We’ve talked a lot about the home buying process here on The Phoenix Real Estate Blog over the years, but most of our home buying tips have assumed you would use them to buy a house for sale by a real estate brokerage with the assistance of a REALTOR®. Maybe it’s because we’re biased…
Nevertheless, I realize there are houses out there that are for sale by their owners, and this week, I heard about a For Sale By Owner (FSBO) transaction I have to share with you.
Here it is…
The house involved in this transaction is located in Phoenix, AZ – in the Arcadia district along the Camelback Corridor – and it sold earlier this month for $253,000 in cash. With only around 200 homes for sale and approximately 50 – 80 homes selling each month in the Arcadia district right now, I’m sure these buyers had a tough time finding something they liked in their price range there. So, in my always curious way, I set out to determine how well priced the home was at $253,000.
After all, the owners sold it themselves without having to pay a commission to any REALTORS®, so the buyers had to have gotten a GREAT DEAL, right? I mean, I’m sure the sellers relayed a portion of those savings on to the buyers, right??
In order to determine a fair market value for the home, I did what I would do for any client of ours who wants to know what the sales prices around a particular house have been lately. I searched the Multiple Listing System (MLS) for any single level single family home, built within 10 years of the house in question, that has within 20% of the square footage the house in question has, sits on a similarly sized lot, is located within the surrounding two mile radius, and sold within the last three months. I added a few other criteria to weed out the oddballs, but rather than bore you with every last step, I’ll just tell you I used similar methods a home appraiser would use to identify four to six of the closest comparable sales. I can do this with fairly resolute accuracy, because I make it a point to study every one of the home appraisals that come across my desk.
After all of this, do you know what I found?
I found that, over the last three months in the surrounding two mile radius, the sales price of the For Sale by Owner house in question tied for the highest sales price, was 25% higher than the average sales price, and three of the four currently active listings are priced below $253,000.
In fairness to the transaction, I obviously do not know what the inside of the home looked like (because it was never listed on the MLS by another brokerage), or what the terms of the sale were. Maybe the walls inside were painted with gold leaf or the garage washes your car while you sleep. Maybe the sale of the home came with a rare but valuable set of baseballs signed by the only three Baltimore Orioles teams to have won the World Series. Maybe…
Home Buying Tips I Do Know
1. Your buyer representation should not cost you anything. If you are thinking about looking at a house for sale by the owner, let your buyer’s agent call the owner first to see if he/she would consider working with a REALTOR® on the buyer-side of the transaction. This way, the seller can still save half of the commission he/she was trying to keep from paying, and you get free advice from a real estate professional who has access to a great deal of information and statistics a FSBO seller probably cannot and will not provide to you.
2. I’m sorry to say this, but it is from many years of seeing homes for sale by their owners. Many FSBO homes are priced the way they are, because the owners cannot afford to sell the home for its current market value. By selling their homes FSBO, many sellers are hoping to avoid many of the costly contingencies involved in a traditional Arizona Residential Resale Real Estate Purchase Contract (e.g., the home inspection contingency, the appraisal contingency, the repair of seller warranted items, etc.).
3. Before you buy any home, you should see and be given time to review a list of four to six comparable sales that was prepared by someone other than the seller or the seller’s representative, preferably by your REALTOR® or home appraiser.
If you have any questions about buying a home, houses For Sale By Owner in particular, or the Arcadia district, please post a comment below, send us a message on our Contact Us page, or give us a call!
Image Credit: stevendamron on Flickr. CC Licensed.