FSBO—In-Depth

Should You Go For Sale By Owner (FSBO)?

The fact of the matter is that selling by owner is a choice—a business choice. As a business choice taking the FSBO route (pronounced “fizbo”) is going to have certain advantages and disadvantages.

It is the intent of this website to cover both objectively.

FSBO—the advantages

Owners handle the selling themselves to save paying a commission. This is the primary advantage of going FSBO. But there are other advantages as well. Owners making a successful sale may get a deep sense of satisfaction and accomplishment. They are able to talk extensively about the strengths of the home they love. And finally, for sale by owners get to deal with buyers directly and therfore keep their fingers on the “pulse” of the process.

FSBO—the disadvantages

When going FSBO, an owner will face the same challenges a real estate professional does. For the most part that involves finding and then keeping a buyer. Both take considerable work.

Finding a buyer is definitely the easy part. A well kept, correctly priced home does most of the work. With a little quality promotion (yard sign, web promotion, newspaper ads, etc) the home should attract interested buyers.

Keeping a buyer, though, is harder. As I like to say: "it was hard back when it was easy." It's really hard now. Lenders of a few years ago wanted to make the loan. Today, lenders seem to look for reasons to kill the loan. Listing brokers see about 1 in 5 contracts fall apart.  For FSBOs that number jumps to a 2 out of 3 "fall through" rate. Why?

In this financing climate it is easy for a buyer to get discouraged by the whole process. As a seller, you will have little or no control over the lending aspect of the transaction. Add to this, the numerous third parties which come into play, and any FSBO has their work cut out for them.

However, these are not unique challenges. Again, a FSBO basically ends up facing the same obstacles any listing broker would. It simply calls for persistence. With persistence a seller can often reach his or her goal—selling the home.

Other things of which to be aware...

There are some basic things every FSBO needs to be aware of—

First, set the right price and stick to it. Many FSBOs end up selling for less (about 10% less) than they could have had they listed their property with a Realtor®. Realtors® love to throw that stat around. What isn't clear from many stats, though, are what concessions were involved. If a FSBO sells for a little less, but pays zero closing costs, and has no other expenses in connection with the sale, they may do just fine. Regardless, however, price is important. Remember, the market has already set the home's price, the owner/seller just has to guess it correctly.

Second, it is good to keep in mind that most sales involve two agents. One represents the seller. The other represents the buyer. So going the FSBO route will require doing the work of at least one broker, possibly two—if you want to pay no commissions at all. But, remember, there are only four kinds of buyers: first timers, relocating, move-ups and investors. Refusing to work with buyer's agents cuts out the first two, since 99% of first-timers and relocators have an agent. So be prepared for work and patience, since dealing directly with a buyer can add a layer of stress. There may be occasions when you will get irritated. 

Third, investors will likely try to "lowball" you. All you can do is counter back at an acceptable figure. If they walk away, they were not serious to begin with. No big loss.

Fourth, a number of Realtors® will contact you wanting to list your property. Most will be new to the business. Their trainers tell them to contact FSBOs. Many do. Some may be pushy. Be prepared for that.

And finally, before leaving the topic, every FSBO should realize that selling one's home is a big, vague goal. If you wake up on Monday with a “well it's time to sell the house” approach, you will get very discouraged, very fast. Don't look at it as one imposing task. Rather, break it down. Setting a price, putting up a sign, placing an ad. These are doable steps, if taken one at a time. Take selling the house one step at a time. It is the only way to keep your sanity.

Your biggest enemy

When selling FSBO, your biggest enemy will not be brokers. It will not be the lowballing investors. It certainly will not be the buyers or their lenders.

The biggest enemy is time. How?

Mainly because a home can become “shopworn” over time. It goes from being that new-on-the-market house in the neighborhood, to the “has that place still not sold yet?” home.

More than that, though, time can decimate any savings. If it takes too long to sell a home, a FSBO has done a lot of work for nothing. 

Here's how that happens:

There are a couple of dirty words for FSBOs (actually, dirty words for any seller). They are “debt service”. It's a fancy term for the monthly payment.

Once a seller decides to sell, their monthly payment becomes an adversary. For instance, if a seller is offering their home for $100,000 and they leave the home on the market for a year with a $1000 per month payment, that equates to spending $12,000—not to mention money spent to advertise and promote the home. Would the commission to pay a broker have been that high? Not likely. So a seller does all that work and spends $12,000 to save $5,000 - $7,000? It does not add up, literally.

FSBOs don't just need to sell. They need to sell within a reasonable period of time. It's good to keep that in mind from the start.

You are not just on the market, you are on the clock too.

Tools

This site offers many sample forms. Notice, they are watermarked, though. (They all have a big red “SAMPLE” splashed across the front.) If you are in need of forms to sell on you own, feel free to contact me, Joel.

I promise I won't give a sales pitch to try to get my “foot in your door.” I don't work that way. I'll be happy to give as much information as I can. All I ask in return is, that if you do decide to list your home, please consider me—remember who helped. My qualifications are noted here. 

In the meantime, best wishes in your efforts to sell.