Is for sale by owner worth it?

By Meeghan Truelove

You’re selling your home. You want to maximize profits. Skirting the real estate agent fees seems like a smart way to do this — but is it?

What is for sale by owner (FSBO)?

FSBO (pronounced “fizz-bow”) is the acronym for “for sale by owner.” In a FSBO transaction, the home seller goes it alone without a real estate agent and represents their own property on the market. This might include:

• Preparing the home for listing photos (and potentially taking those photos)

• Pricing the home, which could involve researching comps

• Marketing the home online or elsewhere

• Scheduling showings

• Negotiating offers and executing a contract

• Navigating the appraisal, inspection, and closing

FSBO sellers often take on most of this work themselves, then enlist a real estate attorney to help with the finer points of the purchase agreement.

Why FSBO?

The main reason a home seller chooses to go the FSBO route is to avoid paying real estate agent commissions, which average around 5 percent, according to Real Trends. The thinking is, that by listing the home without an agent, the seller can save money, ultimately increasing their bottom line.

Another reason a seller might opt for FSBO is if the speed of the sale is more important than maximizing profit. If the seller needs to move and has a buyer already lined up, for example, there’s no need to delay the process with additional showings or open houses and extended negotiations.

Likewise, FSBO can also be an option if a seller isn’t in a rush — the seller can simply wait, on their timeline, to see if any buyers bite.

Is FSBO worth it for the seller?

The best chance for success with FSBO is almost certainly in a hot seller’s market, where there’s high buyer demand and low inventory. It’s much easier to sell a home, with or without a real estate agent, when there are plenty of buyers looking.

FSBO can also be a viable option if you’ve got a prequalified buyer already interested in the property.

Steven Lamorte, vice president with Westchester Property Management Group in New York, experienced this very scenario. He and his wife were prepping their condo for the market when a neighbor told him she might know a serious buyer. The buyer was indeed interested and offered the Lamortes full asking price. They had attorneys draw up the contract.

“Agents are great,” Lamorte says, “and if the market…hadn’t been so incredibly hot, we would have used one, but we lucked out finding the right buyers at the right time for a FSBO deal and it was a positive experience for both parties.”

On the flip side, in a more balanced or buyer’s market, FSBO might not net the seller the most money. That’s because while FSBO spares you from paying agent commissions, you might lose out on a higher purchase price without the help of an agent marketing your home to the widest pool of buyers.

So, if the market’s favoring buyers and profit is most important to you, it might be better to work with an agent (and pay those fees) instead of selling your home yourself.

In a similar vein, if you aren’t familiar with the housing market or how real estate transactions work, FSBO might not be worth the headaches you could encounter. If you price your home on your own and it’s too high for the market, for instance, you’ll have to deal with reducing the price and relisting, which could ultimately cost you money.

What if I’m the buyer?

Sometimes, a buyer can get a better deal on a FSBO property, especially if the seller is inexperienced with pricing or willing to share some cost savings of forgoing agent commissions.

Bear in mind, though, that when sellers represent themselves in a FSBO deal, they’re responsible for all the logistics and legal machinations on their end. If the seller is in over their head, it could jeopardize the deal for both parties. So whether you’re looking at FSBO properties with or without an agent, it’s best to have your own attorney on standby for any questions or complications.

This article is also posted on Bankrate here.