In the world of real estate, both sellers and buyers have a number of tools and services at their disposal that can help them conduct their transactions more easily and more efficiently.
There are, however, some sellers who choose to bypass one of the most useful services in the real estate market – real estate agents – for the chance of reducing their expenses and saving the money which would have been otherwise paid as a commission to the real estate agent who has helped them make the deal.
FSBO: What is it?
FSBO (For Sale by Owner) are homes that are on sale by their owners without the help of a real estate agent. The main reason why For Sale by Owner is used is to save the seller the costs of hiring a real estate agent and the commission, as real estate agents’ commission can take up a large chunk of the profits made by selling a house, and not all homeowners are willing to give that amount of money up if they believe they can handle the sale on their own.
FSBO: The seller’s point of view
From the seller’s point of view, selling the house as an FSBO is a good way to save a good amount of money on the sale by skipping the agent’s commission.
This, however, poses a number of different challenges for the owner who’s trying to sell the house, as not having a real estate agent would mean that the homeowner will have to carry out all of the responsibilities and tasks of selling the house on his/her own.
It is important for any For Sale by Owner seller to keep in mind all the different aspects of a real estate transaction in order to avoid mistakes that might negatively affect the sale, as not having a professional real estate agent could leave him/her exposed to getting scammed or selling the house far below its market value under the pressure of the buyer’s agent.
In short, the main challenge that an FSBO seller is going to face is that although he/she will work without having a real estate agent by his/her side, that will not prevent the potential buyers from having agents, which could give them an advantage over the seller.
Valuating an FSBO home
One of the tasks that an FSBO seller would have to carry out without the help of a real estate agent is evaluating his/her home to determine its fair market value.
This is crucial for any real estate sale, and requires a good amount of research in order to get an accurate estimation and avoid listing the home at a price that is much higher or much lower than the market value.
The seller should always check the average prices of similar properties on the market, and make sure that the price is fair in comparison to other investment properties in the area.
Setting the price too low will result in the seller not earning as much money as he/she could have, and setting it too high will result in not being able to sell the house.
Marketing and advertising an FSBO home
Another aspect of selling a For Sale by Owner home is marketing and advertising the property. A real estate agent would usually handle the tasks of listing the property on different sources and find potential buyers as well as identify investors who are suitable buyers for your property. Additionally, real estate agents will carry out the tasks of advertising the property for sale, staging it for walk-ins, prepare for open house displays, and a number of others to help you find a buyer for your property.
FSBO sellers would have to carry out these responsibilities on their own, which means that they will have to educate themselves and do a lot of research to enable themselves to market and advertise their property in order to sell it effectively.
The sellers would have to learn the different techniques and tricks of marketing the house, finding a good source to market it and advertise it, and being able to advertise it efficiently and making it look good, including taking photos and staging the house to make it more appealing.
FSBO: The buyer’s point of view
From a buyer’s point of view, FSBO homes are not much different from homes being sold with the help of a real estate agent. There are, however, some cases when a For Sale by Owner home could pose a challenge for the buyer. For example, some FSBO homesellers refuse to work with a real estate agent, including from the buyer’s side, forcing prospective buyers to give up on hiring a real estate agent to help them throughout the process of purchasing the property.
But that is not often the case, and usually buyers of an FSBO home will find themselves at an advantage due to having a professional working by their side with enough expertise in the business to get them a good deal. After all, most real estate agents have years of experience in sitting at the negotiations table with a homeseller who is lacking any expertise in home selling.
Questions to ask the seller
There are a number of questions that a real estate investor who is looking to purchase an FSBO home should ask the seller:
- For how long has the property been up for sale?
- Why, from the seller’s point of view, has the property not been sold so far (if the property has been up for sale for a year or longer)?
- Was the property at some point listed by a real estate agent or agents? And for how long?
These questions will help the buyer get a better idea of the property and might even be enough to determine whether the property on display is a good investment or not.
Some other frequently asked questions that are asked by buyers when trying to purchase a For Sale by Owner home may include:
- Can I use a real estate agent for the FSBO transaction?
- If I, as a buyer, find the property by myself, do I have to pay my agent a commission?
- Will I need a lawyer for my purchase?
- Will I need a pre-approved mortgage for the sale?
- Who will hold the escrow money for the FSBO sale?
No matter what the reasons are behind sellers choosing to sell their homes as FSBO, the number of homes being sold without the services of a seller agent are on the rise. While it is hard to say whether or not the money saved by not hiring an agent is worth it from the seller’s point of view, in most cases buyers will find themselves at an advantage when trying to purchase an FSBO home.
For more blogs and guides on real estate investing, sign up to Mashvisor and gain access to our platform and a number of tools that can help you make your real estate investment decisions more easily and accurately than ever before.