Is ‘For Sale by Owner’ a Good Idea?

Selling a house can be a stressful endeavor. A lot has to go right to end up with that perfect buyer, especially if you’re trying to sell fast. It’s also an expensive undertaking, with sellers responsible for a host of fees after the deal is done, including commission for the real estate agents involved with the sale. Closing costs for sellers can range from 6 percent to 10 percent of the home’s sale price, according to Realtor.com, and that doesn’t factor in additional costs like staging the property and moving after its sold. In an effort to cut costs and pocket as much of the sale price as possible, many homeowners look into doing a For Sale by Owner (also referred to as FSBO, pronounced fizz-bow).

At face value, opting to sell on your own seems like an easy out from having to pay agent commissions. But in actuality, selling a home isn’t exactly a simple process that everyone can succeed at. For a lot of people, going the For Sale by Owner route ends up being a waste of both time and money, and it can even have legal consequences. So how do you know if it will work out for you? Read on for a basic primer on For Sale by Owner and a few major considerations that you may want to keep in mind.

What does For Sale by Owner mean?

While it’s mostly self-explanatory, there are a few nuances to For Sale by Owner that any seller needs to know before pursuing it. If you’re selling your home on your own, that means that you’re bypassing the commission fees but also taking on all of the work and liabilities that you’d normally pay a real estate agent to handle.

Selling by owner is a big undertaking. You’ll be responsible for researching comps in your neighborhood and coming up with a marketable price for your property, as well as all of the marketing, paperwork, and legal compliance that goes in to selling a home. Making a mistake in any of these areas can lead to both financial and legal repercussions that could have been avoided with the help of a licensed and experienced agent.

Keep in mind that some states do require sellers to complete paperwork like closing and transfer documents with the assistance of a real estate agent, so if you’re interested in doing a For Sale by Owner, you’ll have to check the laws in your state first.

What’s the controversy?

The main issue with homeowners deciding to sell on their own is that many fail to appreciate the nuances of the process and the myriad skills that agents bring to the table. As such, it’s not widely recommended for sellers who are starting from scratch. An inexperienced seller working on their own will often face a lot of challenges, including the need to manage a lot of complicated paperwork and avoid real estate scams. Even a small mistake can cost the seller in time, money, and legality, meaning For Sale by Owner is a big risk.

When is For Sale by Owner the right choice?

Not all real estate transactions are inherently tricky, and in some instances, going the For Sale by Owner route can actually be wise. A good example is if you already have a strong, interested buyer in the property. If that’s the case, you can work with an appraiser to come up with a fair price for the home and a real estate attorney to handle the paperwork.

If you don’t have a buyer in mind but still want to take the risk of selling by owner, be sure that you know what you’re getting into. Use online tools to market and list your home, research the basics of staging a home, and make sure you’re following all of the necessary legal steps. Don’t be surprised if it’s overwhelming—there is a reason, after all, that real estate agents get paid as much as they do.

How does For Sale by Owner compare to selling with an agent?

Still not sure whether opting to do a For Sale by Owner is the right or wrong choice for you? These stats from the National Association of Realtors (NAR) will help give you a clear idea of what you’re getting into if you go with an FSBO.

For Sale by Owner homes sell for less. According to the NAR, in 2016 the typical FSBO home sold for $190,000. Meanwhile, the typical agent-assisted home sold for $249,000.

For Sale by Owner is not a common choice. Despite how much money you can save on closing costs, most sellers decide FSBO isn’t worth it. FSBOs accounted for just 8 percent of home sale in 2016.

It’s difficult to reach buyers with an FSBO. How you market your home is a major part of how successful you are in finding the right buyer. But as the stats show, those attempting a For Sale by Owner aren’t usually marketing in the right places. For example, the most popular marketing tools for FSBOs are yard signs, with 35 percent of FSBO sellers using this method. By contrast, only 7 percent of buyers in 2016 found their home that way. How about word of mouth? 24 percent of FSBO sellers used this as a marketing tool, but only 6 percent of buyers found their home this way.

What’s the takeaway?

In most states, it’s your right to pursue doing a For Sale by Owner. Whether it’s the smart choice for your home sale however is up for debate. Many of the most common problems associated with an FSBO can be easily avoided with the assistance of a real estate agent. For many, the value that real estate agents bring is well worth the commission costs, particularly the shifting of legal liability.

Before you decide to do a For Sale by Owner, do your research and make sure you know exactly what sorts of challenges you are taking on. As with any sort of major financial transaction, the more you know before you get going, the better off you’ll be.