Will Mortgage Credit Crunch and Impending Foreclosures Cause Increase in Homes For Sale by Owner?

Much of the recent news regarding the mortgage meltdown and waves of possible foreclosures due to individuals who can’t refinance and can’t sell due to lack of equity raises the question if more people will sell their homes “For Sale by Owner”.

We happen to think that the number of FSBO listings will increase over the next few years due to a few reasons. We think this increase will be fueled by a “need” not a “desire” to sell FSBO.

Here are some of the scenarios where homeowners will attempt to sell their homes for sale by owner.

- Homeowners with little or no equity will be facing foreclosure. They may need to ell FSBO because they don’t have at least 10% equity in their homes to pay the real estate agent commissions and they don’t want to incur the possible tax liability of a real estate short sale.

- Homeowners with adjusting sub-prime loans that don’t qualify for the new FHASecure refinance. After the first adjustment of their ARM mortgages these individuals realize they cannot afford the home and cannot refinance. They will tend to try and sell FSBO again due to a lack of equity.

- Tightening underwriting standards may cause sellers to sell by owner to protect net proceeds from sell. Appraisals will come in short or get cut by some lenders. Some of these sellers may try to sell FSBO after the initial transaction cancels, eliminating the real estate commission they can drop the price but maintain their net proceeds.

These are just some quick thoughts as to common scenarios that will cause home sellers to consider selling their homes for sale by owner. What do you think?

NAR Report shows that 46% of Successfull FSBO's would Sell Home by Owner Again

Many real estate agents would lead consumers to believe that they should attempt to sell a home FSBO and those that do will use a real estate agent the next time.

According to the 2006 NAR Profile of Home Buyers and Sellers, FSBO's where asked if they would sell by owner the next time. Here are the results if they did not know their buyer personally.

- Yes, will go FSBO again: 46%
- Not sure: 44%
- No, will use an agent next time: 10%

Surprised... 46% of for sale by owners, indicated they would do it again!

The other 44% was "not sure" but obiviously the experiance / savings were good enough for most to consider going FSBO again.

That is 90% of FSBO's will or may do it again.

Sure, only 10% indicated that they would use a real estate agent the next time but this does not support the horror stories that the real estate community shares regarding FSBO wishing they had used an agent.

What was interesting is that if the FSBO seller sold it to someone they knew, the stats reflected a total of 64% will or may sell FSBO again, while 35% would use an agent.

I would guess that if they did use an agent it would be at a discount, considering they did find the ready and willing buyer.

As techngology and websites like For Sale by Owner Center makes the FSBO transaction easier, we feel that the FSBO market will continue to grow in the future and that the FSBO / MLS only / Discount models will continue to build on their current 29% market share and probably reach critical mass of 50% within the next 4 years.

Especially since most successful FSBO home sellers are already willing to do it again and reap the rewards of significant real estate commissions savings and equity protection.