For most of us, our home represents the largest single investment in our portfolio. When the time arrives to sell a home due to relocation, expanded family, downsizing, etc., a wise decision must be made to maximize profit margin, minimize time on market, and minimize inconvenience to one's lifestyle.

For some, the question is whether to utlize the services of a Realtor or a For-Sale-By-Owner. For most, the decision is to utilize a Realtor. For the homeseller considering the For-Sale-By-Owner (FSBO) route, I would like to share several real estate industry facts as well as personal experience as a Realtor.

Facts -
The National Association of Realtors (NAR) 2005 survey reveals that FSBO sales are underpriced in the market by an average of 16%. In Texas, the Texas Association of Realtors (TAR) 2005 survey revealed that FSBO home sales in the state of Texas were underpriced by an average of 20%. This is calculated by comparing the average square foot selling price of Realtor listings versus FSBO listings.

The two factors below might be contributors to the underpricing of homes by FSBO's.

1. Lack of accurate up-to-date information on recent comparable sales in the market. While a Realtor has access to actual sales data as a member of the local MLS, the FSBO must rely on best-guesstimates, neighborhood grapevine, or a Zillow-style analysis (more on Zillow later).

2. Although the asking price might already be adjusted for the lack of a Realtor commission, the potential buyer seems convinced the price doesn't yet reflect the commission adjustment and asks for a further reduction.

Observations as a Realtor -
Realtors representing buyers tend to focus on Realtor-MLS listed properties due to ease of scheduling showings, quick access to property details, and availability of seller disclosure documents.

If a Realtor-represented buyer wishes to make an offer on a FSBO, the Realtor realizes that he/she will be processing both sides of the transaction increasing the potential for lawsuit liability. For example, a lack of knowledge of disclosure requirements by FSBO sellers.

In part 2, we will focus on choosing a full versus limited service Realtor.