Does For Sale by Owner Save Money?
If you're considering selling your home, you may cringe at the thought of paying a 6% commission rate to real estate agents. This is a steep price and may make you wonder, "Should I do for sale by owner?"
If you're considering the FSBO route, you're not alone. According to research, 36% of people selling their homes attempt to do it on their own. Yet only 11 percent of sellers actually end up selling without an agent.
This begs the question: Is selling your home by owner a good idea? Most importantly, does for sale by owner save money?
The short answer? In most cases, no.
This article will outline what's involved in selling your home FSBO and explain why it often doesn't save money. It will also share the other options you have for selling your home (hint: there are more options than just using a listing agent!)
The Cost of For Sale By Owner
There are many costs and responsibilities that you have to take care of in an FSBO transaction that you wouldn't otherwise have to worry about. Many of these involve major time and money commitments. We will discuss these below.
Buyer's Agent Commission
The process of a home sale typically involves two agents: the buyer's agent and the listing agent. Both are offered a commission from the sale of a home. With FSBO, you may save on the listing agent fees, but you may still be on the hook for paying the buyer's agent.
If you opt not to pay the commission to the buyer's agent, the buyer will have to pay the fee. Many buyers may be unwilling or unable to do this, significantly limiting the number of people willing to purchase your home.
Buyer's agents take this into account. Many won't even show a home if they aren't incentivized by the commission fee.
Unless you cough up the commission, you can probably expect to see very little foot traffic from real estate agents. And with 88% of buyers using an agent, you're cutting off a significant pool of possible buyers.
Pay for MLS Access
There are listing options available for FSBO sellers, but an MLS is still the best place to list your home. Studies show that 90% of sellers list their homes on MLS. So when buyer's agents are searching for homes, where do you think they are looking?
Likely, the answer is where there are a lot of options. FSBO sellers can list their properties in the MLS using two options.
- Pay a flat fee of $50 to $500
- Hire a limited-service real estate agent to list it on the MLS
Both involve paying money to advertise your property for sale. And with a limited-service real estate agent, you get very few of the services that you would get with a typical real estate agent.
Must Price Your Home Right
It can be difficult to price your home if you are not familiar with the market in your area. This, plus emotional attachments that may make you overvalue what your home is actually worth, can be problematic.
In a FSBO transaction, you have to price at or below the market value to stand a chance of selling in a reasonable amount of time. If you price too low, you risk leaving money on the table—to the tune of thousands or tens of thousands of dollars.
More commonly, though, FSBO sellers will list their home at too high a price. In fact, 70% of agents say that overpricing is the number one mistake they see sellers make. Overpricing can cause you to miss out on a sale.
Many people who aren't interested in negotiating will skip out on properties outside of their budget altogether. And though you may think that you can just lower the price later, many buyers who see a price drop will assume there is something wrong with the property. Getting the price right the first time is essential.
If you want to price an FSBO home, the best route is to get it appraised, which usually costs $300-$400. Then you have to compare it to other homes in your neighborhood to see what they are selling for. Some states don't disclose home prices, which makes it even harder to set the right price.
Luckily there are options to avoid all this hassle. One is having a licensed real estate agent take care of the listing, but then you still have to deal with the fees involved in this type of transaction. The alternative is to use the iBuyer Valuation Tool, which will give you an immediate estimate of what your home is worth based on your address.
Dealing With Legal Headaches
Real estate law is complicated. And if you make a mistake it could be costly. The sale could fall through, or in some cases, the buyer could sue.
There are disclosure laws that you must consider, and they vary from state to state. For example, it is illegal to cover mold with paint and not disclose the issue to the buyer.
In some places, you have to disclose issues like pests, lead paint, and any emotional history the home has (such as suicides, violent crimes, or murders that took place in the home). And if you fail to do so, you can be taken to court or be required to pay to deal with the issues.
There are real estate attorneys that can help you get your footing on all the paperwork and laws involved in a real estate transaction. However, they come with a steep price tag—usually between $150-$350 per hour. And even if you can figure it all out yourself, many states require a real estate lawyer to be present at closing to facilitate the sale.
Repairs and Investments
Often sellers will take the time to make major repairs or invest in upgrades to improve the value of their home. These cost both time and money, and if you aren't sure what you are doing this time and money can be wasted.
You may spend too much money on repairs or upgrades that don't lead to a high ROI and end up losing money in the long run.
Of course, having an objective real estate professional who knows the market can help mitigate this risk. They can offer guidance on which investments will pay off and which aren't worth the effort. Even still, this process can be costly and time-consuming.
Time is money, and selling your own home costs a lot of time. Licensed real estate professionals can spend anywhere from 20-200 hours to sell a home. If you aren't experienced, you can expect to sell your home on the higher end of the scale.
When selling FSBO, you have to prioritize answering any calls, emails, or social media inquiries that express interest in your home. If you miss any, you risk losing out on a potential sale.
This added time commitment is in addition to any repairs, upgrades, decluttering, and packing you may already be doing to prepare for your move. For many, the added stress and time involved in the FSBO route is just not worth it.
If you do end up making a sale, you'll be going up against an experienced negotiator. Your buyer's agent will likely have dozens, if not hundreds, of sales under his or her belt. Plus, 38% of buyers report that their agent negotiated a lower sales price.
Plus, this negotiation is often against another real estate agent, who is also experienced. If you aren't experienced in negotiation, you may end up selling your home for way less than you originally anticipated.
Does For Sale By Owner Save Money?
There's a reason why only 8% of home sellers opt for the FSBO route: it often doesn't actually save money. Of course, FSBO does save money on the agent fees. But there are many other considerations when taking in the cost of the FSBO route.
In 2018, the typical FSBO home sold for $217,900. Homes listed by agents sold for an average of $295,000. Even taking into account the listing fees, FSBO sellers walked away with significantly less money from their home sale than those helped by agents.
Plus, all of the added headaches associated with trying to sell your home yourself are often just not worth it.
A Better Option
These statistics don't look good for individuals wanting to sell their homes without paying hefty real estate agent fees. But instead of swallowing the hassle and costs of the FSBO route to avoid real estate agent fees, why not opt for another route altogether?
Enter iBuyer: an instant way to sell your home, without a realtor or the hassle of FSBO. You can skip the repairs, cleaning, showings, and hassle involved in selling your home the traditional way. Instead, get an instant cash offer for your home from top iBuyers.
Don't List Your Home FSBO
Does for sale by owner save money? Not quite. This option obviously has major costs, both monetary and time.
Figuring out how to price your home, dealing with legal headaches, investing in repairs and upgrades, and committing a huge chunk of time just isn't worth it. But real estate agent listing fees are hefty, and it can be hard to bite the bullet on them.
Choose the best option: iBuyer. Instantly sell your home without all the hassle and headaches of FSBO and real estate agents. Check and see if you are in an iBuyer market area today to sell your home without all the hassle.