What is FSBO? “For Sale By Owner,” or FSBO (pronounced “fizz-bo”), is when a homeowner sells their home on the market without a real estate agent. According to the National Association of Realtors, only 6% of sellers sold via For Sale By Owner in 2020.
As with any home sale method, FSBO comes with unique pros and cons. We caught up with top agent Shawna Smith to bring you an overview of FSBO and shed some light on the process, the perks, and common misconceptions.
What does the FSBO process look like for the seller?
If you’re considering selling FSBO, familiarize yourself with the process before you dive in. Without a real estate agent, you’re responsible for preparing your home for sale, marketing, negotiating, and navigating legal and financial documents.
“There’s a lot of work that goes behind it,” notes Smith, who sells 75% more single-family homes than the average agent in Louisville, KY.
While every sale is unique, here’s an overview of a FSBO seller’s responsibilities:
Pre-listing home preparations
Like any seller, FSBO sellers should whip their home into shape to make a strong impression on buyers. Your pre-listing home preparation checklist includes:
Set a listing price
The first step to selling your home is to determine an asking price. Ideally, you should set the price close to your property’s true market value. You must objectively compare your home to recently sold homes in your area and set the price accordingly. This task is easier said than done: HomeLight’s recent Top Agents Insight Report reveals that overpricing is the biggest mistake sellers make when selling their home.
Create a home listing
When creating a property listing, don’t skip on professional photos — beautiful photos influence buyers to schedule showings. Pair the photos with a compelling description that highlights your property’s unique features. FSBO sellers can list their home on an array of For Sale by Owner listing websites or pay a flat-fee MLS listing service to get their home on the MLS for $50 to $500. The MLS will then auto-syndicate the property details to the major online listing sites.
Market the property
When your listing goes live, it’s time to market your home. Create a robust marketing strategy that includes paid advertising, social media outreach, physical signage, and open houses. Remember, the more buyers you reach, the more offers you’ll receive.
Coordinate showings with potential buyers
Buyers need to see your home in person to truly fall in love with it. As a FSBO seller, you must be available to respond to calls and emails from prospective buyers. If a buyer is interested, coordinate a showing at a time that works for both parties.
Negotiate the price with the buyer’s agent
Once you receive an offer you’re ready to move forward with, hash out the conditions of the sale with the buyer. Review the offer for contingencies so you understand the risk of the offer falling through. You’ll most likely negotiate the price and terms with the buyer’s agent, a seasoned negotiator. For many, this is the most challenging step in the FSBO process.
Complete the necessary paperwork and close the deal
When both parties come to an agreement, the seller must work with the title and escrow companies to complete the necessary documents — all 180 pages. Since you don’t have an agent at your side, you may want to work with a real estate attorney to protect yourself from documentation issues, titling errors, and expensive lawsuits. When all is said and done, you’ll sign the deed over to the buyer and collect the sale money.
Benefits of selling FSBO
While FSBO is double the work, it comes with its perks. Sellers have more control over the minutiae of their home sale and save on the listing agent’s commission.
FSBO sellers save on real estate commission
The main reason sellers choose FSBO is to save money. While real estate sales commissions vary, the national average rate is 5.8% of the sale price. The commission is split between the listing agent and the buyer’s agent and it’s customary for the seller to foot the bill. Commission on a home that sells for $350,000, for example, would typically cost the seller somewhere in the ballpark of $21,000.
When you sell FSBO, you save on the listing agent’s half of the commission, but you’ll most likely still need to pay the buyer’s agent’s commission. According to NAR, 88% of homebuyers worked with real estate agents in 2020, and 6% purchased directly from a builder.
It’s worth noting that FSBO sellers don’t pocket all of the 3% they save on the listing agent. FSBO sellers must pay pre-listing home preparations and marketing costs normally included in the agent’s commission.
FSBO sellers retains complete control over the sale
When sellers hire a real estate agent, the agent guides them through the home sale, offering advice on pricing, marketing, staging, prep work, and price negotiation. And while most sellers appreciate the support of an experienced professional, some homeowners prefer to retain complete control over their home sale details. If you choose a FSBO, every part of the process — emails, phone calls, paperwork, marketing, negotiating, etc. — is directly under your control.
Drawbacks of selling FSBO
Without a real estate agent, FSBO sellers take on the responsibilities and risks of selling their home solo. You need time, energy, and objectivity to pull off a successful home sale.
Statistically, you’re likely to sell your home for less money
When you work with a top-selling agent, you reap the benefits of their expertise. Real estate agents understand the nuances of pricing a home competitively, presenting a home for the market, and marketing effectively to get buyers in the door. Every step increases the value of your home and ultimately helps you win the highest sale price possible.
Smith points to poor pricing as a top issue for FSBO sellers:
“The issue is they’re actually losing money on the value of their home because they’re guessing at the value; there’s no real science behind it . . . They don’t realize they’re leaving money on the table.”
Data backs the value an agent brings to the home sale process. According to NAR, FSBO homes sold for a median price of $217,900 in 2020, whereas, agent-assisted sales sold for a median price of $242,300 — that’s quite the margin. An independent study by Black Knight found that FSBO homes sell for 5.5% less, and in some cases nearly 6% less than agent-assisted sales. Furthermore, our analysis of transaction data reveals that the top 5% of real estate agents sell homes for 10% more than their peers, indicating real estate agents’ expertise in increasing the sale price more than makes up for their cost.
Costs can add up quickly
As a FSBO seller, you pay out-of-pocket for services typically included in the listing agent’s fee. These costs include:
- Professional photos
- MLS listing fees
- Open house expenses
- Digital and physical ads
Beyond the basic costs, FSBO sellers often over improve their homes since they don’t know which upgrades increase value and marketability in their local market. If you spend money on the wrong improvements, you won’t recoup your investment in the home sale.
Marketing is easier said than done
Marketing is key to attracting buyers to your home. And sticking a sign at the head of your street won’t do you much good. As a FSBO seller, you need to learn the most effective real estate marketing strategies for your market. Digital marketing is especially crucial since 43% of recent buyers say they first looked online for properties for sale, while 97% of all recent buyers used the internet at some point during the home search process.
Smith points out that when sellers choose to sell FSBO, they take on responsibility for all of the legal aspects of the sale: “When you have an agent, that agent takes that responsibility to make sure that there’s a legally binding contract that all the terms are met for the seller.”
According to NAR’s 2020 report, 10% of FSBO sellers ranked’ ‘understanding and performing paperwork’ as the most difficult task in the home sale, second only to ‘preparing or fixing up the home for sale.’
Real estate agents have insurance that covers them, Smith says, “so if there are some unforeseen mistakes, they [agents] have something to fall back on.” If a FSBO seller breaches a contract or flops a disclosure statement, their buyer can sue them. “If something goes wrong legally, they’re just going to get sued by the buyer or whoever’s involved in that transaction with them. So, they’re taking on a lot of responsibility that they don’t realize,” Smith adds.
FSBO sale statistics
According to Smith, “80% to 90% of FSBO sellers end up hiring a real estate agent or broker within 30 days of trying to sell it on their own.” Here are a few helpful statistics from the National Association of Realtors that you may want to consider before jumping in feet first.
- For sale by owner sales accounted for 8% of total home sales in 2020.
- 46% of sellers indicated that they did not actively market their home.
- 12% of sellers shared that the hardest part of selling their home was fixing it up for sale.
- Of all FSBO sellers, 9% indicated that getting the price right was the most difficult step.
- 43% of sellers believe that while an FSBO requires more work on their part, they’ll end paying less in fees and closing costs.
- 56% of FSBO sellers decided to sell via FSBO because they sold to a relative, friend, or neighbor.
- 51% of FSBO sellers knew their buyer, compared to 8% of all sellers.
- 22% of FSBO sales were located in rural areas compared to only 14% of agent-assisted sales which were in rural areas.
FSBO comes with pros and cons
Now that you know what FSBO is, weigh the option against selling with a real estate agent. A FSBO sale requires time and dedication and doesn’t guarantee you more money at the end of the day.
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