With all the online tools today, selling For Sale By Owner may seem like a tempting alternative to the traditional real estate agent/commission fee route. But does FSBO really work?
FSBO is a serious undertaking: It demands a specific skill set, extensive research, and a great deal of time for no guarantee you’ll sell your home for what you want to. That’s why it’s rare for people to go this route.
To help you determine if FSBO will work for you, we’ve researched the greatest challenges that stand between sellers and their top sale price so you can see if you have what it takes. For added insight, Bethany Culley, a top real estate agent who sells 71% more properties than the average agent in Madison, Mississippi, shares her experience as a buyer’s agent working with FSBO sellers.
To sell your house on your own, here are 10 requirements you must meet for it to work.
1. You have laser-point precision with your pricing.
For FSBO to really work, it’s essential to price your home at or slightly below market value. Listing price is the most influential factor for the speed and sale price your home sells for. Without a real estate agent at your side, you’re on your own for finding the sale price of comparable homes (listing prices don’t count!).
Price too low and you leave money on the table
If you play it on the safe side and price your home on the low end of your estimated home value range, then you could miss out on thousands to tens of thousands of dollars. Nailing an optimal price point is especially difficult in nondisclosure states where transaction sale prices are not available to the public. In these cases, you can only gauge property value through public tax records which can completely miss the mark.
Culley explains: “If someone has lived in their house a long, long time and they haven’t gone to an appraiser to update things, because appraisals are expensive, then you’re just going off what they’re being taxed on which is way lower than the market value.”
Price too high and you’ll hear crickets
On the flip-side, if you price your home too high, it will sit on the market. HomeLight’s recent Top Agents Insight Report reveals that overpricing is the biggest mistake sellers make when selling their home. Buyers reluctant to negotiate down an inflated price may skip over your listing entirely. With little interest, your house will sit on the market until you advertise a price drop. This combination of events can lead buyers to wonder if something is wrong with the property beyond bad pricing.
2. You pay for your own MLS access and keep tabs on activity.
Even with an array of For Sale by Owner listing websites, the MLS is still the king of the listing jungle. In 2019, 9 in 10 sellers listed their homes on the MLS, which was the number one source for sellers to list their homes.
Listing your house on the MLS will auto-syndicate your property details to the major online listing sites. As an FSBO seller, you’ll need to pay to access the MLS with one of these options:
- Flat-fee MLS listing service: These websites will list your home on the MLS for a flat fee of $50 to $500.
- Limited service real estate agent: A limited service agent* will post your listing on the MLS and provide minimal services such as setting up a lockbox for viewings for a flat fee or reduced commission percentage.
*They will not however, tell you your listing price is miles below the mark, share your listing with their social network, or fulfill other supportive responsibilities of a traditional real estate agent.
Once your listing is up and running, it’s your responsibility to monitor daily activity and respond to inquiries (we’ll touch on the importance of communication in a minute).
3. You’re ready to navigate a ton of legal land mines.
There are hundreds of laws governing real estate, varying state-to-state and changing periodically. Unintentionally break a law or overstep the contract and your buyer can sue you for:
- Money damages for breach of contract
- Return of the deposit, plus payment of reasonable expenses for termination of the contract
- Specific performance of the agreement (i.e. take you to court to complete the home sale)
Documentation issues and titling errors in particular are common FSBO mistakes. 18 percent of FSBO sellers polled stated “insufficient knowledge of the paperwork” was the most difficult part of their home sale.
If you need support, you can hire a real estate attorney for an average $150 to $350 an hour, though many will charge a fixed rate. The attorney will step in after the price is settled between the buyer and seller to review the contract and other closing paperwork.
Some states require a real estate attorney to facilitate the sale, mandating their presence at closing. If your state does not, you should still consider hiring one for a layer of legal protection, especially if:
- There are involuntary liens or judgments on your title
- You’re selling on behalf of the deceased
- You’re selling due to divorce or separation and the co-owner is uncooperative
- There are tenants currently renting the property
4. You’re confident about the disclosure laws in your state.
Did you know in certain states it’s illegal to cover up mold with paint without listing it as a known issue in the home disclosure? Or that in Missouri you need to disclose if a child’s welfare was endangered with physical injury on your property?
Well, if you don’t, you need to learn. Every state enforces different disclosure laws, requiring sellers to list known problems with their property such as mold, lead, natural hazards, and boundary line disputes. Carefully abide by your state’s disclosure laws and don’t try to muddle the truth or you could put your home sale in jeopardy.
Buyers who discover undisclosed issues can press for seller made repairs, request additional repair credit, or file a lawsuit. In addition to taking extra money to resolve, these disputes can delay, prevent, or even reverse the entire sale.
5. You can be 100% objective about your house.
Knowing your home better than anyone else is a blessing and a curse. You can highlight your home’s best features and speak to the details of property maintenance. However, your bias can also negatively impact your ability to declutter, stage, and make improvements to increase marketability.
“The owner is looking at the house through a seller’s eyes, thinking ‘my house is great. I’ve been here 30 years, that green shag carpet is not in bad shape. I don’t have a dog, it’s not bad’,” Culley shares.
“It’s only $2,000 for new carpet, but when the buyer comes in, they think, ‘oh my gosh, this is $5,000 worth of work.”
On the other end of the spectrum, your subjectivity may lead you to spend too much money on home improvements which don’t yield a high return on investment. For instance, you might see your cracked backyard patio as a must-fix, but research shows this project brings a mere 47.6% return.
Without an objective professional who knows the market, it’s difficult to gauge that Goldilocks spot between too little and too much improvement.
6. You’ve got 200 extra hours to spend on selling your home.
Selling a home can take anywhere between 20 to 200 hours for a real estate professional. As an amateur, you’ll likely take twice as long to complete each step with the extra time dedicated to research. As if that’s not long enough, remember this double-time only makes up for your absent real estate agent’s duties. You’ll spend even more time tending to your normal responsibilities as a seller such as decluttering, cleaning, repairs, lawn maintenance, and paint touch-ups.
7. You’ll pick up every phone call and hold up your responsibilities (or risk alienating agents who want to work with a professional).
Fly solo in real estate and you’ll face a stigma: FSBO sellers are unreliable. This is mostly from a few bad eggs ruining it for the group, but even the best FSBO sellers struggle to respond to inquiries at the speed a professional real estate agent would.
Throughout your workweek, you’ll need to prioritize answering calls, emails, and social media messages about your listing or risk losing prospective interest. Forget to respond to a voicemail and a buyer’s agent might skip following up, thinking you’re not serious about selling. Delay an email a week and your buyer is already negotiating for another house.
8. You’re a seasoned negotiator.
FSBO sellers are their own advocates at the negotiation table. You’re up against a professional with tens to hundreds of home negotiations under their belt. In 2019, 38% of buyers stated their agent negotiated a lower price and 47% said they won better sales contract terms — and that statistic mostly reflects negotiations with sellers who have a real estate agent on their side. You won’t stand a chance at coming out on top unless you’re accustomed to negotiating high-stakes business deals.
9. You’re OK with selling your house for less.
FSBO properties sell for less than the selling price of other homes: This is the number 1 reason sellers choose to partner with a top real estate agent. Last year, FSBO homes sold at a median of $200,000. That’s significantly lower than the median of agent-assisted homes at $280,000 even after $12,000 in commission fees for the latter is taken into account.
When you sell FSBO, you forgo the professional support needed to optimize each phase of the home sale which collectively results in the best possible price. Your choices of home repairs, listing price, and negotiation tactics can lose you thousands of dollars a pop, adding up to a major deficit.
10. You’re the type of person who’d go to WebMD or LegalZoom rather than go to a doctor or attorney.
Online resources can give you a false sense of confidence. At the end of the day, flipping through two pages of Google results or even picking up a book isn’t the same as acquiring 10-15 years of experience in the field.
For a comparable analogy, you can Google your medical symptoms to get the gist of your ailment, but you’ll still need to consult a doctor for a true diagnosis, professional treatment advice, and a prescription if your serious about getting better. For life’s most important decisions, internet research just won’t cut it — you need an expert by your side. Selling your home is one of the biggest transactions of your lifetime; You should give it the professional attention it deserves.
So, does FSBO really work?
Yes, FSBO works… if you’re an intuitive pricer, objective designer, creative marketer, astute communicator, legal expert, and top-notch negotiator. You’ll need to wear a lot of hats to sell your home and you’ll need to wear them well to secure a top selling price. FSBO is a big undertaking and most sellers aren’t fit for the venture. It’s no surprise that 89% of sellers choose to work with a real estate agent instead.
Disclaimer: Information in this blog post is meant to be used as a helpful guide, not legal advice. If you need legal assistance with the sale of your home, please consult a skilled real estate attorney.
Header Image Source: (Sean Locke Photography / Shutterstock)