What are the Benefits of Listing a ‘For Sale by Owner’?
The traditional route to selling your home is to contact a local real estate agent and allow them to handle the details. They have the training and experience to assess the real estate market in your neighborhood and determine the most effective listing price, and they’re motivated to get as much from the sale of your property as possible. After all, their commission check reflects your final selling price.
“For Sale by Owner” — Pros, Cons and a Checklist for Sellers
What happens if you’re ready to sell or at least test the market, but you don’t want to work with a real estate agent? Perhaps you don’t agree with the listing price most agents recommend for your home. Most sellers decide to go “for sale by owner” or FSBO because they don’t want to share their profit with an agent. They’re willing to spend more time selling the home on their own in exchange for a more lucrative profit.
Is that a good idea? Could you end up with the highest selling price if you leave it to the real estate experts? The decision varies between sellers, and it’s important to understand the pros and cons before putting your home on the market. Your choice could impact the length of time your home sits on the market and the quality of the agreement once it does sell.
Keep reading to learn about both sides of the deal so you know what you’re getting into with an FSBO experience. We’ll also provide a checklist that will help you get started if you do want to go list your home for sale by owner.
Benefits of For Sale by Owner Listings
Let’s start with the good stuff. Why would you want to sell a house without the guidance of an experienced real estate agent? It starts with the one factor that many sellers focus on when making that decision: money. There are also some other benefits that you may not think about until you walk through the experience a time or two.
You Keep the money
You aren’t responsible for just paying your real estate agent’s commission when you sign a contract. You will also pay the agent representing your buyer. If your agent finds the buyer for your home, they could earn a double commission. That all comes out of your pocket, though some agents will agree to a reduced rate when they control both sides of the deal.
Most real estate agents charge between 4% and 7% of the sales price. Even if you get your agent to agree to the lower end of that range, you can expect to pay at least $4,000 per $100,000. Add the commission for the buyer’s agent and the fact that many agents charge at least 6%, and you see why listing a home for sale by owner is so appealing.
If those numbers convince you that FSBO is the best option for you even with no other benefits, drop down and read about the cons of listing a home on your own first. It’s important to understand exactly what you need to do when serving as your own real estate broker.
You're the boss
If you have a bit of an entrepreneurial spirit and don’t mind doing the hard work by yourself, you may enjoy the challenge of listing your home for sale by owner. You may decide that you have a substantial social media following, a significant social circle, professional affiliations, or other connections that will make it easy to talk to a lot of people about your home. While doing so, you’ll have the opportunity to make every decision from your listing price to your marketing techniques and how you present the home to interested buyers.
If you want to consider alternatives to a complete sale such as rent-to-own agreements, you may do better without a real estate agent. Most experienced brokers don’t want to negotiate anything less than a full sale because they want to collect their commission and move onto the next property. Rent-to-own and other flexible agreements require you to serve as a property manager for a short period of time, but they also allow you to attract a wider variety of potential buyers.
You may also enjoy being in complete control of negotiations with buyers. Representing yourself will also allow you to select your buyer if you have personal qualifications you want to consider.
You're always in the loop
Real estate brokers tend to shuffle multiple homes at one time, and they may represent buyers as well. While an experienced professional will do their best to keep you up to date on overall progress for your home, they’re not likely to tell you in detail about everything they’re doing to sell your property. That can leave you with endless questions and concerns, especially if your home doesn’t sell quickly.
When you list your home for sale by owner, you are the broker. You always know what’s happening because you’re the one doing the work. If a sale doesn’t come fast enough, you know why.
Cons of For Sale by Owner Listings
There are some downsides to selling a house without the assistance of an experienced agent. Before you get dollar signs in your eyes, make sure you’re aware of what a real estate agent does to sell a home. It’s likely a lot more work than you realize unless you have some industry experience or insight. We’ll give you some insight by listing the biggest cons to listing a home for sale by owner.
Real estate marketing is a complex field
Do you know how to market a home effectively? While most real estate agents now use social media, their marketing plans go far beyond Facebook and Instagram. In fact, social media marketing is far more complex than many people realize. Take a quick look at just some of the tasks that are involved to present a simple campaign on Facebook:
Take attractive pictures that put the property’s biggest selling points on display
Write effective posts that speak directly to potential buyers
Attract a large pool of buyers interested in buying a home in your area
Design compelling Facebook ads
Correctly list your ads so that they’re seen by the right people
Interact with potential buyers, answering questions, taking additional pictures, etc.
Arrange property viewings
If potential buyers aren’t connected to you through social media already, you may find it difficult to make any progress with social media marketing. Don’t assume that posting pictures online is all you need to do to sell your home quickly.
A real estate agent will know how to create a customized marketing plan that goes well beyond social media. Many also have support teams that can pursue multiple marketing campaigns at once, interacting with more buyers in less time to get as many viewings as possible.
Even if you want to rely on showings, how will you alert suitable buyers to the viewing? Just getting the people to walk through your door and look at your home is a struggle if you don’t have access to the right people at the right time.
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Marketing isn't always free
A real estate agent is likely to spend some money in the process of marketing your home. How much they’re willing to spend will depend on the value of your home and how confident they are in their ability to make the sale within the terms of your contract.
If you decide to sell your home independently, you will need at least a small marketing budget. You may spend money on home improvements that can boost the value of your home or staging some rooms so that they’re more appealing to buyers. You may decide to spend money on ads that will put your FSBO home in front of buyers online.
The more money you spend trying to sell your home, the less money you really have in your pocket once the home sells. When you work with an agent, they can absorb the marketing expenses. They’re also less likely to waste money on marketing strategies that aren’t likely to work for your home.
It can be time consuming
You may dream of finding a long list of buyers interested in your home, but do you really have time to work with them? Are you available to answer your phone and answer questions throughout the day? Are you open to buyers knocking on your door at unexpected times and requesting a viewing? If you don’t get the exposure you expect, how much time are you willing to spend finding more buyers?
If you don’t have a lot of time to spare, then listing your home for sale by owner may demand more effort than you can give right now. That alone may prove the value of working with a real estate agent with more resources.
Not All Buyers are qualified
Do you know the difference between pre-approved and pre-qualified? You may eagerly work with a buyer to agree on terms of a sale, but what if they can’t get the financing required to follow through on that deal? Few buyers have the cash in hand to outright buy a home.
If you can’t qualify buyers, you will end up spending time with buyers who can’t follow through in the end. That’s a waste of time and can drag out the sale of your home unnecessarily. You may even pass up a great buyer because you’re working with someone who isn’t suitable for your home financially.
Real estate negotiations require experience
How sharp are your negotiation skills? How much experience do you have negotiating real estate deals? If you don’t know what you’re doing, you’re likely to accept terms that are less than ideal. You could even end up losing money that you would otherwise earn with a seasoned real estate broker. There are also a variety of legalities that you may not even know exist until you make a mistake in the negotiations.
What You Need to Know Before Listing Independently
Let’s take some of the pros and cons of listing your home for sale by owner and take a deeper look. There are some things you just need to know before deciding for or against an FSBO arrangement.
If your main concern is the cost of commission to the real estate agents, you can increase your listing price a bit to pass some or all of those fees onto the buyer. That may allow you to get the benefit of working with a real estate agent while still pocketing a fair amount of cash on the sale of your home. If an agent can earn you a higher sales price than you would get on your own and you can raise the price enough to cover the commission fees, you could end up with more money than you would with an FSBO sale.
If you sign with an agent and they find a buyer, you may still have to pay the agent’s commission if you decide to back out of the deal. That makes testing the waters with an agent and later backing out to list the home yourself an expensive proposition. Read the terms of your contract closely before agreeing to list your home through an agent, and make sure it’s the best listing option before you commit.
You can try to sell your home on your own first and then turn to an agent if it doesn’t work out as expected. Just keep in mind that many potential buyers may look at your home while it’s listed for sale by owner and then not come back once your agent goes to work. The longer your home is on the market, the closer buyers may look for potential problems before making an offer.
You can learn some of the skills that you will need to effectively sell your home on your own, but it will take time and maybe more money. Carefully consider whether you would make more money by simply allowing an agent to handle the sale of your home.
Seller’s Checklist – Prepare for a Profitable Sale
Have you decided that for sale by owner is the best way to get your home on the market? The following checklist will give you a general idea of what it might take to do so successfully. There are a lot of small details and technical skills that fall underneath each of these points, so consider this more of a jumping-off point than an exhaustive guide.
1. Determine the Target Market for Your Home
Who is most likely to buy a home in your neighborhood, at your desired price point, and with features found in your home?
2. Identify Your Home’s Top Selling Points
What does it offer that many competing homes in the area don’t offer? What features are most likely to attract buyers?
3. Determine Your Ideal Selling Price and Your Lowest Selling Price
It’s easy to determine how much you want to earn from the sale of your home, but how little are you willing to accept?
Set your asking price, depending on the price of surrounding homes and other factors. What is the best price to attract buyers without shortcutting your profits?
4. Create a Multi-Faceted Marketing Plan
How can you get the word out about your home, and what will it take to implement each of those campaigns?
5. Set a Time Limit for the Sale of Your Home
If you work with a real estate agent, you’re likely to sign a contract giving them a set period of time to make the sale. Give yourself a time limit. How long will you try to sell your own home before you call in a professional?
6. Determine Your Boundaries When Working Directly with Buyers
Do you feel comfortable allowing strangers to view your home at any time of the day or night? Do you need to ask someone you trust to come to your home during viewings? Think about your safety and comfort level when it comes to interacting and negotiating with buyers.
7. Learn How to Qualify Buyers
You don’t want to waste time. You may also want to consult with an attorney to make sure you understand all the legal and financial aspects of listing a home for sale by owner.
8. Determine the Hours You Will Work to Sell Your Home
Having set hours that you devote to the sale of your home will help you follow through with marketing plans and other time-consuming tasks without feeling overwhelmed.
To Conclude,
Selling your own home can save you some money, but it may not save you as much as expected. Weigh the pros and cons carefully before you decide to take on the adventure. You do need a real estate agent. The question is whether you serve as your own or hire someone put heir expertise to work.