For Sale By Owner: How Does it Work?
Feb 18, 2023
When you’re selling a home, you have two options: hire a real estate agent to handle the sales process for a commission or list the home as for sale by owner (FSBO).
About 18% of home sellers choose the FSBO option, and half of those successfully complete a sale without the assistance of an agent. FSBO sellers manage their property sale, bypassing a seller’s agent and potentially saving thousands of dollars in commission fees. In this article, we’ll explore how FSBO works and how it can benefit you.
How Does For Sale By Owner Work?
The challenges of selling a home as FSBO may seem overwhelming. However, you can successfully sell your home with this approach with research and preparation.
- Prepare the house. Perform essential repairs. Landscape neatly. Apply a fresh coat of paint in neutral colors. Clean your home and remove clutter and personal accents.
- Set an asking price: Another crucial aspect of FSBO is setting the right asking price. Determine the appropriate selling price for your area. This is often the most difficult aspect of FSBO. We recommend obtaining an online home valuation here and also leverage data from apps like Zillow.
- Create your listing. Take quality photos and prepare a detailed description of your home. Hiring a professional is a must. No iPhone photos!
- List the home. You can choose from various FSBO sites that have unique pricing and service offerings. Most FSBO services provide access to the Multiple Listing Service (MLS), a database managed by the National Association of Realtors, or other platforms that cater specifically to FSBO properties. While a flat fee is required to list on the MLS, this cost is usually just a few hundred dollars.
- Market the home. Yard signs, Facebook marketplace and online listings will help drive traffic from potential buyers. Although you can’t use the same sites as an agent, you still have some options. Make sure to attract buyers with a mortgage preapproval letter, showing they’re serious about purchasing your home.
- Show the home: Once you list, you’ll get calls from buyer agents that want to show your home to their buyer clients. When owner selling, it’s common to work with buyers agents. In most real estate transactions, the seller pays the buyer’s agent commission, which is typically a percentage of the sales price. However, in an FSBO sale, the seller can offer a reduced commission or negotiate the purchase price to offset the buyer’s agent fee.
- Engage a title company or closing attorney: To ensure a smooth transaction, it’s essential to have a real estate attorney and a title company involved in the process. They will help with drafting a purchase agreement, managing the earnest money deposit, and guiding the closing process. While this might cost some money upfront, it’s a small price to pay for peace of mind.
The FSBO route is most successful when you’re in a neighborhood with other listings where buyers are likely to see your signage. Homes on busy streets do well with the FSBO approach as well.
Why Try For Sale By Owner?
Saving money is the most common reason that sellers choose to list their homes as FSBO. Other common reasons, which each ranked among the top three reasons 33% of the time, were that the seller:
- Wanted to save time.
- Already knew a potential buyer.
- Was confident he or she could succeed without an agent or broker.
- Wanted control throughout the transaction.
While a knowledgeable seller might succeed in reaping some of these benefits, others are more difficult to attain. Before you commit to selling your home as FSBO, you should understand the benefits, disadvantages, and process. Approximately half of sellers who attempt to use the FSBO method eventually call upon an agent or broker for help.
Advantages of For Sale By Owner
When done correctly, the FSBO process can offer some notable advantages over using a real estate agent and paying full commission. Some of the benefits of selling your home yourself are as follows:
- The opportunity to make more money. A listing agent typically takes a commission of 3%. When you’re selling something as large as a home, this percentage can amount to thousands of dollars that you’re able to keep in your pocket by acting as your own agent or hiring a flat fee broker.
- Control over the home listing. When you take over the sales process, you maintain complete control over your marketing strategy and listing price. You don’t have to negotiate the best way to handle the home. Plus, you can choose from various different for sale by owner websites to promote your property, each of which offer different services and prices.
- Control over your showing schedule. When working with an agent, you’ll have to accommodate the schedule of both the agent and the buyer for showings and open houses. This arrangement may result in inconvenient appointment times where you have to vacate the home for a showing.
Potential Challenges of For Sale By Owner
Listing a home as FSBO is challenging. Real estate agents work full time, often putting in overtime hours on weekends and evenings to help clients stage, list, market, and sell their homes. When you choose to sell your home without an agent, you have to take over all the tasks of the agent, putting in as many hours as the agent would and more.
Each step of the FSBO process will have a learning curve for the novice seller, which means that you’ll spend a longer amount of time to complete essential tasks than an agent would need.
If you don’t want to pay the 3% commission but still want agent support, you may consider a low commission broker like SimpleShowing.
Some of the challenges of listing your home as FSBO include:
- Setting the right price: You must understand the market in your area to determine the best selling price for your home. If you price the house too high, it may stay on the market for months. If you’ve already purchased a new home, these months are critical. You’re paying a mortgage you no longer need while the home languishes on the market.
- Staging the house properly: Many home repairs and improvements can dramatically increase the value and selling potential for your home. However, you may not know what they are. You’ll have to do in-depth research to make sure you’re investing in the right projects.
- Marketing effectively: Real estate agents have access to marketing tools and websites that individual sellers do not. You’ll have to put more time and effort into marketing a FSBO home than a real estate agent would need to invest in using an established network.
- Handling showings: Although you’ll have control over showing times, you’ll also have to handle the process of letting potential buyers into the house on your own.
- Dealing with legalities: Selling a home is a complex process governed by local laws. You need to make sure you’re in compliance with state disclosure laws and home selling requirements regarding your property. These laws dictate things like property disclosures, due diligence and what you tell buyers.
- Negotiating the sale: Once you have an interested buyer, you’ll need to determine whether the individual is properly qualified for a home loan. Knowing how to negotiate effectively is frequently cited as a reason why FSBO listings often fail.
- Understanding closing costs: Finally, be prepared to pay closing costs, which include fees for the real estate attorney, title company, the buyer agent commission and any taxes or other expenses. By carefully managing the FSBO process, homeowners can sell their homes without a traditional agent and enjoy significant savings.
Sell for a 1% Listing Fee
If you’re a dedicated home seller who’s ready to put in the time and research, this approach can be a money-saving option that helps you get thousands of dollars more from your final sale, as long as you approach the process with care. You can also check out SimpleShowing’s 1% Listing Fee that will give you the agent support you need while still saving you thousands.