For Sale By Owner: A Complete Guide
Molly Grace7-Minute Read
December 30, 2020
For faithful DIYers, there’s nothing more satisfying than completing a job on your own and saving yourself the money it would have cost for you to hire a professional.
It’s this feeling of satisfaction that drives many of these same people to DIY selling their homes. How exactly does this work?
Let’s take a look at how the for sale by owner process works.
What Does For Sale By Owner Mean?
The term “for sale by owner” (sometimes called FSBO) refers to when a homeowner sells their home without the help of a real estate agent.
One of the main reasons sellers choose to go the FSBO route is because they want to try to maximize their profits when they sell their home. Real estate agents are paid commission on the homes they sell; forgo the real estate agent and you get to keep that money for yourself.
However, there are a lot of benefits that come with hiring a professional real estate agent, and going without one can actually end up costing you more in the long run. We’ll discuss this more in depth further down.
Another common reason that sellers choose to FSBO is that they often already know the person they’re selling the home to, so they don’t need a real estate agent to help them market the home to attract buyers.
Benefits Of Listing As For Sale By Owner
When a home sale is completed, it’s typically incumbent on the seller to pay the commission of both the buyer’s agent and their listing agent. The total commission is typically around 6% of the sale price, 3% of which goes to the buyer’s agent, with the listing agent getting the remaining 3%.
This commission comes out of the seller’s proceeds from the sale. So if you sell your home for $250,000, $15,000 of that goes to the agents involved in the process.
This commission is the reason why many FSBO sellers decide to sell the home themselves rather than use a listing agent. Though you’ll likely still have to pay the buyer’s agent’s commission, you’ll cut in half the amount of money you have to part with.
Things To Consider About For Sale By Owner Listings
If you prefer a more hands-on, do-it-yourself approach, you may prefer a FSBO sale, where you can control every aspect of it, from pricing to staging to contract details.
However, the FSBO route also comes with a lot of risks. Consider this: though making more money is often the goal of FSBO sellers, they often net less than those who work with an agent. According to the National Association of REALTORS®, FSBO homes sold at a median of $217,900 in 2019, while agent-assisted homes sold at $242,300. Even after the median agent-assisted seller pays a 6% commission, they’ll still net $227,762.
Why do agent-assisted homes sell for more? That’s the benefit of having a professional do the work for you.
Real estate agents receive training on how to effectively market and sell homes. They know how to price homes to sell, how to stage a home for showings, how to vet potential buyers, how to negotiate contracts and how to navigate your state’s laws regarding real estate transactions.
Because it’s their job, real estate agents can give each home sale they’re responsible for much more attention than the average FSBO seller, who likely has a full-time job or other responsibilities taking up most of their time. Professional real estate agents prioritize being available to answer calls or emails from potential buyers and coordinate showings or open houses.
These things can make a big difference when it comes to selling your home for its full market value.
The For Sale By Owner Process
If you think you have what it takes to successfully sell your home, here’s what that process will typically look like – keep in mind, however, that the requirements for selling a home vary a bit by location, and you may have to take additional steps not mentioned here depending on what state you live in.
Set The Asking Price
One of the first and most vital things you’ll need to do is decide how much you want to sell your home for. A home’s asking price should be based on how much similar homes in the area are selling for.
When a professional agent prices a home, they usually create a report called a comparative market analysis (CMA), which looks at the sale price of recently-sold homes that are similar to yours.
These similar homes are known as comparables, or comps, and they’re the key to correctly pricing your home to sell.
Comps include homes that are similar to yours in size, number of bedrooms, age, condition, features and location – comps should be physically near each other, such as in the same neighborhood or at least in a similar neighborhood in the same school district. They should have sold recently, within the previous 3 – 6 months.
When pricing your home, do your research and find as many comps as you can to get a full picture of how much homes like yours are selling for. Only look at homes that have recently sold, as a home’s listing price can differ quite a bit from what it ends up actually selling for.
Once you’ve found some solid comps, you should have a better idea of what your home’s market value is.
If you have any additional features that make your home stand out from other nearby homes (maybe you recently upgraded the kitchen or installed brand new windows), you can adjust your price to reflect that. However, be careful about overestimating how much value your upgrades add; don’t expect a dollar-for-dollar return on pricey renovations.
To get an idea of how much your home is worth, check out the Rocket HomesSM Property Report tool.
Market And Advertise The Listing
Thanks to the internet, attracting prospective buyers to your FSBO home is easier than ever, with endless online resources for sellers looking to effectively market and sell their homes.
When you sell FSBO, it’s important to get the word out about your home. Since most buyers are conducting at least part of their home searches online, it’s vital that you list your home on all the sites buyers are searching on and make your listing as attractive as possible.
This means having great photos and, potentially, video. You may want to consider hiring a professional photographer with experience in photographing real estate to properly showcase your home.
Host Tours And Appointments
When you choose not to work with a real estate agent, you’ll be the one responsible for making sure that buyers get to actually see your home in person.
First and foremost, it’s vital that you keep your phone on you and make yourself available to answer calls from potential buyers. The more interested buyers you can give showings to, the more likely you are to find a buyer who wants to make an offer.
You should also consider creating a flyer to give to anyone who tours your home. Include basic information about the home and some photos highlighting its best features.
However, be sure to take proper safety precautions when showing your home or hosting open houses. Be careful about what information you share with buyers and put away personal belongings when people are viewing your home. Only allow buyers accompanied by a licensed real estate agent to tour your home.
Negotiate And Finalize The Offer
Once a buyer has submitted an offer, you can reject it, negotiate it or accept it as written.
You should only consider offers that are submitted with either a mortgage preapproval letter or proof of sufficient funds to purchase in cash. This shows that they’re serious and actually able to complete the sale.
If the offer is lower than you expected, you can always negotiate for a higher price. Be careful, though, about getting emotional about your home’s sale price. It’s natural to feel a little defensive if a buyer tries to lowball you, but you should try to remain as objective and realistic as possible.
At this stage, it might be a good idea to hire a real estate attorney. Selling a home is a legally regulated process that involves a lot of paperwork and certain disclosures. Having a lawyer on your side who can ensure you’re following your state’s laws and that your interests are represented in the contract can potentially save you a lot of money and headaches down the road.
Close The Deal
Once you accept the offer, a closing will be scheduled and your sale will be on its way to completion. During this time, be sure to keep the lines of communication open between you and the buyer or their agent.
Once buyer closes on the house, you’ll receive the proceeds, minus the buyer’s agent’s commission.
The Bottom Line
Selling your home on your own can be challenging. Though it gives you control of every aspect of the marketing and selling of your home, it also comes with a lot of responsibilities. If you’re not careful, you could end up selling your home for less than it’s worth.
Be sure to first consider all the pros and cons and ensure that you’re able to put in the time needed to successfully sell your home before you decide to sell FSBO.
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