By Bob Musinski, Mike Cetera
Reviewed: Rachel Witkowski
Courtesy of Forbes.com
It’s tempting to bypass a real estate agent and sell your home on your own, especially in a hot housing market. You could save thousands of dollars in commission fees if all goes well.
It’s not that straightforward, though. Selling a home is often a complex process, and you need to have the appropriate expertise and enough time to close a deal that gets you fair market value.
Here is a look at what it means to sell your house without a real estate agent, the challenges and rewards and who else you may need to seek help from if you’re going to go it alone.
What Is For Sale By Owner?
Homeowners who choose the for sale by owner (FSBO) option lead all or most of the process, from listing the home and showing it to prospective buyers, to negotiating the deal and closing.
FSBOs usually fall into one of these two categories:
The seller and buyer know each other. If you want to sell your home to a family member or friend, you might find it easy to sell without a real estate agent. It’s assumed that many FSBO transactions fall under this scenario because, as a National Association of Realtors (NAR) survey noted, 46% of FSBO sellers did not actively market their home, which seems to indicate the buyers and sellers knew each other.
The seller wants to go it alone. You can lead the process to set a price for your home, market it online and handle all the negotiations. There are plenty of ways to get assistance with the FSBO process, including websites such as fsbo.com and forsalebyowner.com that showcase homes across the country.
Benefits of Selling Your Home Yourself
There’s one major motivating factor that drives homeowners to consider going it alone: cash. But keeping the real estate commission for yourself isn’t the exclusive benefit to selling your house without a real estate agent. Here are three benefits to FSBO:
FBSO can save you money. A seller can save several thousand dollars in commission fees by not hiring a real estate agent. The more DIY you make it, the less you’re likely to pay others. But you’ll need to account for the many costs associated with home listing and selling, such as posting the home on the Multiple Listing Service (MLS). Also, if the buyer has an agent, you’ll probably pay that agent’s commission, which could be up to 3% of the sale price.
You control the process. You can determine your price, whether or where the house is marketed and handle all negotiations when you opt for FSBO. Of course, you also have a say in all of these things when you work with an agent.
Your home may sell quicker. The NAR admitted in a recent survey that FSBO homes sold more quickly than agent-assisted homes. The NAR says 77% of FSBO homes were sold in two weeks or less, but that’s usually because the seller knows the buyer.
Drawbacks of Selling Your Home Yourself
There is a reason why some home sellers try FSBO for a while, then decide to hire an agent after not selling their home—it’s not easy. Here are a couple of reasons FSBO might not work well:
You lack expertise. Unless you have an extensive background in real estate, you might not be able to effectively handle the most important parts of the job, such as setting a market-friendly price, staging and marketing the home, and reviewing and negotiating a purchase contract and other details. You can’t afford to fail in any of those areas.
It takes much of your time. FSBO sounds like a cool DIY project–you know the home, the neighborhood and what you want to get for the home, and it’s a hot market. Sounds easy, right? But consider the hours it will take to determine the price, stage the home (including making necessary repairs), marketing and showing the home and negotiations.
7 Steps to Sell Your Home Yourself
If after looking at the benefits and drawbacks of selling your home on your own, you decide FSBO is still the right move, there are things you can do to better position yourself for success. Follow these steps when selling your home on your own:
1. Weigh the Pros and Cons
This could be the most expensive transaction of your life, and you don’t want to mess it up. Make sure you consider all situations and not just how much money you might save. For example, can you effectively search for a new home while you’re trying to sell your current one on your own?
2. Get the House Ready
This could take a while if you need to make minor repairs in addition to freshening up the interior and exterior. This is an important step whether you’re doing FSBO or working with an agent, and it’s best if you’re not doing this while marketing the home. You also want to have the home staged as early as possible for photos that will be posted online.
3. Set the Price
You could do your homework on homes sold in your area, get a comparative market analysis (CMA) from an agent and consult real estate websites for estimates. You might also want to hire an appraiser, as that will be a requirement during the home buying process anyway.
4. Market the Home
There are several FSBO website options as well as the MLS, and the costs can add up if you’re not careful. You could also put up yard signs, print flyers, post on social media, talk to friends and family and possibly even set up your own website.
5. Show the Home
In-person visits can be tricky, especially if you have children and pets to get out of the home for every showing or if you have concerns about coronavirus-related exposure. One alternative is to offer a video tour that’s live or online, but eventually, the prospective buyers and inspector will need to have an in-person look.
6. Review Paperwork and Negotiate
You’ll need to review a buyer’s offer in writing and the purchase contract, which is when it might be ideal to rely on an attorney. Prospective buyers will try to include contingencies that can make the purchase dependent on what they discover during the inspection, for example. Also, you need to provide disclosures to buyers, which are often required by state law.
7. Close the Sale
This is the culmination of the process, and some states might require you to have a lawyer if you haven’t hired one already. The hope is that, once the process is over, you’ll get the price you want for a cost that would be less than if you had hired an agent.
Experts You May Still Need to Hire
Even if you choose to sell the home yourself, there are some real estate professionals you may need to hire to help you complete the process, including:
An appraiser. A professional appraiser could provide some valuable insight into how your home compares with similar ones in your area.
A real estate attorney. Unless you are an expert in contract law and negotiating expensive deals, you might want to consult with a real estate attorney who can help review the purchase contract, negotiate issues related to the inspection and assist at closing.
A title company. Sellers usually provide the owner’s title insurance policy, which can be obtained through a title company. Once you are under contract, the title company could be an impartial third party to hold the buyer’s earnest money. The company also could help you with preparing closing documents and disbursing funds at closing.
The iBuyer Option
A new digitally based option to sell your home without an agent has emerged in the last several years, led by websites such as Opendoor, Redfin (Redfin Direct) and Zillow (Zillow Offers). They’re called iBuyer sites, and generally operate in this way:
If you sell direct, you can get paid quickly–possibly within days–and the company might take care of any repairs that might be needed
If you list, the company will help you find a buyer. Opendoor offers buyers a $10,000 interest-free advance for renovations
You’ll want to make sure you understand the limitations (some services are only available in limited markets), the process and the costs. The sites often operate on a fee-based model, so you might end up saving money but not as much as if you handled the entire process yourself.
How Much Can You Realistically Save With FSBO?
Sellers who limit expenses when they successfully sell homes on their own can save thousands of dollars, but there are many variables.
For example, if you’re selling a home to a family member and have agreed upon a fair market price, you can save on marketing costs and likely just need to hire a real estate attorney, which could be around $500.
A typical real estate commission is 5% to 6%, which could mean about $10,000 to $12,000 on a $200,000 home if the sale involves both the seller’s and buyer’s agents. If you have to pay a buyer’s agent, that amount could be cut in half or close to it, because the seller’s agent and buyer’s agent usually split the commission total at closing.
If you go full-on FSBO, the costs for staging, marketing and hiring experts and partners such as lawyers and appraisers could cut your total savings by $1,000 or more (unless you would have needed to hire a lawyer regardless).
Then there’s time. How much is it worth for you to spend dozens if not hundreds of hours preparing, marketing and showing your home, then negotiating an offer and the closing?
Also, according to a NAR survey about 2018 home sales, about 8% of home sales are FSBO, and they typically sold for just under $218,000. In contrast, agent-assisted home sales averaged about $295,000.
If going the FSBO route is worth your time and you have the expertise, then it’s worth a try. But you might find that you’re better off hiring a professional for such a large and important transaction.