Selling Property as a For Sale By Owner (FSBO)
There are a variety of considerations to be made in connection with selling a home, including whether or not to do so as an unrepresented seller, more commonly referred to as a For Sale By Owner (FSBO). Outlined below is a summary of the major advantages and disadvantages of selling your home as an unrepresented seller.
ADVANTAGES
No Payment of Commission/Brokerage Fees
If you are able to sell the property without representation at its true market value, you will retain all the proceeds from the sale of the house (less any marketing costs, seller-related closing costs and the cooperative commission you may pay to a buyer’s agent). This is the number one reason people choose to sell their home themselves and is the most significant benefit in doing so.
Knowledge of Property
Most likely you know the property better than any realtor could ever know it and are in a unique position to “sell” the positive aspects of the property.
Control
You remain in complete control of the selling side of the transaction and do not need to negotiate through a representative/real estate broker.
DISADVANTAGES
Less Net Proceeds from Sale
Unrepresented sellers sell their homes on average for 15-20% less than homes sold through a full-service realtor. This means that even when paying a typical listing commission of between 5-7%, homeowners using a realtor net an average 10-15% more than homes sold by unrepresented sellers.
Safety
You must be willing to show your property to whoever expresses interest, regardless of their true motivation. Sometimes this may be while you are alone or have children in the house, whereas realtors accompany buyers and are usually able to “weed out” suspicious persons or unqualified buyers.
Time
You must be available at your home in order to show the property. When working with a realtor, you do not need to be home for buyers to view your home. Also, with a realtor you can request advance notice of showings and set ‘no showing’ times.
Legal Liability
Liability for mistakes made on the seller’s side of the transaction, even seemingly minor ones, will be entirely your responsibility. You will be responsible for fully complying with federal, state and local laws, including, among other things, federal and state equal housing laws (e.g. the Fair Housing Act) and all required seller disclosures. Disclosure laws in particular are constantly changing and realtors complete continuing education courses to stay abreast of these changes for your protection. Please be aware, however, that a real estate professional cannot provide legal advice unless he/she is also a licensed attorney, so even with seller-agent representation, questions that require legal advice or opinions should be directed to a qualified lawyer.
Limited Exposure to Realtors’ Clients
Over 90% of buyers work with a realtor when purchasing a home and many realtors avoid showing For Sale By Owner properties to their buyer clients, largely out of fear that (1) the seller will not pay a finder’s commission to the realtor for bringing a buyer to that property, and (2) they will get stuck doing the work that is normally done by the seller’s realtor, in addition to the work required in representing their client through the transaction.
Unequal Bargaining Position
As the overwhelming majority of buyers will be represented throughout the transaction by real estate professionals, buyers may be armed with significant knowledge and expertise provided by their realtor that you will not share. Most unrepresented sellers do not have the same level experience with real estate negotiations and generally accepted industry practices as the realtors that will be representing the buyers in the transaction.
No Inclusion in Multiple List Service (MLS)
A full-service realtor will list your property at no cost in the local MLS, where it will be exposed to thousands of realtors and any buyers who are doing web-based searches for property (over 80% of buyers begin their home search online, often before contacting a realtor) through sites with MLS feeds like realtor.com.
Unfamiliarity with Offers/Contracts
You will be solely responsible for reviewing, understanding, and in some cases providing, paperwork, legal forms, addenda, etc., as part of the transaction. The paperwork involved in offers, counteroffers, and post-ratification negotiations can be complicated.
Unfamiliarity with Financing
You need to be as familiar with financing terms as your buyer or buyer’s agent. In a multiple offer situation, the offer with the highest price is not always the strongest, most reliable offer to choose. There are thousands of loan programs available to buyers today, yet being able to quickly evaluate the relative strength of a prospective buyer’s financing terms is important.
Unfamiliarity with Closing/Settlement
If you are not familiar with the process of the closing/settlement, the often nuanced conditions of sale, or obligations of the parties pursuant to the contract, you may end up leaving money on the table—that is, in the buyer’s pocket—or worse, a deal that falls apart.
Inaccurate Pricing
One of the most important steps in marketing your property is selecting an appropriate sales price, yet without the experience or technological tools available to realtors, this can be a difficult task. Over-pricing and under-pricing both carry significant disadvantages to you.
Faulty Buyer Perceptions
Many buyers perceive For Sale By Owner properties as an opportunity to get a bargain-priced property, as they often think the savings incurred by not listing with a realtor should go to them, not you.
Advertising Costs
You must pay out-of-pocket all costs related to marketing your home—as well as be familiar with which advertising venues are most effective for your specific property.
Inexperience
You must rely on you own instincts and knowledge during the selling and negotiation process, and not the training and experience of a licensed real estate professional.
