If you're selling your home, you may wonder whether you should follow the FSBO (for sale by owner) route. After all, selling your home without agent representation could allow you to bypass commission fees, potentially saving you thousands of dollars.
Of course, there's more to selling a house than planting a "For Sale by Owner" sign on your lawn. Selling a home for sale by owner may seem like a simple way to avoid paying a real estate commission, but in actuality, you'll need to put in substantial work and have the appropriate knowledge to guide the sale through escrow and close the deal.
What Is "For Sale by Owner"?
As its name implies, for sale by owner is when a homeowner sells their home without the professional assistance of a real estate agent or broker. Generally, home sellers opt to sell their home FSBO to avoid paying real estate commissions on the home sale. But even if you sell your home yourself, you must still pay the buyer's agent commission.
Not sure if selling your home FSBO is your best option? Weigh the benefits and downsides of FSBO to help determine if this route makes sense for your situation.
Pros of Selling a House For Sale by Owner
- You can avoid paying the seller's commission. Going it alone can save you a substantial sum in real estate commissions. If an agent represents the buyer, you'll likely be on the hook for paying the agent's commission fee, which can run up to 3% of the total sale price. Be prepared to pay other fees for the home inspection, appraisal and property listing in the Multiple Listing Service (MLS).
- You can focus entirely on selling your home. Even the hardest-working seller's agents have to juggle the needs of multiple clients at once. By selling your home FSBO, you can focus all your efforts on one goal: selling your home for the highest possible price.
- You can control the process from start to finish. If you prefer to maintain control of the home selling process, FSBO may be a good option. When you work with an agent, you give your input and listen to your agent's suggestions on critical decisions such as the home price and marketing strategy. By selling your home FSBO, you can set the price and enact your vision for marketing your home and attracting buyers.
Cons of Selling a House For Sale by Owner
- You could get less money for your house. Because you may be less experienced in things such as adequately pricing a home or bargaining with a buyer, your FSBO may fetch a lower price than you'd sell for working with a real estate agent. According to a 2022 National Association of Realtors (NAR) study, FSBOs sell for less on average than the selling price of agent-assisted sales. In 2021, the study found, FSBO homes sold at a median price of $225,000, compared to the median price of $345,000 for homes sold with the help of an agent.
- Selling your home is time-consuming. FSBO can require more time than many people have after work and family commitments. Before you choose this route, carefully consider how many hours you have available compared to the time that selling your home requires. Keep in mind, selling your home involves many processes, including house repairs, marketing, showing your home, negotiating and closing the deal.
- Paying a buyer's commission is advised. Listings in the MLS show the commission the seller will pay a real estate agent whose client buys the house. When a buyer's agent sees an MLS listing with below-market commissions, they are less likely to show your home to the buyers they represent. If you really want to bring buyers to your home, consider adding a statement to your listing that informs buyer's agents they will receive commission in the typical range of 2.5% to 3%.
Should You Sell a Home FSBO?
Given the advantages and disadvantages of the FSBO route, there are times when FSBO makes sense and scenarios when it can be a less-than-ideal option.
Reasons You Might Consider FSBO
- You already have a buyer. If you have a buyer lined up and you agree on the purchase price, you may want to sell your home without agent representation. According to the NAR study, 50% of FSBO sellers knew the buyer of their home. Even so, there's a downside to DIY home selling, as we'll cover in a moment.
- You want a fast home sale. A 2020 NAR report admits that FSBO homes sold faster than agent-assisted homes, usually in less than two weeks. Perhaps that's because FSBO sellers know the buyer 50% of the time. While selling your home fast is nice, it may not be worth the lower sale price most FSBOs receive compared to agent-represented homes, even when you factor in the savings from not paying the seller's commission.
Reasons You Shouldn't Consider FSBO
- You don't have legal expertise. Selling a home can be complex, and the potential for things to go wrong is always present. Even if you already have a buyer ready to purchase your home, you could be legally exposed if you don't have a brokerage behind you to safeguard your legal liabilities.
- You don't have sufficient time. While many FSBOs sell quickly, others sit on the market longer than homes with agent representation. Remember, selling a home is time-consuming and can effectively be a full-time job. If you don't have the time for marketing, showings, negotiations and other processes, your chances of success diminish.
The Bottom Line
Home sellers often seek to sell their home FSBO to save money by avoiding agent commissions. But many times, the results can be unfavorable. Statistics show that working with a real estate agent nets a higher asking price, more than enough to cover the agent commission fees and still come out ahead.
Selling your home FSBO can also inadvertently leave you with legal liability. If you choose the FSBO route, consider hiring a real estate attorney to review the buyer's offer and purchase contract and to provide other counsel.