What Is for Sale by Owner and Is It Really Better Than an Agent?
With record-breaking home prices and sales in 2020, many people are considering selling their homes in the upcoming season.
If you're looking into what selling a house entails, though, you might be tempted to forgo hiring a real estate agent and sell the property yourself.
When people do this, they are listing their home for sale by owner. What is for sale by owner, and is it the right option for you?
Let's take a look at what you need to know about selling as the owner without an agent and what your other choices are.
What Is For Sale By Owner?
What is for sale by owner mean? It means that the homeowner is selling the house without the help of a real estate listing agent. These homeowners are responsible for every part of the process of selling their home from start to finish. This includes pricing, listing, staging, drying up paperwork, negotiating, and closing.
Why Do People Sell Houses FSBO?
Before we go any further, what does FSBO stands for? When you see this acronym on yard signs or internet listings, it means that the house is "for sale by owner."
There are a number of reasons why people might choose to sell on their own rather than hire a real estate agent. The main reason that people choose to sell houses in this fashion is to avoid the 6% commission fee that typically goes to the real estate agents to help facilitate the sale.
People who sell for sale by owner are typically trying to keep more of the profit from selling their house. However, an important point is that local real estate agents will likely have a lot more experience when it comes to pricing, marketing, negotiating, and more. For this reason, people can end up making less money when they sell this way than if they had hired an agent and paid the commission.
For Sale By Owner Things to Know: Pros and Cons
Like all things, there are two sides to an FSBO home sale. Let's take a look at the advantages and drawbacks.
Is For Sale By Owner Worth It? The Pros
The most obvious pro of selling for sale by owner is that you can avoid paying commission to the listing agent. Usually, both the buyer and seller have an agent and the commission, which is on average between 4 and 6% of the purchase price, is split between the two of them.
Second, the listing price of the home is totally within the seller's control. As the sole decision-maker when it comes to pricing your home, it's important to do research and determine the actual value of the home rather than what you feel like it's worth.
Third, the seller is in total control of when open houses and showings are held, rather than being at the whim of the realtor's schedule.
Fourth, as the homeowner, the seller is motivated to get the best price they can for their home. On the other hand, real estate agents might push sellers to knock the price down 10, 20, or 30,000 dollars to help the house sell faster, as a price reduction of that amount won't severely affect their commission.
Lastly, another benefit of selling FSBO is that you're an expert of the neighborhood. You have more knowledge than anyone about what the benefits of living in your home are, so you can use that information to sell your property to prospective buyers.
There are also a lot of downsides to selling FSBO.
For one, it can be emotionally difficult to hear the inevitable criticisms and complaints that potential buyers have. It can be difficult to separate your emotional attachment and appreciation for the house from the reality of a business negotiation.
Secondly, it can be hard for people to fairly price their own homes. This is totally normal, as you have countless memories tied up with the place. Objectively pricing a home that you are attached to can be a real challenge, and it takes quite a bit of work to overcome this.
Third, most sellers who choose to list their own home likely don't have any sales experience. Real estate agents know the market, have access to pricing data, no the common pitfalls, and understand the legal standards and loopholes. It can take a lot of research and time to be able to even come close to matching the sales experience of a professional.
Additionally, negotiating during the selling process can be time-consuming, stressful, and aggravating.
Another con is that you'll have a lot of homework to do regarding the rules and regulations in your state. It will take a lot of skill, time, and energy to course through the endless documents associated with selling a house. If not done correctly, you could create financial or legal issues for yourself down the line.
Also, a con is the fact that potential buyer's real estate agents might discourage their clients from placing an offer on a FSBO home. It is common for agents to have had negative experiences with FSBO sellers, who often don't know what their doing, price their homes too high, and are emotionally tied to their homes.
You also might not make as much money selling FSBO as you would with a real estate agent, even factoring in the commission.
It can also take longer to sell a house when you list it on your own. It's a lot more work than you might think.
That brings us to our last point, which is that selling a house is a huge time suck. To do it right, it will completely take over your life for a period of time. It's important to understand the investment of time you will have to make before you choose to go this route.
What Are Your Other Options?
If you're drawn to selling for sale by owner, but are worried about the drawbacks associated with that path, you do have some other options.
First, of course, you could hire a real estate agent. While there are benefits to selling this way, there are also drawbacks. You may find that your real estate agent is pushing you to drop the price more than you'd like to or that they are too busy to answer the questions you have.
It also takes quite a bit of time to sell a house on the traditional market. This means that your situation can be in limbo for months at a time, with the deal potentially falling apart at any moment.
One option that you have that can be faster, more convenient, and more straightforward is selling your home to an iBuyer or a real estate investor. These individuals or companies are typically making cash offers, which means that you don't have to worry about whether or not the buyer can actually receive financing from a lender.
Selling a house is one of the most stressful things you will do in your life. Homes are huge financial investments, and the way that the process drags on can be absolutely agonizing.
When you sell a house traditionally, you can wait for days or even months to receive offers. You'll also typically invest money ahead of time into making repairs and upgrades to make the home more appealing to buyers. The process of showing the house can be frustrating as well, where you have to keep your home perfectly clean for months just in case someone wants to take a look with a few hour's notice.
Selling a house is very disruptive to your daily life. In order to sell a house as fast as possible this way, you'll have to be flexible and change your own schedule frequently to accommodate open houses and showings.
Then there is the issue of the buyer's financing potentially falling through or the buyer backing out. Closing dates can also often get pushed back, affecting your plan for your move to a new house.
On the other hand, when you sell to a real estate investor, you can typically get an instant offer. You also won't have to stress or invest money in repairs or upgrades, nor will you have to stage or clean your home.
Additionally, the hassle of showings and open houses is completely removed if you go this route. You also don't have to fret about loans being approved, as investors typically pay in cash.
Lastly, and perhaps most importantly, this process is more on your own terms. Closing dates can happen quickly but ultimately happen when you want them to.
Are You Looking to Sell Your House in a Fast, Hassle-Free Way?
Know that you know the answer to "what is for sale by owner?" you can make an informed decision about whether it's the right option for you.
In most cases, selling a house is a lengthy process that drags on and leads to countless sleepless nights. If you're worried about the severe interruption you might experience if you sell your house, considering faster, simpler options might be the right decision for you.
Are you interested in finding out how much you could get for your home from an iBuyer? Click here to enter your address and get a cash offer on your home in as little as 24 hours!