When you plant a for-sale-by-owner (FSBO) sign in your front yard, you’ll likely find no shortage of advice from friends, family, neighbors, real estate agents, and random strangers.
Everybody, it seems, is an expert.
So when a close friend recently decided to go the FSBO route, I resisted offering up my thoughts. First of all, I’m not a real estate guru. Secondly, I’ve had mixed results in the FSBO game.
Years back, my wife and I tried to sell our home ourselves and eventually ended up calling in a real estate agent to the rescue about a month in. Ironically, though, the house we bought was FSBO. The deal went through without a hitch and likely saved us—and surely the homeowner—some serious cash.
With an empty nest awaiting us this fall, we’re mulling over whether to sell that very same house. I remain intrigued by the FSBO option, so I figured I’d start exploring the pros and cons. Here’s a breakdown to consider before you go it alone.
The big potential win, of course, is more cash in your pocket if you successfully sell your home yourself at market value or above. According to Consumer Reports, you can save as much as 6% on commissions—or $18,000 on a $300,000 home. Assuming you priced your house right, the additional cash could go a long way toward a down payment on another home or simply flow into your bank account instead of that of a real estate agent.
A major downside, according to the publication—as well as my own personal experience—is the amount of time likely required to successfully execute on a FSBO. “The process is far from easy,” Consumer Reports writes. “You’ll have to invest a lot of time in doing the work a realtor would ordinarily handle, which includes everything from showing and marketing your home to negotiating the final price.” No doubt you’ll be spending quite a bit of time advertising, hosting open houses, fielding phone calls, being the tour guide on walk-throughs, reviewing offers, and formulating counter-offers.
The good news is that, according to the National Association of Realtors’ 2018 Profile of Home Buyers and Sellers, FSBOs tend to sell more quickly—sometimes in as little as two weeks. Yet, they note that number is likely skewed by the fact that the buyer and seller frequently already know each other.
The internet has certainly helped make spreading the word about your FSBO easier. Services such as For Sale by Owner, FSBO.com, and 4SaleByOwner.com offer packages ranging from free to $500 or $600, and you’ll likely want to advertise multiple times in the local newspaper or real estate supplement, which could cost you an additional several hundred dollars. Also consider the potential costs for enlisting the expertise of a real estate attorney. Many people who decide to go FSBO don’t realize that some agents offer limited services to help with specific aspects of selling a home. You can get a market analysis or on-demand assistance to help negotiate the price and details of the sale. Costs will vary depending on the market you’re in and other factors.
When we decided to go with the agent, we were already out about $1,000 and still ended up having to pay commissions when the house sold three weeks later. Meanwhile, the house we bought sold in about two weeks, so those sellers ended up way better off financially.
Investopedia defines opportunity cost as “the loss of potential gain from other alternatives when one alternative is chosen.” In other words, what are the potential ripple financial effects of going FSBO? If you work in sales and you sink 50 hours into the home-selling process instead of locking in new commissions, you may not be ahead of the game—particularly if you end up going with an agent. If you’re in a market in which seasonality is a big factor, you could run the risk of going through the prime selling season lacking the considerable reach, marketing power, and expertise of a real estate pro. Of course, if you promptly sell your house, you’re way ahead in the cost category by not shelling out the commission costs.
Hassle and headaches
After I tried to sell my house on my own, I had newfound appreciation for real estate agents. While it’s true that sometimes they make a sale by doing seemingly little more than picking up a phone and showing up with a contract, I suspect that’s the exception, not the rule. There’s a lot of behind-the-scenes work to deal with—lowball offers, no-shows for walk-throughs, buyers getting cold feet at the last minute. The list goes on.
When we went FSBO, we got some ridiculously low offers that required finding a tactful way to tell the lowballer their offer was ridiculously low. I would have preferred that task be handled by someone else, particularly in the instance when the lowball offer came from a coworker. Inexperience can also cause trouble. When we bought a previous house FSBO, we learned only after submitting an offer that the seller had promised the house to another couple as well. She preferred that my wife and I get it, but I spent a stressful few hours counseling her as best as I knew how on extricating herself from the sticky situation. It all worked out—for us at least—but it could have gotten ugly.
There’s an army of anti-FSBOers out there, many of them agents, who will tell you that selling your home alone is one of the worst mistakes you’ll ever make. Central to their argument is the potential risk you face if you lack expertise in the laws and guidelines that govern the sale of a home and the backing of an established real estate firm if legal issues arise. While anti-FSBOers often clearly have an agenda, their warnings should not be ignored. There’s a wide range of regulations governing the sale of a home that can vary considerably from state to state. It makes sense to seek the advice of a knowledgeable real estate attorney or contract limited services from a real estate agent who can provide guidance and translate the fine print.