buffers, negotiators and communicators that help prevent people’s emotions from getting the best of them, as they often do during the high stakes processes of buying and selling real estate.

Colorado Real Estate Contracts, Earnest Money and Good Faith

The time between when an offer is accepted and the deal is closed on a piece of Fort Collins real estate can be a tense time. The seller is waiting to see if the buyer will continue after all their due diligence investigations of the property, their loans, the HOA, and their insurance. The buyer is hoping that the inspection doesn’t turn up anything that will cost them more. They are hoping that the appraisal comes in where it needs to so they can secure financing for the home.

Realtors® and real estate agents and the contracts that we deal with are there to help keep people acting honestly, and in good faith. First, the contracts are binding. Though that sentiment doesn’t help if a buyer were to simply back out and forego their Earnest Money, there is an assurance that they have a deeper understanding of what they are agreeing to when they are represented by an agent.

We explain to them the seriousness of what they are about to do, and it’s written in big CAPITAL letters. In my opinion, this lets everyone at the table know that we take this process seriously, our clients take this process seriously, the state of Colorado takes this process seriously, so if anyone breaches this contract, the consequences could be serious.

Colorado Buyer Agency Contract - Excerpt

Buyer Agency Contracts, and other official forms approved by the Colorado Department of Regulatory Agencies, let people who are signing them know that they are binding and legal.

Earnest Money

Earnest Money is huge benefit of working with a state licensed real estate agent. Part of this is because we have very official processes, procedures and rules concerning how it is handled.

COOL LINK! Check out Paul’s article about Earnest Money in Colorado Real Estate.

Now, if and when you FSBO, if a buyer is willing to hand over $2,000 to $10,000, in cash, or a check that can convert to cash to a seller…well, put it this way; as a buyer, I would be cautious about doing that. What would their incentive be to hand back money that was given with a handshake or a personally written contract? Sure, they might. But if there is a dispute and the solid deal that you both thought you had struck now seems sideways…that could be a nightmare. Yes, we are all entitled to take people to court over things like this. But, there is an old saying that goes like this. “If it goes to court, everyone loses. Except the lawyers.”

A solid, official, trackable process for handling earnest money is a big part of my job. Using real estate agents and state approved contracts means you know what will happen to the Earnest Money in almost every imaginable scenario. If an unimaginable scenario comes up, the contracts that we use require mediation. The money is kept in a trust account, so the buyer doesn’t have to try to get their earnest money back directly from the seller, with little leverage for doing so, should the situation go sideways. My brokerage and I, and all other licensed real estate agents deal with earnest money like our job depends on it, because it does. Just this one element was enough for me to use a Realtor® for my property purchases and sales before I became a Realtor® myself.


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Size and Scope

The sheer size and scope of selling real estate is bigger than just about any purchase we will ever make. How many times in your life will you buy something that costs over $200,000? I, personally, have never spent that much money on anything besides my home. The amount of money is staggering, and that is probably one of the reasons being a real estate agent is a state regulated profession and activity.

Because of the size and scope of selling a home, or buying a home, engaging in it when it isn’t what you do for a living can be precarious. There is a lot on the line. If it is important to you to get it done on the first try, or on at least an early try, because even we Realtors® see deals crumble because of things that are out of everyone’s control, FSBO is a bit of a risk.

Headache

Let’s call it what it is. When we endeavor to do a job that is not our job, it can and often does inevitably turn into a cranium combusting headache. As it should. Doing tasks with which we don’t have experience and skill takes longer the first bunch of times we do them. This takes away time and energy from getting to those other tasks with which we don’t have experience and skill.

Headache. Paperwork can be a headache. Making sure the paperwork is good enough to satisfy buyers, municipalities or other governing bodies, title companies? It can be a headache.

Marketing can be a headache. Establishing new digital account, compiling passwords, understanding how to upload photos, understanding how to take photos, understanding which should be the feature photo, choosing the thumbnail photo, writing the description, identifying building materials, gauging which parts of the property could be problematic and should therefore be disclosed? Headache.

Now any of these things on their own are not monumental tasks. But I’ve just scratched the surface of what it takes to market a home to a successful sale. The property details are pages of content. Does the home need a lead based paint disclosure? Showings, open houses, signage, on and on and headache and headache and headache.

Closing. Recording. Transferring funds. Capturing funds.

Oh, on top of this, you may have to move, which is universally known and accepted as a headache.

All of this headache leads right to our next not so subtle subtitle point. Heartache.

Heartache

Uncertainty equals heartache. Taking on another almost full-time task on top of your job and your busy life can quickly add to a sum total of heartache.

And finally, selling your home for less money is an eventuality that often waits at the conclusion of a For Sale by Owner. Futher, knowing, for the rest of your life, that if you would have just paid a professional to do this very complicated, involved and serious job, then you could have grossed more and therefore netted the same or more; combined with the memories of all the time you lost, all the jobs you had to do two, three, four or more times; the time with family you lost, the events with friends that you missed and the overall opportunity cost lost—heartache.

Summary

Real estate agents in Colorado are licensed to help people buy and sell real estate. If you are reading this and are in my area, you are very lucky because the community of Realtors® here, are in my opinion, mostly a pretty darn good lot. They care about our communities well being and work with integrity. We charge for what we do, but if you choose a good Realtor® (like me), you can rest assured that you will be well represented.

The chances for a standard For Sale By Owner to go sideways are ample. The different aspects and facets of the process are complicated. The stakes are high. The compensation to a real estate brokerage is a significant cost, but in the end, the net gain is what counts.

FSBO’s often fail, and when they succeed, usually do so with numbers that end up with about the same net gain or less that they would have if the seller would have employed a licensed agent to handle the sale. This, in my opinion, is a loss, because of the time and energy lost and the stress that was experienced from handling this job.

I wholeheartedly advise against FSBO, and would love to be the Realtor® that helps you sell your home!

Please let me know if I can help you!

*Opinion


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