For sale by owner, or FSBO, explained
When it comes to selling your home — most likely the highest-ticket item you own — it’s natural to want to maximize your profit.
Depending on who you ask, the for sale by owner (FSBO) model can be a terrific money-saving way to sell your home, or it can be fraught with headaches and net you less money at the end of the transaction.
Here are some things to consider when deciding whether for sale by owner is right for you.
What does for sale by owner (FSBO) mean?
“For sale by owner is when a seller chooses to market their property for sale on their own without hiring a real estate agent,” explains Tori Hughes, an Atlanta, Georgia-based agent with Harry Norman, Realtors. “Sellers are drawn to the FSBO route because they have the perception they will save money by not hiring an agent to market their home.”
When you hire a real estate agent, the agent is paid a percentage of the sale price of the home. The U.S. national average for real estate commissions in 2019 was 4.96 percent, down from 5.03 percent in 2018. That means on a house that sells for $300,000, at 4.96 percent, the real estate commission will be $14,880.
How for sale by owner works
There are a variety of ways the FSBO arrangement can work.
“In some cases, a seller will place a for-sale sign in the yard and advertise online via Zillow or another third-party site. If an agent brings a buyer to see the property, the seller will sometimes offer to pay a commission to that agent. In other situations, the seller and buyer may not use the assistance of an agent at all,” Hughes says.
It’s important to note that in a FSBO situation, the seller assumes all of the responsibilities that a real estate agent would normally handle. This includes determining the home’s appropriate price based on the market conditions, marketing, taking photos, staging, showing the property, collecting and negotiating offers, and managing the logistics of the transaction.
Professional real estate agents are trained to do all of those things to maximize your profit and minimize the hassle for the person selling the home.
“One common misconception is that [sellers] will be able to save money by not paying commission to a listing agent. In most cases a seller will be able to sell their home at a higher value with the assistance of an agent and in turn net a higher profit after paying commissions,” Hughes explains. “Another drawback is not having the guidance of an agent who is an expert on the contracts and forms used in real estate transactions.”
However, there are services available that help with some of the elements of selling a home, so FSBO sellers don’t have to navigate the process completely alone.
For instance, real estate agent Josie Reo operates MLS 4 Less Realty, serving the Eastern region of New York State. With this service, sellers pay a flat fee upfront to have their home listed on the multiple listing service (MLS) and advertised online — but if the buyer uses a real estate agent to find the home, commissions will still have to be paid to that agent.
Is for sale by owner the same as owner financing?
For sale by owner may sound similar to owner financing, but the two are unrelated.
“Owner financing is when a seller will act as a bank and allow the buyer to make payments to them on the property versus going through a bank and obtaining a mortgage,” Hughes says.
A homeowner can offer owner financing with or without selling the home with a real estate agent.
Is for sale by owner worth it?
When Courtney Osgood’s parents needed to sell their Corning, New York home in 2012, they decided to list it for sale by owner.
“We chose to go that route simply because my parents didn’t want to pay a Realtor to sell the house when they thought they could do it themselves,” Osgood says. “It was actually a fairly simple process, and it only took a couple of weeks before we ended up closing.”
They had a few things working in their favor: Osgood’s father built the house, so he had a good handle on the appropriate resale value, and Osgood’s work as a publicist gave her the skills to write a compelling listing.
“I created the ad, wrote the copy, uploaded the photos, posted and managed the ads. Then my parents showed the house and dealt with all of the closing logistics,” she says.
After showing the house to a few potential buyers, they received a full price offer and closed quickly. It went so well that a friend of Osgood’s parents asked her to help sell their home, as well.
Still, Hughes, a Realtor, makes a case for at least consulting with a real estate agent to make an educated decision about whether for sale by owner is right for you.
“Given the fact that statistics show that most sellers will be able to net a higher value when hiring an agent, sellers’ lack of knowledge regarding the forms and contracts, and the stress that surrounds the transaction, FSBO is not worth it,” Hughes says. “I would encourage anyone who is considering FSBO to interview agents before making that decision. Give an agent the opportunity to present their marketing plan, and prove their value — you may just change your mind.”
Featured image by Jeff Greenberg of Getty Images.
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