What is FSBO? “For Sale By Owner,” or FSBO (pronounced “fizz-bo”), is when a homeowner sells their home on the market without a real estate agent. According to the National Association of Realtors (NAR), only 7% of sellers sold via For Sale By Owner in 2023.
As with any home sale method, there are pros and cons to selling a house without a realtor. We caught up with top agent Shawna Smith to bring you an overview of FSBO and shed some light on the process, the perks, and common misconceptions.
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What does the FSBO process look like for the seller?
If you’re considering selling FSBO, familiarize yourself with the process before you dive in. Without choosing a real estate agent, you’re responsible for preparing your home for sale, marketing, negotiating, and navigating legal and financial documents.
“There’s a lot of work that goes behind it,” notes Smith, who works with over 75% more single-family homes than the average agent in Louisville, KY.
While every sale is unique, here’s an overview of a FSBO seller’s responsibilities:
Benefits of selling FSBO
While FSBO is double the work, it comes with its perks. Sellers have more control over the minutiae of their home sale and save on the listing agent’s commission.
FSBO sellers save on real estate commission
The main reason sellers choose FSBO is to save money. While real estate sales commissions vary, the national average rate is 5.8% of the sale price. When you sell FSBO, you save on the listing agent’s commission. According to NAR, 89% of homebuyers worked with real estate agents last year, and 6% purchased directly from the previous owner.
It’s worth noting that FSBO sellers don’t pocket all of the 3% they save on the listing agent. FSBO sellers must pay pre-listing home preparations and marketing costs normally included in the agent’s commission.
FSBO sellers retain complete control over the sale
When sellers hire a real estate agent, the agent guides them through the home sale, offering advice on pricing, marketing, staging, prep work, and price negotiation. And while most sellers appreciate the support of an experienced professional, some homeowners prefer to retain complete control over their home sale details. If you choose a FSBO, every part of the process — emails, phone calls, paperwork, marketing, negotiating, etc. — is directly under your control.
Drawbacks of selling FSBO
Without a real estate agent, FSBO sellers take on the responsibilities and risks of selling their home solo. You need time, energy, and objectivity to pull off a successful home sale.
Statistically, you’re likely to sell your home for less money
When you work with a top-selling agent, you reap the benefits of their expertise. Real estate agents understand the nuances of pricing a home competitively, presenting a home for the market, and marketing effectively to get buyers in the door. Every step increases the value of your home and ultimately helps you win the highest sale price possible.
Smith points to poor pricing as a top issue for FSBO sellers:
“The issue is they’re actually losing money on the value of their home because they’re guessing at the value; there’s no real science behind it . . . They don’t realize they’re leaving money on the table.”
Data backs the value an agent brings to the home sale process. According to NAR, FSBO homes sold for a median price of $310,000 in 2023, whereas, agent-assisted homes sold for a median price of $405,000 — that’s $95,000 less than what you would get if you worked with an agent. Furthermore, our analysis of transaction data reveals that the top 5% of real estate agents sell homes for 10% more than their peers, indicating real estate agents’ expertise in increasing the sale price more than makes up for their cost.
Costs can add up quickly
As a FSBO seller, you pay out-of-pocket for services typically included in the listing agent’s fee. These costs include:
- Professional photos
- MLS listing fees
- Signage
- Staging
- Open house expenses
- Digital and physical ads
Beyond the basic costs, FSBO sellers often over-improve their homes since they don’t know which upgrades increase value and marketability in their local market. If you spend money on the wrong improvements, you won’t recoup your investment in the home sale.
Marketing is easier said than done
Marketing is key to attracting buyers to your home. And sticking a sign at the head of your street won’t do you much good. As a FSBO seller, you need to learn the most effective real estate marketing strategies for your market. Digital marketing is especially crucial since all home buyers used the internet to search for a home in 2023.
Legal Responsibility
Smith points out that when sellers choose to sell FSBO, they take on responsibility for all of the legal aspects of the sale: “When you have an agent, that agent takes that responsibility to make sure that there’s a legally binding contract that all the terms are met for the seller.”
According to NAR’s 2023 report, 7% of FSBO sellers ranked ‘understanding and performing paperwork’ as the most difficult task in the home sale, second only to ‘getting the right price.’
Real estate agents have insurance that covers them, Smith says, “so if there are some unforeseen mistakes, they [agents] have something to fall back on.” If a FSBO seller breaches a contract or flops a disclosure statement, their buyer can sue them. “If something goes wrong legally, they’re just going to get sued by the buyer or whoever’s involved in that transaction with them. So, they’re taking on a lot of responsibility that they don’t realize,” Smith adds.
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