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KNOW YOUR DEALS
FSBO – For Sale By Owner
R. BALAJI
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This column will explain several jargons and real estate nuances that need to be understood in property transactions.
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— Photo: P.V. Sivakumar
New deal: Avoiding middlemen can save on property costs.
FSBO or ‘For Sale by Owner’ most often refers to real estate for sale. FSBO is a real estate offering handled directly by the seller, which does not involve a real estate agent, but allows homeowners to take control of the sale process. The most important reason to choose FSBO is to save real estate agent fee and to bring in some kind of a control in the process. Direct sale isn’t a rarity although it is not very common due to lack of support and knowledg
e about the entire process. This is a common and popular concept in the U.S., slowly catching on in other parts of the world. Currently, only 20 per cent of transactions in our country are FSBO, but the scope is vast.
In India, although the real estate agent’s role is still prominent in property dealings, people do want to directly interact with clients. Most of the FSBO transactions pertain to residential property.
It allows direct contact with the buyer and saves the agent commissions. The homeowner opts for different ways to advertise his property — signboards, web listings, newspaper classified ads, flyers, word of mouth, and open houses — but the money spent on working with realtors is eliminated. FSBO sellers can now reach their global clientele through the Internet.
The best option
* Owner knows his house better than anyone.
* Owner can highlight the advantages and discuss its faults and surroundings.
* Owner also knows his financial expectations.
How does it help the seller?
Money paid as commission is saved; seller decides about the advertising; seller determines the price after selecting the buyer; property negotiations are by mutual understanding of seller-buyer, hence saves time; stronger negotiation position; lessens dependency upon agents.
What seller should know
FSBO seller has to pass through the three stages:
* Preparing house for sale; marketing and showing your property; negotiating and closing. To perform these activities, sellers need to understand at least the basics of the real estate market laws and tendencies. Fair knowledge about current market rates and trends is also necessary to quote competitive property price.
How does it help the buyer?
* Direct interaction with seller eliminates cost on mediator, makes discussing and negotiating an easier flow; no dependency on agents and brings transparency.
* FSBO buyer should know that FSBO seller is not a professional; hence he should also be well informed about the processes. Not going through a professional means he should know some basic real estate nuances…current market rates, status of property, its worth and resale value.
Disadvantages
* In the absence of a middleman, the seller is supposed to do every bit of the transaction on his own. A busy professional may not find it easy.
* In developed countries, real estate attorneys and lawyer communities are dedicated for transaction-related processes and real estate agents take care of the interest of their clients, be it seller or buyer.
* And the seller, being busy, may find it difficult to do everything on his own. Even then, if the seller seeks professional assistance by real estate attorney, he can successfully close the deal.
(The author is the CEO, Propmart, a real estate solutions provider)
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