Is for sale by owner worth it? It might be.
As a homeowner, you obviously want to make as much money as possible from the sale of your home. If you don’t have to pay a commission you put yourself in a nice position to do that.
Real estate agents get paid well so I don’t blame homeowners for trying to save a big pile of cash. Just keep in mind that selling your home on your own can be more difficult than you initially thought.
There are some drawbacks you should definitely be aware of before you do a “For Sale By Owner”, or FSBO. Before we get into the downside, let’s cover the upside.
What is the Upside to Doing a “For Sale By Owner” Sale?
You Can Potentially Make More Money
The significant upside to selling your own home is saving the commission you would have to pay to an agent. You can potentially net more from the sale, a lot more. For example, if you sold your home for $600K and paid a 6% commission that’s $36K you could have kept in your pocket. That’s nothing to sneeze at.
Unfortunately, the chances of selling a home without a real estate agent are actually really low. Yes, I’m a real estate agent, but this is not my opinion. It’s what the numbers show. Statistically speaking, less than 10% of all for sale by owners succeed in selling their own home. That’s more than a 90% failure rate… but if you can pull it off it’s definitely worth it.
What is the Downside to Doing a “For Sale By Owner” Sale?
You Might Not Make As Much Money As You Thought You Would Have
For Sale By Owner homes statistically sell for significantly less than homes sold by real estate agents. According to the National Association of Realtors (NAR), FSBO homes sell for $40k-$60K less than homes sold the traditional way.
You won’t have to pay a real estate agent thousands of dollars in commission, but the reality is you might not sell your home for as much as you could have if you worked with a professional.
There are 2 major factors that determine the sale of a home.
1. The pricing of the home.
The number 1 reason homes don’t sell is because they’re overpriced. If you’ve overpriced your home it will be almost impossible to sell because you’ll scare buyers away. This will result in your home sitting on the market for a long time, which you don’t want.
Even if you don’t hire a real estate agent I recommend talking to one about pricing your home. How you price your home can have a major impact on the price you ultimately get. As a professional real estate agent we can give you a Comparative Market Analysis, or CMA. We’ll do it for free. Give us a call and we’ll help you with that so you can price your home correctly from day one.
2. The marketing of the home.
The main objective is to get as many qualified buyers to see the home as possible in the shortest time. If your home’s overpriced and you don’t have a solid marketing plan you’ll miss any potential to receive multiple offers.
It’s basic supply and demand. You want to get as many offers as possible so as a seller you can have the upper hand. When you have multiple offers from different parties often the price gets bid up over the initial asking price. This is unfortunately highly unlikely to happen when you sell your home on your own because not enough people are going to know your home is for sale.
This brings us to the second downside to selling your own home…
Marketing a Home Can Be Difficult – Especially Without An Established Network
Anybody can list a home online, but good marketing ensures your home gets noticed by buyers that are looking for homes like yours.
Yes, an agent will put your home online. However, a good realtor will create that buzz around your home and spread the word throughout their established network of agents working with buyers in your area. A competent agent can reach more buyers than a listing on a for sale by owner site ever would.
It Won’t Be Listed on the Mulitple Listing Service (MLS)
Most buyers find homes by looking online. Real estate agents pay to put their clients’ homes. In turn, the MLS distributes the listing to realtor.com and all the other sites the MLS is affiliated with. When your home is on the MLS it has the potential to be seen by thousands of agents representing buyers.
This is important because according to NAR, over 80% of buyers use agents. Yet when you sell your home on your own it won’t go on the MLS and you’ll miss out on being seen by all those agents working with all those buyers.
When your house is listed on the MLS it’s like you have thousands of real estate agents trying to sell your home, but when you try to sell your own home and list on a for sale by owner site you only have one… you.
Selling a Home Is Hard Work
Aside from having the home inspected and coordinating to make repairs you’ll have to hire a professional photographer/videographer for marketing. You’ll also have to manage the listing which means you’re going to have to take phone calls from interested buyers and you’ll have to show them the home when they’re available and when you’re available. If you work this can be a huge burden.
On top of that, you’ll have to negotiate an acceptable sales price. And if you’re not a skilled negotiator you can end up getting steamrolled in the negotiation process.
No matter how smart you are you’re not going to be better than a good, keyword – good, real estate agent who’s smart as well and does all of these things every day.
You’re going to be new at this, which means every step of the way you’re going to have a learning curve and the last thing you want to do is practice or experiment when it comes to selling your house!
You’re Going to Have to Qualify the Buyer
If you’re lucky enough to find a buyer it’s important to make sure they’re qualified to buy. Many people that sell by owner don’t have the skill set or experience to determine a buyer’s qualifications and waste a lot of time with the wrong people.
Just because someone has a pre-qualification letter doesn’t mean they’re qualified. There is a big difference between being pre-approved for a mortgage and pre-qualified.
Many times a pre-qualification letter isn’t worth the paper it’s written on and if you don’t know the difference between a pre-qualification and a pre-approval you might waste time showing your home to someone that can’t finance the steam off a hamburger.
You want to be sure the buyer has a pre-approval letter and insist on seeing it. Having a pre-approval letter isn’t a 100% guarantee the buyer will get the loan, but it’s the closest you can get.
You’ll Have to Show the Home
If you sell by owner you’re going to have to show it yourself. When you do this beware that you’re inviting the public, complete strangers, into your house and there’s always a risk to that.
Unfortunately, there are criminals that target people that show homes and open houses. As real estate agents, we have systems in place to ensure our clients’ safety, the safety of their belongings, and our own safety. Since you’re going to be on your own with this you want to be smart about what you put in your listing and who you show your home to.
Anytime your show your home make sure you have someone with you, you remove any valuables before the showing, you have buyers show you their ID, and you make them sign a sign-in sheet.
You Could Potentially Get Into Legal Trouble
When you decide to sell by owner, you could do something wrong and not even know. Do your research and make sure you’re in compliance with your state’s laws.
Each city or state has its own laws. Don’t overlook this, it’s very important you don’t take any shortcuts here because if you don’t know the rules you could expose yourself to major risk. Especially with disclosure requirements.
If you as a seller are aware of any defects or malfunctions in your house, they need to be disclosed. Depending on the state you’ll have to legally disclose information on lead-based paint, nearby sex offenders, environmental hazards, or even if someone died in the home. If you’re aware of any of these things and don’t disclose them you could end up with an upset buyer on your hands and/or potentially end up in the middle of an ugly lawsuit.
You Can Attract Bargain Hunters and Be Bombarded by Low-Ball Offers
There are certain people that target “for sale by owners” because they want to steal the house. They’ll try to get into your pocket and low-ball you because they think you’ll take less because you don’t have to pay a commission to a real estate agent. You’ll need to be ready and know how to handle these people so you don’t get taken advantage of.
The Bottom Line
So, is for sale by owner worth it?
Considering there’s more than a 90% failure rate for “for sale by owner” homes and when they do sell they sell for $40k-$60k less than by working with an agent, if you’re looking to make more money then working with a good real estate professional will pay for itself over and over again not just financially, but in terms of time saved, and avoided stress from not exposing yourself to legal trouble.
However, if you think you can defy the odds, be the exception and sell your own home, and you have the time to do it at a minimum offer to pay a commission to an agent that brings you a buyer because, like mentioned earlier, over 80% of buyers use agents.
Instead of paying a full 6% commission, you’ll end up paying about 3% so you can still save money and you can potentially get your home sold faster. Just keep in mind the buyer’s agent works for the buyer, not for you. Their only job is to protect their client so you’re still going to be pretty much on your own.
On a positive note, the buyer’s agent will help you with the paperwork to ensure the home gets sold because they ultimately want to get paid.