FSBO (For Sale By Owner)
As the name suggests, a “for sale by owner” (FSBO) property is one for which the owner sells the property directly without using a go-between like a broker or a real estate agent. Owners have many reasons to list their homes as FSBO properties. Some choose to do so to avoid agent fees, which can represent 3% to 5% of the sale price.
Keep reading to learn what to expect when buying a FSBO house as well as some key considerations to keep in mind if you plan to sell your home without a listing agent.
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What Does “Home for Sale By Owner” Mean?
If you see a house listed as “for sale by owner” (FSBO), the seller isn’t using a listing agent or broker to sell their home. Many sellers choose this route to get the most profits possible from their homes. Because real estate agents take a percentage of each house sale as part of their service (between 3% and 5%), homeowners may opt for a FSBO transaction to avoid added fees.
When working with an agent, the seller pays their agent’s and the buyer’s agent’s fees. Given a real estate agent’s typical commission percentage, the seller ends up paying between 6% and 10% of the home sale proceeds to the agents. In a FSBO transaction, however, the only agent the seller must pay is the buyer's agent (if they use one). This reduces the seller’s overall costs.
But, other reasons exist for selling your home on your own. Some sellers already have a buyer in mind when listing their home, for example, which makes paying listing fees unnecessary.
How Does FSBO Work?
When a seller lists their house as a FSBO property, they take care of the listing, interacting with potential buyers, negotiating, and showing their home. The owner also is responsible for all necessary paperwork, legal arrangements, and title exchange services.
In some states, it’s not practical for an owner to sell their home independently due to complicated real estate processing laws. If someone wants to sell their vacation property in another state, for example, they’re unlikely to be on location for every aspect of the sale. In that case, working with an agent may be their best choice. FSBO sellers should be prepared to contact any needed real estate attorneys, escrow agents, and more.
Buying a FSBO home is similar to purchasing a home listed by an agent. If you work with a buying agent, your agent should communicate with the homeowner and take care of any paperwork, schedule your viewings, and more.
Buyers can still get financing for FSBO homes, which is good news for potential buyers. But, because the seller doesn’t have the experience of a licensed agent, they can’t help potential buyers find financing or offer financial advice. Thankfully, a buyer’s agent should be able to point their client toward these services.
Steps for Selling a FSBO Home
Follow these 10 steps if you take the FSBO route to sell your home:
- Choose FSBO or an Agent: First, make sure you want to sell your home without an agent. While cutting down on agent fees may seem tempting, selling a FSBO property requires a time investment. The seller is responsible for not only choosing a listing price, listing and advertising their home, staging the home, and setting up viewings, but also must contact all attorneys and agents required for the signing. A seller without an agent is responsible for vetting potential buyers, negotiating the selling price, and securing all the required documentation for selling their property.
- Research Home Pricing: Before you list your home as a FSBO property, you should research similar properties in your area that sold recently. These should give you a good benchmark for your home’s value. If you want a more concrete value for your home, consider hiring a home appraiser. However, hiring a professional home appraiser can cost you out of pocket and reduce your overall profit when selling your home.
- Stage and Advertise Your House: Pay attention to how real estate agents photographed and staged previously sold properties in your area. Advertising is a big part of selling your property along with picking the right time of year to list your home. While quick profits may tempt you to list your home as soon as possible, pay attention to when people shop for a new home.
- Pick Your Price: One of the upsides of listing your home as a FSBO property is that it’ll usually sell faster than agent-listed properties. Part of this stems from a quicker closing time, but another part is due to pricing. Because you have less overhead to worry about, you can list your home for a lower price than others in your neighborhood and still make a profit. But, remember to carefully calculate your costs to avoid paying just as much as — if not more than — you would with an agent-listed sale.
- Clean and Make Repairs: An obvious step when selling your home (FSBO or agent-listed) involves making general repairs and decluttering. While you don’t have to go overboard, making your home look as nice as possible inside and out can attract potential buyers. Because FSBO sellers advertise their homes on a smaller scale, every little bit of polish and shine helps. In addition, hiring a professional photographer can help show the best sides of your property and attract buyers despite this adding another overhead cost.
- Create an Online Listing: Once you have photos of your property and know what price to list it at, the next hurdle involves creating a listing for your home. While agents can use a multiple listing service (MLS) like Zillow.com, Realtor.com, and others, many FSBO homes don’t qualify for these services. However, some local MLS organizations allow people to advertise their homes for a flat fee so keep an eye out for them. Sellers also can use paid advertising options and FSBO websites that exclusively list owner-sold properties.
- Extend Your Reach With Paper Listings: Many FSBO sellers use paper listings for advertising their homes along with social media pages and physical signs. The National Association of REALTORS® noted that in 2020, 28% of FSBO sellers used friends, relatives, or neighbors to advertise their homes while 20% used yard signs.
- Evaluate Buyer Offers: Once you get the first offer on your home, you’ll have several options. First, you can accept the offer, reject it, or make a counteroffer. However, checking the potential buyer’s financials before deciding is essential. A buyer should provide a mortgage pre-approval letter to confirm their financing. Remember that while real estate agents can’t call loan institutions directly, FSBO sellers may contact a buyer’s lender.
- Complete Closing Paperwork: Once you stage and show your home and have a potential buyer, the paperwork portion of selling a home comes into play. One of the essential things a FSBO seller can do is know when they need help. Real estate paperwork varies by state, meaning familiarity with local real estate laws is a must before selling your home. For example, you might need a lead paint notice if your house was built before 1978. Because each state has slightly different real estate laws, check your state’s website to determine what a seller must provide at closing.
- Seek Help, if Needed: Consider contacting a real estate attorney when you're ready to close on your home. While you may have a general grasp of real estate laws in your area, home sale documents can seem confusing and overwhelming. Hiring an attorney can help take some of the closing pressures off the seller and ensure the entire process goes smoothly. While you may not need a real estate attorney (depending on your state's laws), they can make the process easier and help you avoid accidental closing complications.
FSBO Advantages
Listing your house as FSBO offers three key benefits:
- Lower Agent Costs: As previously mentioned, FSBO sellers don’t have to pay an agent fee — only the buyer’s agent fee. This means they can cut their total agent fees for the purchase in half.
- Greater Control: The FSBO route gives sellers more control over the sale process and may result in a faster closing time than an agent-listed sale.
- A More Direct Sale: Listing a house as a FSBO property also allows a seller with a buyer in mind to cut out the middleman and sell directly to that buyer without any advertisements.
FSBO Disadvantages
Despite its benefits, the FSBO model also comes with a few drawbacks. These include:
- Lower Profits: The FSBO route may appeal to sellers who want to be in charge of selling their homes, but, in many cases, FSBO homes end up netting a lower profit than homes sold by an agent. In a report on the 2020 real estate market, the National Association of REALTORS® noted that the typical FSBO home sold for $225,000 compared to $330,000 for agent-assisted home sales.
- Potentially Overwhelming Responsibilities: On top of price negotiation issues, FSBO sellers must manage every aspect of their home’s sale. These responsibilities include listing the property, setting the price, taking pictures, evaluating offers, confirming potential buyers’ financial information, and providing all necessary paperwork. This can not only make it challenging to sell remote properties, but also create more stress for the seller as well as lead to mistakes due to inexperience.
- Selling Complications: While FSBO sellers can hire people (e.g., attorneys, appraisers, photographers, and more) to help sell their homes, this can erode the overhead profits they sought to hold onto by selling their homes without an agent. As such, FSBO sellers must budget carefully. Moreover, because FSBO sellers are in charge of monitoring the financial viability of potential buyers, the entire selling process can seem complicated.
Things to Consider Before Selling Your Home as a FSBO Property
While the draw of higher profits may tempt you, be honest about whether the FSBO route is right for you. Listing a house as a FSBO property not only creates more work for the seller, but also exposes them to potential complications and mishaps usually handled by an experienced agent.
Sit down and list everything you’ll need to sell your home, including potential appraisal costs, attorney fees, and home repair expenses. Remember to also factor in the stress of trying to sell your home. As a FSBO seller, you’ll be in charge of scheduling showings, rejecting offers, and making counteroffers to potential buyers. If these tasks feel daunting, consider hiring an agent instead. Remember, you can still list your home with an agent after attempting to sell it as a FSBO property and vice versa.
Frequently Asked Questions
Yes, the seller pays the buyer's agent out of the sale proceeds.
Never directly give earnest money to a seller. Instead, use an earnest money escrow account. Thankfully, earnest escrow accounts usually work with money-transferring services like PayPal. As with any purchase, keep an eye out for signs of fraud and make sure you trust the services you work with when handling earnest money.
Because the seller directly handles all correspondence for a FSBO listing, the best time to contact them will depend on the individual. However, calling shortly after the 9-to-5 workday can be an excellent time to talk to someone about their home.
Unlike working with a traditional agent listing, calling on the weekend may also be a good idea because the seller will likely answer your call. In addition, pay attention to any notices on the FSBO listing to see if there are ideal contact times listed.
FSBO sellers handle multiple offers similarly to sellers with an agent-listed property — except all offers go directly to the seller instead of through an agent. Multiple offers on a home can complicate things for everyone involved so be sure to talk with your agent before bidding on any property, including FSBO properties.
FSBO sellers can list their homes through various free avenues, including social media platforms and physical “for sale” signs. However, listing a FSBO home on an multiple listing service (MLS) may incur a fee so sellers should be aware of this upfront. Any paper advertisements also will likely have a price. Consider potential listing costs before selling your house without an agent.
In a FSBO sale, the seller can either draw up the contract with the buyer or hire an outside party to draft the purchase agreement. When drafting a contract yourself, ensure it includes all the necessary information. Also, talk to a real estate professional before using a homemade real estate agreement or contract, as you may run into legal complications down the road.
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To find the answers to other financial questions, check out our other articles:
How to Buy Wholesale Real Estate