For Sale By Owner

The Good, The Bad, and The Ugly

When ready to sell their home, many homeowners consider selling their house themselves to save on commissions. This is known as “For Sale By Owner,” or “FSBO” (pronounced fizzbo). As a real estate agency, you might expect that we would discourage this, but for some people this can be quite effective.

First, the good:

The Good #1 - Save on commissions.

Saving commission costs. Real estate agents must earn a living somehow, and usually (not always) this is done by collecting a percentage commission when a house is sold. This rate is negotiatable, usually between 4%-7% and most commonly 6%. A portion of this comission goes to the agent representing the seller and the other portion goes to an agent that might be representing the buyer. For an item as expensive as a home, these commissions can be quite large. Selling your home without the use of a real estate agent means you avoid these commission. That's definitely good!

However, here are the bads:

The Bad #1 – Limited audience.

With the age of the internet, ideally there would be one single, marvelous website where all homes for sale were listed. Sadly, there is not. The largest list of homes for sale is the Multiple Listing Services (MLS) that are run indirectly, for and by, by real estate agents. Most internet sites pull from these listings, yielding the most wide-reaching marketing. For buyers that are using a real estate agent, their agent is also leveraging these listing services. So the worse part of FSBO can be summed up by having less access to buyers. If there are a thousand people that might be potentially purchase your home, only a fraction of them will even know it is on the market. This may result in a seller receiving less for their home than they otherwise could sell it for. Fortunately, firms such as New Option Realty, offer flat-fee listings, where you can have your home listed in the MLS, for a flat fee rather than commission.

The Bad #2 – Setting the asking price.

There is another key benefit that real estate agents have with the MLS. They have a record of sale prices for homes. Using this record, they can help sellers estimate the value of their home. This is called a Comparative Market Analysis (CMA). In our experience, online websites that give value estimates, such as Zillow, are grossly inaccurate and out of date. The good thing is that many real estate agencies will offer you a free CMA (including New Option Realty) so you can get an idea of what to ask for your home. With free CMAs and flat-fee listings, most of the “bad” of selling your own home can be removed. But there’s always…

The Bad #3 – The work.

Doing FSBO requires you to the all the work. You will still have to handle the phone calls, the negotiations and the closings all on your own. Even if you have an agent, you will still be involved in much of this anyway, so if you are experienced and know the process, you will likely be just fine. If you mitigate the first two “bads” by getting a CMS so you will know what price range to target and listed your home in the MLS to have a broad reach for potential buyers, you’ll probably be happy to negotiate the offers. New Option Realty does offer assistance for all the “other” tasks you may want help with and we charge a reasonable hourly rate for the work.

And...

The Ugly – Buyer’s Agent commission.

For good or bad, a large number of buyers use a real estate agent to help them find and purchase a home. These agents generally earn a living based on commissions paid at the time of closing. When a house is listed in the MLS, a buyer’s agent commission can be set, which is how much the buyer’s agent will receive at closing (paid by the seller). Licensed agents are bound by a code of ethics to help their customers find the house that is best for them, and therefore, they should still let their buyer’s know about your property, even if you don’t pay a buyer’s agent commission. However, agents are people, they have families to support, etc. If there are dozens of homes to send over in a list to their client, they have no motivation to include yours in the list unless it better meets their customer’s needs. They have a good reason, no commission, for leaving it off the list. This quandary, as well as others, is why New Option Realty works on a fee basis rather than a commission. We want to do what’s best for the customer each and every time and have everything “above the board”. We recommend that all of our seller’s listing with us offer a buyer’s agent commission to help mitigate this last “bad”. That reduced your savings from selling your own home, but greatly increases your pool of potential buyers.

If you can think of any other pros or cons with FSBO, let us know. We love working with experienced home sellers so they can maximize what they get to keep when selling their home.