For Sale by Owner (FSBO) Definition

What Is For Sale by Owner (FSBO)?

For sale by owner (FSBO) refers to property whose owner is selling it directly without the assistance of a real estate agent or broker. In an FSBO, the owner assumes the responsibilities typically handled by a real estate agent.

Shortcuts

  • For sale by owner (FSBO) refers to property whose owner is listing it for sale without the assistance of a real estate agent or broker.
  • Many FSBO sellers do this to avoid paying a commission to a real estate agent or broker, which can eat up a chunk of the sale price.
  • In return, the FSBO owners need to take on the role of an agent in a traditional real estate transaction, from listing it, to showing the property, and to screening potential buyers.
  • Regardless of whether the owner sells on their own or through an agent or broker, some states still require a closing attorney.
  • There is evidence that FSBO properties sell for less, but most FSBO properties are less expensive properties to begin with.

Why Choose For Sale by Owner?

An owner does an FSBO usually to save money[1] since listing with an agent or broker requires the latter to be paid a commission. Some owners also like the idea of more control over the sale with the ability to negotiate directly with potential buyers and handle all aspects of the sale without relying on a third party.

fsbo

Unique properties (or those with a niche appeal) may also be listed as FSBO. In these cases, an owner may feel they are best equipped to market the property and attract potential buyers who will appreciate its qualities.

Any real property may be an FSBO listing, but most FSBOs are houses.

A National Association of Realtors survey indicates that FSBOs account for 7% of U.S. home sales[2]. In these FSBO transactions, the sellers talk directly to the buyers or agents to avoid commission costs.

Taking the FSBO route saves sellers significant costs on agents’ fees. When working with an agent or broker, a seller typically pays a 4% to 5% commission of the property’s selling price. The amount will be split equally between the sellers’ and buyers’ agents[3].

With FSBO sales, the seller will usually still pay a broker commission if their buyer hires an agent. This commission or fee for a buyer’s agent ranges from 2% to 3% of the sale price[4].

Owner Responsibilities in an FSBO Sale

Because the owner is not enlisting the help of an agent, they are expected to take on the responsibilities that real estate professionals do themselves.

They need to handle the following[5]:

Set the asking price

This is one of the most challenging steps in FSBO real estate transactions, as property owners must understand the market well. They have to estimate the top dollar potential buyers are willing to shell out for the FSBO property.

researching computer

To arrive at an accurate price, FSBO sellers need to do market analysis that real estate agents typically provide to clients. This analysis involves comparing recently sold or listed homes in the FSBO listing’s area, i.e., their features and pricing.

The resources that can be used for this comparative market analysis may include real estate websites like Trulia and Zillow, local tax records, and other data sources.

Market the property

To attract potential buyers, an FSBO needs to match the marketing efforts of real estate agents. FSBO sellers typically produce the marketing goods, such as the ads for the listing.

FSBOs can be listed on the multiple listing service (MLS) for a flat fee of $400 to $500. A local multiple listing service is one of the top ways to alert potential buyers.

Alternatively, many FSBOs find their way via websites like Craigslist, Zillow, and Trulia, where listings are hosted for free[6].

Social media platforms, like Facebook, are also marketing outlets for FSBOs. Some fee-based marketplaces specializing in FSBOs also accommodate these listings, such as ForSaleByOwner.com and FSBO.com.

RELATED: How to Find Amazing Real Estate Deals on Craigslist

Prep the listing and host showings

As in agent-assisted sales, FSBOs have to be prepped to compete for the attention of buyers. Thorough cleaning and repairs are among the preparations FSBO sellers take to stage their listings.

digital house showing

These steps are crucial to spruce up the property; they enable direct-selling homeowners to craft marketing materials, such as photos and videos, that can entice potential buyers.

FSBO homes may also need to be shown to potential buyers. This means the owner needs to host open houses and showings.

Screen buyers

FSBO sellers directly interact with buyers, responding to their calls and emails. While providing thorough information on their listings, they need to screen prospective buyers.
Like a real estate company, an FSBO seller typically has a two- to three-day window to respond to buyers’ offers. Adapting to a real estate market that has become highly digitized and requires a swift response is now a must among FSBO sellers.

Prepare the sale’s documents

Even though FSBOs are listed (and sold) without an agent or a broker, these deals typically require a real estate attorney. This professional’s help is crucial in the complicated paperwork of a real estate transaction and, more importantly, necessary to close the deal[7].

AL AK AZ AR CA CO CT DE FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY DC

Twenty-two states (shaded in dark blue in the interactive map above) require a real estate attorney, such as New York and Georgia[8], where attorneys need to oversee the transaction. Real estate attorneys charge either a flat fee or an hourly rate for services that include documentation. The other services they provide include referrals to title companies and escrow agents.

Do FSBOs Sell for Less?

NAR statistics indicate that FSBOs deliver less money for sellers than agent-assisted sales. These figures show FSBOs selling about 18% lower than those sold through an agent.

There are several likely reasons for this:

  • Lack of experience. Owners who choose to sell their property as an FSBO may not have the experience and knowledge needed to navigate a process as complex as selling property. As a result, they may not price the property appropriately or negotiate as effectively with potential buyers.
  • Limited exposure. A real estate agent’s network is one of the most important reasons to list through an agent. FSBO properties may not receive as much exposure to potential buyers, which can limit the number of offers the owners receive.
  • Emotional attachment. Owners emotionally attached to their property may have a higher opinion of its value than is objectively in line with the market. This can lead to unrealistic pricing and difficulty negotiating with buyers.

homesickness

Nevertheless, some industry research disputes the NAR data[9]. In general, it is not that FSBOs sell for less than similar properties but because FSBOs are less expensive to begin with. This can factor in the consensus that FSBOs sell for less, when there may be more nuance to the situation.

Sources

  1. Chen, J. (2022.) For Sale by Owner (FSBO). Investopedia. Retrieved from https://www.investopedia.com/terms/f/for-sale-by-owner.asp#toc-what-is-for-sale-by-owner-fsbo
  2. National Association of Realtors. (2020.) Quick Real Estate Statistics. Retrieved from https://www.nar.realtor/research-and-statistics/quick-real-estate-statistics
  3. Guinan, K. (2022.) How Do Realtors Get Paid? Bankrate. Retrieved from https://www.bankrate.com/real-estate/realtor-fees/
  4. Burns, R. (2019.) Who Pays the Buyer’s Agent in FSBO Transactions? For Sale by Owner. Retrieved from https://www.forsalebyowner.com/blog/how-to-work-with-a-buyers-agent-when-youre-a-fsbo-seller
  5. LaPonsie, M. (2020.) How to Do ‘For Sale by Owner’ the Right Way. US News. Retrieved from https://realestate.usnews.com/real-estate/articles/how-to-do-for-sale-by-owner-the-right-way
  6. Marquand, B. (2022.) How to Buy a House for Sale by Owner. NerdWallet. Retrieved from https://www.nerdwallet.com/article/mortgages/how-to-buy-a-house-for-sale-by-owner
  7. Waugh, E. (2022.) The Key Paperwork You Need to Sell a House, With or Without a Realtor. HomeLight. Retrieved from https://www.homelight.com/blog/documents-needed-to-sell-house/
  8. LemonBrew. (2020.) Which States Require a Real Estate Attorney. Retrieved from https://www.lemonbrew.com/which-states-require-a-real-estate-attorney-to-close-a-deal/?name=which-states-require-a-real-estate-attorney-to-close-a-deal
  9. Wake, J. (2018.) For Sale By Owner? The Truth About How Much Homes Sell For Without A Broker. Forbes. Retrieved from https://www.forbes.com/sites/johnwake/2018/07/17/the-truth-about-home-sale-prices-when-you-sell-your-home-yourself-without-a-real-estate-agent

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