Understanding for Sale by Owner (FSBO)
For Sale By Owner (FSBO) is a method of selling property in which the seller does not involve a real estate agent or broker.
The main reason to take the FSBO route is saving up on agent commission and fee, which can often be as high as several thousand dollars.
However, with responsibilities ranging from marketing the house to drawing up a for sale by owner contract, this selling approach can be daunting and stressful. But what exactly are the steps involved in the FSBO process?
For Sale By Owner Process:
Although the precise tasks and responsibilities might vary from sale to sale, below is an outline of the steps common to most FSBO sales:
- Firstly, the seller needs to determine the accurate asking price of their property. This can be done by researching the property value of neighborhood homes with similar features, like square footage or the number of rooms.
- The next step - and arguably the hardest - is marketing the house. You could get brochures or fliers distributed, list your house online, or even place newspaper ads.
- Once the advertisements are out, you need to schedule the showings or appointments with potential buyers.
- Once you accept an offer from a potential buyer, the next step, if needed, is the price negotiation.
- Upon agreeing on the price, a for sale by owner contract is written up, outlining all the pre-agreed conditions of sale. Some companies even offer free For Sale By Owner contracts.
- Once both the parties have signed the contract, the sale is closed, and the deed of the house is signed over to the buyer.
FSBO owners can seek help from various services. For instance, an MLS (Multiple Listing Service) helps people determine their property's fair value by linking them up with specialist brokers and appraisers.
Moreover, MLSs can also provide guidance on property marketing and legal paperwork involved. Some companies also have services that let you benefit from free paperwork for selling a house by owner.
What are the benefits of an FSBO sale?
Traditionally, when someone wanted to sell their house, they would turn to a real estate agent or broker to take care of the sale process. Although involving brokers or agents can save a lot of precious time for the homeowner, these professionals do not come cheap. Moreover, brokers charge a commission that is approximately 6% of the property's selling price, resulting in reduced profit for the seller.
For instance, if your house sells for a price of $600,000, the broker will keep $36000 from the deal ($600,000 * 6%). In other words, you will make only $564,000 from the sale of your house.
On the other hand, if you conducted the entire sale process by yourself, you could have kept 100% of the sale proceeds. This cost-saving is why people who know how real estate transactions work, and are comfortable with the selling process, do not involve agents and brokers.
It is never a bad idea to think about saving money - especially when we are talking thousands of dollars. However, it is also important to remember that not involving an agent would mean that you, the seller, will bear all responsibilities involved with the transaction.
If you are not familiar with real estate transactions, you might not pay enough attention to detail and end up committing a costly error. For instance, if you do not have an idea about a fair asking price, you could ask for a price that is too high and drive away potential purchasers. On the flip side, a lower-than-normal asking price could mean that you inadvertently end up selling your house at a significant loss.
Also, make sure to comply with all the legal requirements associated with an FSBO sale. Draw up the legal documents as required, such as property disclosures, lead paint records, and occupancy agreements.
Also, make sure to disclose all adequate details about your house. Another essential factor to consider is the media you will use to advertise your house - do not underestimate the importance of a yard sign. Will you photograph your house yourself or hire a professional photographer? At what time will you conduct the house tours, and how many people will you attend to at a time?
The internet - and the unlimited wealth of learning resources that come with it - have allowed people to self-educate on topics without needing any help from professionals. Undoubtedly, this has also played an important part in the recent rise of FSBO sales.
Although a For Sale By Owner approach might feel overwhelming at times, just remember to access multiple resources to arm yourself with the requisite knowledge, then think like a real-estate professional and come up with a sound strategy for successfully selling your house.
Do not shy away from taking assistance from relevant resources like MLSs and other services like those which provide free paperwork for selling a house by owner (although you might have to spend a bit on some of these services, it will still be significantly less than what you will save if you are able to execute a successful FSBO sale).