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FSBO: Tread with Caution

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By : Justin McClain    99 or more times read
Recently I had a friend who was interested in listing their home for sale and asked me to discuss the difference between having a licensed agent list their home as opposed to listing their home on their own as a For Sale By Owner (FSBO). After our discussion I thought this might be something good to share with others who may benefit from knowing this knowledge.

My goal of this article is not to scare anyone from selling their home on their own, but to point out the common pitfalls that people fall in and why itís recommended to thoroughly research your options. The thought of selling your own home appeals to many homeowners as it allows the potential to save thousands of dollars. On the contrary, this can also cost thousands of dollars if not done properly. Taking on the job of selling your own home will lead to taking on a large amount of work and responsibility.

It is obvious that most homeowners choose to sell their own home in an effort to save money. A full service brokerage firm will usually charge 6% of the total sales price as their fee. Therefore if your home were to sell for $600,000 the fee would be $36,000 which is typically split between both the buyer and sellers brokerage firms. This would be the amount a homeowner could save. However if you underestimate the worth of your home, miss file paperwork, leave it on the market for too long, you could lose even more. Also, something to consider is most buyers will be represented by an agent who will request 3-4% when working with a FSBO as they will probably be doing more work than if the seller were represented by a licensed agent. In the end, (if you get full price) your real savings would be $15,000, is this worth any headaches and potential legal problems down the road?

Itís important to calculate how much money you would save without the use of a licensed agent and decide if this would be worth the effort and time you would need to dedicate to the sale of your home. This would involve researching legal issues, necessary contracts, technicalities of contracts, as well as having the knowledge of the real estate market in your area and in general; this is something a licensed agent has already done and should be doing on a daily basis. If you donít have time to do the research you may want to consider working with a professional.

Marketing your home can seem quite simple. Getting posters, signs, fliers, newspaper and magazine ads are something that is available to everyone. A licensed real estate agent has access to MLS, the Multiple Listing Service, which is a computer database service where agents can share property information across the state or even the country. Real estate professionals have access to MLS. An option is to pay a fee to have your home listed on MLS, however if the home does sell through MLS you will need to pay a fee to the buyers brokerage firm.

In addition to MLS, licensed agents will know how to properly market your property. The best chance to sell your home is in the first 60 days of listing the property for sale. Therefore, it is very important to properly market your property to the potential buyers or the individuals who will bring the buyers. A licensed agent will put together an individual marketing plan for your property.

Selling your own home will require you to put the money forward for any sale-related costs, including: appraisal of the home, costs of experts to determine the value of the home, title insurance and title investigators. With a licensed agent, the agency will absorb the costs of marketing and legal fees.

On top of having to pay for the costs of various professionals, you will also be responsible for finding these individuals. A licensed agent will have access to professionals who you can contact. They can also give their feedback on ones they have worked with on previous transactions.

Negotiation is a very important part of selling a home, it is a business transaction and there may be individuals coming in with ridiculously low offers that are not intended to be accepted. A licensed agent can help to ensure you have a strong negotiating platform, especially knowing there is a good chance the buyer has an agent working for them.

Real estate contracts can be long and complicated. Most individuals who are determined to sell their home on their own will need to consult a lawyer to look over any contracts involved. This can be a very costly process. This is an area you want a licensed professional on your side as one word can make all the difference.

Being a homeowner has a potential negative as you may have built an emotional attachment in your home. There is a risk of attaching too much sentimental value to your home and putting value that would not be there for another buyer. A licensed agent will act as a third party, and although they will act in your best interest, they wonít have an emotional attachment to the property.

If you have the time, patience, money and desire to sell your home by yourself, then you may want to consider selling your home as a FSBO. Be aware of what you are getting yourself into first, there is a reason real estate agents exist; buying and selling property is not easy. Overall, you may decide that your time, piece of mind and happiness is worth more than the money you could save. Research your options and choose wisely.
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