What Is For Sale By Owner (FSBO)?

for sale by owner (FSBO) is a type of transaction where the owner of a property chooses not to hire a real estate agent or broker to sell the property. That means the owner will handle the typical functions of an agent, such as pricing and marketing the property, as well as negotiating with buyers. FSBOs are generally done to avoid paying a real estate commission, which is a percentage of the sale price paid to an agent or broker. 

How an FSBO Works 

FSBO transactions allow the seller to save the commission fees that they would pay to the buyer’s and seller’s agents. For example, a 6% commission on a $300,000 home is $18,000—money that might be saved with an FSBO transaction. However, there is a tradeoff. FSBO transactions require all aspects of pricing and marketing the property, as well as entertaining potential buyers and the paperwork. 

Preparing an FSBO

Setting up a home for an FSBO transaction means handling the detailed tasks that an agent would, such as staging the home and listing it on various real estate websites. Marketing goes beyond putting up a yard sign. It’s wise to put some of the money that will be saved on commissions toward marketing, such as virtual tours or drone photos, as well as high quality photos of the inside. Some of that money can even be used to offer additional compensation to buyer’s agents as an incentive to show the property. 

Other marketing avenues may include Zillow and other listing sites. Handling the administrative stuff is also part of an FSBO, which includes scheduling viewings, answering calls and emails, and keeping up with ad relistings. Thus, having a system for this is necessary to ensure timely responses and to avoid scheduling conflicts. 

How to Have a Successful FSBO 

To get an idea of fair value when doing a FSBO, it’s advised to get an appraisal, which will cost $300 to $400, or contact title companies for comparable sales. Appraisals can also highlight issues that may need fixing ahead of a sale. 

Part of marketing may include getting the property listed on the multiple listing database (MLS). Paying to list on the MLS, which costs around $400, is still cheaper than paying the seller’s agent commission. Being on the MLS allows the property to be easily searched and found by agents. However, listing on the MLS may mean you have to pay the buyer’s commission. 

One struggle with the FSBO route is being able to detach emotionally. Being too emotionally attached to a home or property can result in pricing the home too high and rejecting otherwise fair offers. An FSBO transaction is best completed when viewing the deal as a business transaction. 

The other key for a successful FSBO is being able to negotiate. With a seller’s agent, they handle this part. One thing to consider is that buyers may offer a price that is below “market” value for a FSBO property as they know the seller is not paying a commission. 

Being a good negotiator also means being to reject low-ball offers and balancing patience with emotions. The onus also falls on the seller during an FSBO to assess buyers and to reject ones that might be hard to close or that might have a difficult time coming up with the down payment. 

Downsides of FSBO

While the upside is evident—the money saved by not paying commissions—there are downsides that must be weighed. The seller might be able to devote more time to selling the home than an agent or broker, but they might not be as efficient at the process. 

The seller of an FSBO transaction assumes all responsibility for completing the transaction. This can be a difficult or time-consuming task for those who have never bought or sold a home. Overall, real estate transactions can be cumbersome with plenty of paperwork. Real estate agents can help with time-consuming tasks and help make the transaction less emotional for sellers. 

This includes pricing the home “right,” which can be difficult, especially if emotions are involved. An agent can help determine a fair price for the property and avoid having the house sit on the market for an extended period of time.

Even with an FSBO, where you’re looking to avoid paying real estate commissions, you may still have to pay the buyer’s agent or broker if you use the MLS.  

FSBO Sale Prices

Real estate agents and related associations point out that homes sold via FSBO sell for cheaper than homes that utilize an agent or broker. That is, real estate agents sell homes for higher prices. The statistics might be true, but they could also be skewed, where most FSBO transactions are done for cheaper properties in the first place, such as mobile homes. 

Selling properties, such as condos and manufactured homes, via FSBO is easier for individuals than multifamily structures or large homes. These types of properties, however, are inherently cheaper. A duplex is likely to sell for more than a condo, and a single-family home will usually sell for more than a mobile home. So, it’s not that real estate agents necessarily get higher sale prices (although some surely can); it’s that they sell higher-priced properties to begin with.

When an FSBO Makes Sense

FSBOs are quicker and easier to move in high demand markets. But an FSBO could also make sense if you have time, as the process can be slower. Those embarking on selling a home themselves tend to be those living in urban areas and younger generations, versus older generations like Baby Boomers. 

An FSBO transaction is generally best done when there is already a trusted and interested buyer, such as a friend or relative. In this case, a real estate attorney can be used to handle the paperwork, and the commission can be saved. Already having a buyer takes out a big responsibility for a seller—marketing. 

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Related terms
Home Inspection
A home inspection is something that a home buyer will pay to have conducted during the escrow period. A home inspector will come to the property and look at different aspects of the home that may deter a buyer from wanting to follow through with the purchase.
Title Insurance
Every title insurance policy covers either a homeowner or the lender that financed the mortgage for the property. Lenders require you to pay for lender's title insurance as part of your mortgage closing costs. Homeowner's title insurance is mostly optional and is paid for by the seller or the buyer of the property.
Private Mortgage Insurance
Private mortgage insurance, also called PMI, is a type of mortgage insurance buyers might be required to have if he or she uses anything other than a conventional loan. Like other kinds of mortgage insurance, PMI protects the lender if the buyer stops making monthly loan payments.