What is For Sale By Owner?
In the U.S., “For Sale By Owner” (known simply as FSBO) is seen as a way to optimize the financial return on your house sale. Basically, if you are not using a real estate agency to sell the house for you, and you are doing all the marketing and negotiating yourself, you will not need to pay any agent’s commission.
Don’t be under any illusions, however. Going down the FSBO route and selling your house yourself is no easy endeavor – it can be an immense challenge.
In fact, during 2020, only 8% of house sellers in the U.S. used the FSBO method.
That said, thousands and thousands of American homeowners take the bull by the horns and embark on their own house sale every month. Furthermore, once you fully know the process involved, it’s actually very doable.
By the way, here’s another little nugget of information you’ll find useful – if you want to sound like someone who knows a little about the real estate business, FSBO is pronounced “Fizz-bo.”
However, one truth remains.
It’s still an immense challenge, nothing like you’ve ever done before, and you’ll get absolutely nowhere selling your own house yourself if you do not have a tried and trusted strategy for doing so – one that has been proven to work, time and time again.
In this article, among many other useful pieces of vital information for all FSBO sellers, such as the avoidable common mistakes many FSBO sellers make, we’ll provide you with as near-perfect a FSBO strategy as you’ll find anywhere.
Why Do Homeowners Sell Their House FSBO?
The most obvious reason to sell your house yourself is a simple one – to maximize as much profit from the sale as possible. By selling your home FSBO, you avoid the need to pay a real estate commission – usually around 6% of the sale price.
Here’s an example:
With a real estate commission of 6% of the sale price, if you are selling a house for $400,000, you will have to pay a commission of $24,000.
Now that $24,000 – or 6% – may not seem like too much out of a $400k sale, but here’s the reality.
Even though the commission is based on the sale price of the property, it’s actually paid out of any home equity you have on the property.
Here’s what we mean:
Although your home may be worth $400,000, you may well have a $250,000 mortgage on it, meaning your net equity on the property is $150,000.
So, if you’re paying a real estate commission, you will have to reduce that by our earlier figure – $24,000.
This then gives you a net profit of $126,000 when the dust has settled.
After another dose of reality where you factor in any other closing costs, your net equity is further reduced – down to $120,000 or less.
And that’s it – the exact reason why homeowners choose to sell their houses themselves – just the simple matter of cost.
FSBO Facts & Stats
We live in an age of digital communication, where you can contact like-minded people or complete strangers at the touch of a button. Many American adults have pretty much transferred their entire lives into the size of a screen no bigger than a mobile phone.
You would have thought, then, that using this boundless technology to sell your own house would have become far more popular and far easier than it actually has done.
Here are several facts and stats about FSBO house sales in the U.S. that may just surprise you.
#1. Over Half of FSBO Sellers Know Their Buyer – Compared to 8% of All Sellers
The National Association of Realtors (NAR), which has been following and analyzing FSBO vs. Realtor market and industry data since 1981, reports that most FSBO sellers sell to a friend, a family member, or a neighbor.
In 2020, compared to only 8% of all house sellers, over half (51%, in fact) of FSBO sellers knew the person they were selling their home to.
Furthermore, 22% of FSBOs occured in a rural area where residents were more likely to know each other, compared to around 15% of all home sales.
Therefore, even though the “FSBO route” is rare, it’s even rarer for sellers to still ignore the real estate agent option when no buyer is already lined up and ready to sign on the dotted line.
#2. Independent Research: FSBOs Sell for 5.5-6% Less on Average
Unsurprisingly perhaps, the NAR will also tell you that FSBO homes often sell for less than if a real estate agency assisted in the marketing and selling of the property.
However, they wouldn’t be lying – independent research has also found this to be true.
For example, market researchers at Collateral Analytics, leading real estate data source, looked at several metropolitan real estate markets, such as Phoenix, San Diego, and Boston, between 2016-2017 to study this statement.
The researchers found the gap in “selling prices for FSBOs when compared to MLS sales is remarkably close to average commission rates.” On average, the study found, FSBOs sell for 5.5-6% less than agent-assisted sales.
In other words, the statistics tell us that the amount of money real estate agencies charge would be lost to the seller on the FSBO house sale price anyway.
#3. The Rise of The Internet Hasn’t Made FSBO More Popular
The rise of the internet in the last few decades prompted many industry experts to wrongly predict the end of the real estate agent, eg. online home valuations and property searches would do their job for them.
However, the use of real estate agencies has only increased. Again according to the NAR, FSBOs accounted for 15% of home sales in 1981 – compared to just 8% today.
#4. Accurately Pricing a House is One Step to Maximizing Profit
Online pricing tools can provide a ballpark range of your home’s value. However, without in-depth local knowledge, they won’t be able to pinpoint the price, and they will not provide a professional pricing strategy tailored to the local market and the type of property you’re selling.
#5. Job Experience Doesn’t Equate to Selling Expertise
Lastly, a word of warning for those who think that a career spent either as a salesman or a lawyer would stand them in good stead when it came to their own FSBO sale.
Take the story of the current Solicitor General for the State of Oklahoma…
Mithun Mansinghani, a former lawyer, tried to sell his Washington D.C. home by FSBO, and hoped to save between $40,000 to $50,000 in commission. Although his property was listed online with MLS, the free real estate listing service, Mansinghani got little interest.
After 30 days with zero offers, the lawyer bit the bullet and hired a local real estate agent, who apparently sold the house within weeks at Mansinghani’s full asking price.
5 Essential Stages of FSBO House Sales
Here are the 5 distinct stages of FSBO considered essential to selling your house yourself – failure to do any of these fully will probably not result in any sale whatsoever, and if you get really lucky and it does, it’ll be a sale that doesn’t maximize your profit as you hoped it might.
Step 1: Determining Your Home’s Fair Market Value
All of the following stages are critical, and this is probably the most critical. Price your house too low, and you lose profit; price your house too high, and the property will just sit there unviewed and, of course, unsold.
Here are 3 ways to determine a relatively accurate house value:
- Online Real Estate Valuations: You can get free valuations from a number of websites, eg. Trulia. Remember, they are only estimates at best, and could be out by thousands of dollars.
- Real Estate Agent’s Market Analysis: Agents will provide a more detailed analysis of your home, and the accuracy of the figure will improve from an online valuation. However, even though they are usually free, the agent is hoping their valuation will encourage you to sell your home through their agency, so you’ll get the full sales pitch, too.
- Licensed Appraiser: Professional appraisers normally provide the most accurate estimate of the value of your home, and it’s handy to use as a bargaining tool when negotiating the sale price with the buyers. The downside is the cost – appraisers charge around $300-$500 for a report, and it cannot be used as an appraisal for a mortgage application by the buyers.
Step 2: Preparing Your House For Sale
Begin with a detailed walkthrough of your house, and ask yourself, “If I was buying this house, what would I not like?” It may be difficult – you do live there, after all – but you must try to be as objective as possible.
If that’s too difficult to do, get an outsider’s opinion. Additionally, here are some general improvements you can make:
- Make Any Minor Repairs – such as leaky faucets, windows that stick, electric lights that don’t work properly, loose door handles, and so on. If you have an automatic garage door opener, make sure it works perfectly.
- Declutter – such as the attic, the basement, the garage, closets, and wardrobes.
- Touch-up Paint – make sure all the paintwork is clean and looks fresh, and favor neutral colors (your buyers already do).
- Cleanliness – ensure your house is clean and smells fresh.
If you don’t have time to complete all those improvements, or you’re not sure how…try looking into a home staging agency. They can handle it all for you – for a fee.
Step 3: Marketing Your House For Sale
There is no best or single way to market your home, but you should follow these basic principles:
- Quality Yard Sign: Every home for sale has a large sign pronouncing the fact to the world. They can usually be purchased from office supply stores, and it’s wise to spend a bit extra and get a quality one.
- Sales Flyers / Brochures: A supply of handy information about the house sale is a must – to give to people viewing the house, those making inquiries, and for anyone you meet who expresses interest. Prepare several photos, too (both interior and exterior).
- Online Advertising: Several popular listing websites include HomeFinder.com and MLS.com (mentioned previously). You should also list your property on Facebook and Craigslist, too. Remember – the more places online where people can see your property, the more chance one of them will be the buyer you’re looking for.
- Open House Hosting: It is always best to host open house days on either a Saturday or a Sunday, and also works when good weather is forecast. Start advertising your open house event at least a week before the event, and set up signs on major roads near your home to guide viewers in.
Step 4: Negotiating the Sale
Without a real estate agent, you will have to negotiate directly with any potential buyers. Any negotiation is all about give-and-take, and you need to accept this right from the beginning.
The buyer will almost certainly come in with an offer that’s going to be below your asking price, and they may even include some tough conditions, too, such as having you pay the closing costs.
If their initial offer is not acceptable, you’ll need to also decide exactly how low you’re willing to go. Initial negotiations will be verbal, but once the basics are agreed upon, the buyer will then have to submit a written offer.
For this, it’s a good idea to have a small supply of real estate contracts specific to your state (you can find these by doing a simple web search).
The contract must contain every detail of the sale, including
- Purchase price
- Closing concessions
- Specific items to be included
- Closing date
- Location of the closing
The contract should also detail any contingencies, such as the buyer insisting on a home inspection.
Before proceeding any further, you must receive a copy of the buyer’s mortgage approval within several days of accepting the offer.
The closing will usually take place in the offices of an attorney or a title company, depending on your state, and you and the buyer must agree on this specific location.
Step 5: Handling the Closing
The closing on a house – the completion of the process – is an entirely legal affair, and it will be handled either by a closing attorney or the title agent. Once you decide who this party will be, they will provide you with the information on the required procedures.
The closing work is done by the closing agent. However, you may be called upon to provide certain documentation along the way, and you must ensure that you provide it as quickly as possible.
You should also maintain contact with your buyers between the time of the contract acceptance and the closing.
Invariably, the biggest obstacle in most real estate closing transactions is the buyer’s mortgage. Most mortgage approvals have conditions that must be satisfied between the time of approval and closing. It is important to understand that if the buyer is unable to meet even one of these conditions, the loan approval can be withdrawn.
Avoiding Common Mistakes of FSBO Sales
|Hiring an agent may cost more in commission, but it can take a lot of the guesswork out of selling.|
If you decide to sell on your own, set a reasonable sale price, and keep the time of year in mind.
Keep your emotions in check, and stay focused on the business aspect of selling your home.
Prepare for the sale – don’t skimp on the photos in your listing, or disclose any issues with the property
Property Investments: The Instant Cash Alternative to FSBO
Regardless of real estate market conditions, it’s always smart to look at your options, to see the best route to take to sell your house, and to get the best return when you do.
At Better Off Home Buyers, we can make you an immediate offer for your house at a fair price, the whole process can take as little as 7 days, and you’ll receive the return on your house sale fully in cash.
You may also find they are other great benefits to selling to Better Off Home Buyers that a traditional house sale transaction cannot offer you.
Let’s compare selling your house yourself (FSBO) and selling your house to a professional full-service property investor such as ourselves – Better Off Home Buyers
Selling Your House Yourself (FSBO) vs. Selling Your House to Better Off Home Buyers
|Real Estate Activity||Selling Your House Yourself (FSBO)||Selling Your House to Better Off Home Buyers|
|Inspection & Financing Contingency||Sales can and do fall through, so all sellers need a backup plan||Not required|
|Subject to Appraisal||Yes, the sale is normally subject to appraisal||No appraisal is required, as we make cash offers|
|Average Days Until Sold||+/- 91 dayson average||Immediate cash offer, with closing in as little as 7 days|
|Number of In-Person Viewings||20+ viewings on average||1, just us|
|Payment of Necessary Repairs||Typically, the seller’s responsibility – however, subject to negotiation||None, as we pay for all necessary repairs|
|Commissions & Fees||6% on average, paid by the seller if an agent is subsequently required||None|
|Closing Costs||2-5% on average, paid by the seller||None, as we pay all costs|
|Closing Date||30-60 +/- days after accepting a buyer’s offer||The date of your choice|
When you add up the time you save by working with Better Off Home Buyers, the hassle-free experience, and the money you save on commissions, fees, and holding costs while you wait to sell your house yourself, selling to a professional house buyer could well be your best viable option.
Simply fill out the short form below or give us a call at 503-809-4855, and let’s learn more about each other. You will then receive a “no-obligation-no-pressure” offer for your property.
Remember, our process is simple – you can even close on the date of your choice. You could potentially save thousands of dollars (as well as months and months of your time) by contacting us today.