FSBO, or For Sale By Owner, vs. Using a REALTOR®

This has implications from both side so we will evaluate the selling side and the buying side of a FSBO property. This account will take broad statistics into account and not necessarily local ones.

From the Selling side

As a seller of real estate, it is often considered to sell your property FSBO instead of using a knowledgeable agent in an effort to save money. The statistics are everywhere that proves the undeniable fact that agents command a higher selling price and even after their commissions are accounted for, still net sellers more money. So what is the real reason?

Well, many sellers are more in tune with market conditions now. Many will just ask an agent for an opinion of market value. Then, they will attempt to market it as FSBO at the agent listing price. There is nothing inherently wrong with this and is a reasonable strategy. The problem comes in when you get to service providers and buyers.

Service providers (mostly FSBO sites trying to get $$$ to list the property on the local MLS) do not care if your house ever sells. The only thing they care about is getting the $$$ from you as marketing expenses. They will take your $400-$800 and pay an agent in the area to list it on MLS (which is most areas is against MLS by-laws as the agent is not in a fiduciary relationship with you in most cases).

The next part are the buyers. If a buyer comes to you off the street so to speak, they still have to get a loan and you need to be prepared to point them in the right direction. Most buyers who do not know the ins and outs go straight to a real estate agent for help who will inform them (if they are doing their job correctly) of the actual market value of your home. They will then add in their commission, typically by way of an exclusive buyer order, and are going to offer you fair market value LESS the commission you would have normally paid a selling agent. You will also often times get less than favorable terms in the transaction as the professional representation is all in favor of the buyer.
On the other hand – if the buyer knows what they are doing, they will often low-ball you in an effort to get the best deal. Their thought-process is they can get a MUCH better deal if there is no real estate commission. Why would they pay the same price for a house that is FSBO as they would if it were listed?

Expect to sell your home for 5-13% below market value if you sell FSBO.

Buyers and FSBO

Many times FSBO sellers are not in a position to sell their home for what it is worth. If they are not represented by an agent, then they are probably not familiar with options available to them such as short sales.

If the seller is able to sell at market value (with or without commission as market value for a FSBO is different than market value for a brokered transaction), then FSBOs are great for you to look at. If you see a FSBO that you want my opinion and expertise one, I will gladly assist you as my commission is almost always covered just by the money I will save you in the deal.

Conclusion

Sellers: Unless you have vast real estate experience, it is almost never in your interest to try to market and sell your home yourself. There are thousands of case studies you can look up online to prove this. While it does occasionally work for some, the overwhelming majority of sellers come out at the bottom by doing this.

Buyers: Look at FSBOs but contact your agent/broker. Their expertise will guide you to get the best deal and protect your interests.

I represent both buyers and sellers in their real estate needs. Contact me to see how I can help you with your needs.