Selling your home without hiring a real estate agent could mean thousands of dollars back in your pocket, which sounds tempting, especially as housing prices rise. But is it the best move?
There are many websites that allow you to skip the listing agent and offer your home as “for sale by owner” — or FSBO (pronounced FIZZ-bo).
But FSBO sellers should be prepared to do a lot of legwork to manage the sales process, with no guarantee of a final sale. Remember the process of finding a home you could afford and getting a mortgage? Selling a home on your own can be far trickier.
Here are five questions you should ask before selling a home on your own.
- Do I know the value of my home in today’s market?
- Am I ready to work with a buyer’s agent?
- Will I take charge of sales and marketing responsibilities?
- Can I bear criticism of my home?
- Am I willing to screen potential buyers?
1. Do I know the value of my home today?
A common mistake FSBO sellers make is pricing their home too high, leaving the property to languish on the market.
“When a home sits for a long while, buyers start to wonder what is wrong with it,” says Piper Nichole, author of “The For Sale By Owner Handbook.” “The best option is to come out of the gate priced right.”
To market a home competitively, sellers should research the final sale prices of similar properties in their community.
Real estate websites typically offer local sales trend information, selling prices for comparable homes (“comps”) in the community and the average length of time on the market. But these websites do not have all the data that a real estate agent has access to, so it might be worth asking a Realtor to perform a market analysis or hiring an appraiser.
Many real estate websites offering a quick estimate “are not doing a market analysis, they’re just writing an algorithm,” says Michael Seward, broker and owner of Michael Seward Real Estate.
2. Can I work with a buyer’s agent?
In a typical real estate transaction, you would hire an agent to list your home and you would pay a fee, traditionally about 6 percent of the purchase price, Nichole says. The buyer’s agent and seller’s agent often split the commission in half.
But if you’re selling on your own, sometimes you can offer a commission to the buyer’s agent to incentivize them to show your home. The commission is about 3 percent of the sales price. A buyer’s agent typically expects this, so not paying a commission could shrink your pool of potential buyers.
However, you should first learn about your state’s real estate laws so you don’t overpay the buyer’s agent or get stuck in a transaction that’s more harmful for you.
“It’s been my experience that a lot of real estate agents don’t know the laws or the code of ethics,” Seward says. “If you offer a commission to a buyer’s agent, familiarize self with state and local laws first.”
3. Can I handle sales and marketing duties?
Some FSBO sellers underestimate the amount of effort it takes to market their house. You need to keep the home clean, clutter-free and “show ready” at all times.
Other important steps include:
- Taking good, professional photos of the property and writing effective sales descriptions.
- Buying and installing a “for sale” yard sign with promotional flyers that include contact information.
- Listing the property on several classified advertising and real estate websites.
You’ll also want the home placed in the Multiple Listing Service, or MLS, a real estate brokers’ database of properties for sale.
FSBO sellers can’t submit to an MLS, but some companies have brokers who will list a seller’s home in the MLS for a flat fee, typically a few hundred dollars.
In addition to marketing their own property, FSBO sellers often need to find and hire people to help them complete the sale. These professionals include real estate attorneys (to review contracts and offer advice), appraisers and contractors (to make any necessary home repairs).
4. Can I bear criticism of my home?
The emotional aspect of selling a home is often overlooked, but it’s an important part of the selling process. Owners will probably hear a lot about their home’s shortcomings from buyers trying to negotiate a lower price.
Or worse, they may not receive any interest in their home, especially if the price is too high.
It can be easier to sell a home as a FSBO if you don’t have an emotional attachment to it and can take an objective view of its value.
5. Am I willing to screen potential buyers?
If you’re going to be a FSBO seller, you must be willing to screen the buyers.
Before you sign a contract with a buyer, make sure the purchaser will be able to come up with the money.
“You don’t want to take your house off the market to negotiate with someone who was never qualified for the home in the first place,” says Dale Robyn Siegel, president and mortgage loan originator at Circle Mortgage Group.
Before accepting an offer, ask for a current mortgage preapproval letter from a reputable lender. The letter should show that the buyer spoke to the lender and has been preapproved for the purchase price of the home.