You don't know what you don't know, are you leaving equity on the table?
A home that is for sale by owner, referred to as a FSBO (pronounced Fizz-Bo) means the homeowner is going to sell the home directly to the buyer with no real estate agent involved. Often, a homeowner will choose this method of sale because there are no commission fees as there is no Realtor. While this cost-savings is appetizing, there are risks involved and sometimes a homeowner might actually lose money on a FSBO if they’re inexperienced.
Pro - FSBOs save money on Realtor commissions. Typically a seller pays the real estate agent’s commission on both sides of the transaction, their Realtor and the buyer’s Realtor. But in a FSBO, the homeowner only pays the buyer’s Realtor commission.
Con - Without a Realtor, it’s the homeowner’s job to accurately price the home for sale. While it might seem like an easy job, pricing a home for sale requires the understanding of and utilization of a lot of data if the homeowner is going to earn the most equity possible from the sale. There are many resources to determine what a home might be worth, but a Realtor’s job is to know how to use the resources and more to prove a home’s worth.
Pro - Homeowners can pay certain real estate brokerages to list their home in the MLS for a flat fee. The MLS (Multiple Listing Service) is the most common way for buyers to find homes for sale that fit their criteria since the MLS feeds out into most of the main home-searching sites (like Zillow.com and Realtor.com). This is worth way more than a FSBO sign in your yard or word of mouth.
Con - Most homeowners do not have a background in marketing, let alone home sales. And unless you have a huge social media presence, you might have a difficult time reaching potential buyers. There are also marketing efforts Real estate professionals have researched in order to attract the right kind of buyer to your home. In some markets this doesn’t matter, but in others it’s the difference between a big sale and a not-so-big sale.
Prepping your Home
Pros - You will be in charge of deciding what buyers want to see and don’t. In some ways that’s great because you will be able to take your time, cleaning and fixing small issues on your own.
Cons - You won’t have the professional set of eyes telling you that a buyer and/or their Realtor will notice the crack in the front sidewalk that you’ve been stepping over for 20 years. You also won’t have access to the many vendors Realtors have already used and vetted in order to get your home ready for sale quickly and at a reasonable price.
The Sales Process
Pros - Unless you are intimately familiar with the real estate process and its legal timelines, there might not be any pros here.
Cons - The odds that an inspection, appraisal, mortgage, title, lien, or permit issue NOT popping up during a transaction are very low. These things can stop a transaction dead in its tracks almost immediately. If you don’t know how to navigate the many issues that come up during these points of sale, you might want to consider hiring a Realtor!
Contracts and Negotiating
Pros - You will not have to communicate through another person in order to come to an agreement. Everything will be in your hands and in your control.
Cons - You might not be a lawyer and even if you’ve sold a home before, every transaction is completely different. Negotiating a contract in a way that is both legal and beneficial to you might come down to “you don’t know what you don’t know.” And remember how you didn’t want to deal with a Realtor? You’ll have to deal with a Realtor either way during this process.
There are some advantages to selling your home yourself, the biggest of which is the potential money you could save by not paying a Realtor his/her commission. Successful FSBOs happen everyday, but you should know that this list of pros and cons does not even begin to cover all the things a Realtor will take care of on your behalf. Do your research first to decide if you will actually be saving money, not to mention headaches, by selling your home yourself.