You watched the tutorials, learned the ins-and-outs, and you DIYed that kitchen reno, so why not DIY selling your house too? If you like to have your hand on the wheel in negotiations and are a quick study, For Sale by Owner (FSBO) may be for you. But curiosity and confidence are only half the battle – it’s important that you understand the FSBO process, which can be daunting, before you dive in.
What Is FSBO?
While the concept of for sale by owner probably seems straightforward, it has some nuances that make it unique. As the name implies, it’s the process of selling your home on your own without the help of a professional real estate agent. This means you’ll handle everything from listing your property and attracting prospective buyers, to showing the home and negotiating a purchase contract, to closing the deal. Going the FSBO route can be easier if you’re selling your home to someone you know, which negates the need to market your home, but there are still a number of factors to consider before you decide to sell your home on your own.
We’ll break down the pros and cons and then go through the steps involved.
The Pros for Selling Your Own Home
- You could save money. If you opt to sell your home without a real estate agent, you avoid commission fees. Agents charge a percentage fee based on how much the sale of your home brings in, so if you do it yourself, you keep more of the profits by avoiding the seller’s agent commissions. Keep in mind, however, that you may still need to pay the buyer’s agent, and their commission is usually ~3% of the final purchase price.
- You could speed up the sale. Some studies have shown that the sales process for FSBO homes can be much quicker than realtor-assisted sales, sometimes by a couple of weeks. This is especially true if your prospective buyers are people you already know and with whom you can agree upon a purchase price.
- You could have more control. You’re not relying on a real estate agent (who likely is juggling multiple other client listings), so you can set your home’s sale price, prepare your home for sale the way you see fit, and negotiate with the buyer’s agent without an outsider’s opinion. This can be a double-edged sword, of course, but here again, if you already know the buyers or if the real estate transaction is not a tricky one, it may be worth it.
The Cons of Selling Your Home through FSBO
- You may not have the necessary real estate expertise. There’s something to be said for the counsel of an experienced listing agent, who can assist with setting the asking price; preparing the home to sell, including staging it for open houses; ensuring your buyer is qualified to get a mortgage; and more. As a FSBO seller, you need to know the real estate requirements and laws for your area, and you may need to handle complicated paperwork as part of these legal requirements. Simply said, working with licensed real estate professionals can help you avoid potential legal pitfalls in the FSBO process. Do you due diligence up front so you’re prepared during the offer, contract and closing stages.
- You may need to put in hard work and extra time. This goes hand-in-hand with learning your state’s requirements and regulations, which can feel like a full-time job. After that, you can expect to spend a chunk of time on each phase of the sales process. Be ready to field phone calls from buyer’s agents, schedule showings, respond to offers, review the purchase agreement and much more.
- Marketing can be challenging. A key part of successfully selling your home is successfully marketing your home. That’s especially true in a hot market. Are you up to speed on the latest marketing tools for FSBOs, including how to wield social media to your advantage? Are you ready to list on the MLS and run quick advertising campaigns on the Internet, or perhaps even a few newspaper ads? Do you have local contacts who can let others know about your for sale property? Keep in mind that part of marketing includes professional photography, which will help showcase your home online.
- The financial benefit may not be as much you’d imagine. Many homeowners opt for an FSBO sale because they expect to make more money selling their home without the services of a real estate agent. However, there may be out-of-pocket expenses, such as advertising costs. You also may not end up getting top dollar for your home if you don’t price it correctly , or if you are not effective at pricing negotiations and concessions with your buyers. While the buyer will likely pay most of the closing costs, you as the seller will be responsible for some fees. In the end, it may be worth paying the real estate commission fee. As a point of reference, the average realtor commission (seller and buyer agent fees combined) is ~6% of the home’s final sales price.
The Path to FSBO in 6 Steps
If you decide the pros outweigh the cons and an FSBO transaction is right for you, here are the steps you’ll need to follow.
- Set the asking price. It’s critical to price your home accurately from the outset so that your listing price isn’t too far above – or below – your home’s fair market value. Price it too low and you could make less money. Price it too high and you could scare away potential buyers. Look at nearby homes for sale and their asking prices, as well as how much homes in your area have sold for. You can check online real estate sites and consider hiring a professional appraiser, who can do a comparative market analysis and determine the worth of your property. Get your home in order before the appraiser arrives.
- Prepare your home. You want your home to show well, both in person and through eye-catching photos in your online home listing, to pique potential buyer interests So, before you can sell your home, you must commit time and money to prepare your home, both the interior and exterior, by freshening up, decluttering and cleaning. You may need to invest in a new coat of paint, some minor repairs, and even home staging. A professional stager can help showcase your home’s best features and ensure that it appeals to as many potential buyers as possible.
- Market your home. This means promoting it any way you can, including through social media, yard signs, flyers, newspaper ads, and even word of mouth. Ask friends and family to share your social media posts and consider setting up a website with the photos and a virtual video tour. Consider getting your home on the Multiple Listing Service (MLS), an extensive database of properties for sale, which you can do as a flat fee listing when you don’t have a real estate agent. These efforts can reach potential buyers and professional realtors looking for properties for their own clients.
- Show your home. In addition to private showings with prospective buyers, host an open house or two. Weekend afternoons are ideal for these events, and make sure you have a professional property flyer or brochure to give potential buyers when they visit your open house.
- Field offers and negotiate. You don’t just want any offer; you want offers from qualified buyers. Potential buyers should provide you with a mortgage preapproval letter confirming they can afford your home. As you negotiate on price (which could be with the buyer or with their real estate agent), don’t be surprised if the buyer wants a home inspection and if they ask for certain repairs, seller concessions or even a lower price as the result of the inspection.
- Handle paperwork. You’ll need to review the buyer’s offer and draw up a purchase agreement. You’ll also likely need to provide the buyer with state-specific disclosures. Consider hiring a real estate attorney who can help you navigate this part of the process and even assist with the negotiations prior to and during close.
- Get to the Closing Table. Close the deal and celebrate. It’s important you, as the seller, are knowledgeable of the types of closing costs involved in a real estate transaction as some buyers may ask for the seller to help pay for closing costs.
Selling your property via FSBO (or buying a FSBO home) doesn’t have to be difficult. In fact, it may offer some advantages. If your potential buyers aren’t already working with a lender, refer them to AmeriSave. Our experienced mortgage bankers can act as a valuable resource. And if you’re in the market for a home, FSBO or otherwise, our knowledgeable team can work with you to help you obtain a loan that’s right for you.