For sale by owner (FSBO) is when a homeowner lists their home for sale without the use of a professional real estate agent. If you are an FSBO seller, then you are responsible for the sales process from beginning to end which includes the pricing, marketing, listing, staging, showings, negotiating, closing, and paperwork. Below is a comparison between having a real estate agent handle everything versus selling your home independently.
Profit and Commission
A lot of homeowners may think that a home sale by owner option sounds like a better deal for them than hiring a real estate agent because they don’t have to pay commission and want to maximize their profits. However, in some cases, the seller may not walk away with the most money by going the FSBO route. According to the National Association of Realtor’s (NAR) 2018 Profile of Home Buyers and Sellers, the average FSBO sales price was $200,000, while for a home represented by an agent got a median price of $264,900. This is nearly a $65,000 difference! While it is tempting to lower the commission percentage in order to get more profit from the sale, the incentive for the real estate agent is to also gain more profit and so they will work hard to attract potential buyers and negotiate a higher selling price to benefit both you and them.
FSBO sellers often priced their house incorrectly. You could underestimate or overestimate the value of your home. FSBO sellers tend to use free online assessment tools or use other houses in their neighborhood as a reference to determine the property value, leading to an inaccurate listing price. If the price is too high, there’s a risk of turning off potential buyers. If the price is too low, then there’s that loss of money that you could have gained. A real estate agent will be able to provide you with an accurate home value based on thorough market analysis.
FSBO homes are sold more quickly (less than two weeks) than agent-assisted homes due to the fact that 73% of FSBO sellers knew the buyer, according to NAR. But for the other 27%, this is not the case, so you may wait much longer for a closed deal if you don’t have the proper marketing knowledge and tools. FSBO sellers are not likely to reach their target audience by just doing some simple social media marketing or have a sign posted in front of the house. You need to know how to properly target the right people who are the most likely to be interested in the property with the intention to buy it. Agents are able to offer more exposure by putting the property listing through the Multiple Listing Service (MLS), allowing them to promote the listing to other agents to share with their clients who may be interested in the property. MLS contains a vast majority of houses listed for sale. However, the thing about MLS is that it’s only accessible by licensed real estate agents. By using a great real estate sales strategy, agents know how to market to the right buyers and how to reach them through various marketing channels, thus getting the best visibility and higher chance of the house being sold.
Staging and Showings
You could also spend too much or too little on staging and renovation. A good real estate agent has an eye for detail and they can recommend small changes that fit within your budget that will lead to more money and better ROI when it’s time for negotiation with the buyer. Regarding showings, buyers can be uncomfortable with the seller around, so having an agent is helpful. As FSBO seller, you would need to deal with people who are simply there to just look with no intention of buying the house as well as house flipper who are looking make a profit from your house. A real estate agent will handle the scheduling, house tours and all these other hassles for you.
Paperwork and Liability
The paperwork during the closing process can be long and difficult if you don’t know much about contract law. There can be more than 20 pages of paperwork that needs to be covered and filled out which includes the contract and addendums. If you don’t know the law and required paperwork specific to your community, then there’s a chance that you’ll be opening yourself up to lawsuits. An agent will handle all the property disclosures and documentation to avoid any liability in the future.