For Sale by Owner (FSBO)
For sale by owner (FSBO) is a term that refers to a method of listing a property for sale. 1:45 Though the details of each real estate transaction vary, here are some of the tasks the seller is responsible for in an FSBO transaction: Determine the asking price by researching neighborhood property values for homes with similar features (aka comps), such as the number of bedrooms and the home's square footage. Stage the home for sale and make any necessary repairs. Still, it's important to remember that when a seller doesn't employ a real estate agent, the seller assumes all the responsibilities of completing the transaction. Sellers may also need to track down other documents, including the property survey, permits, certificates of occupancy (COs), loan documents, utility bills, property tax bills, homeowner association covenants and agreements, and the property title. However, sellers with little knowledge of real estate transactions can find the situation stressful and may be better off working with a qualified real estate agent.
What Is For Sale by Owner (FSBO)?
For sale by owner (FSBO) is a term that refers to a method of listing a property for sale. When a house has an FSBO listing, it means the owner is selling the property without the help of a listing agent or broker. One reason sellers choose this option is to avoid paying the real estate agent a commission on the sale.
How For Sale by Owner (FSBO) Works
Though the details of each real estate transaction vary, here are some of the tasks the seller is responsible for in an FSBO transaction:
Benefits of Listing as FSBO
Going through a real estate agent or broker can save a homeowner a great deal of time and headaches. However, commissions can reduce the seller's profits. The average real estate commission in 2019 (the most recent data available) was 4.96%, down from 5.03% in 2018, according to research firm Real Trends.
A 5% commission on a $250,000 sale would come out to $12,500. If the seller handles the sale themselves, they would get to keep the entire $250,000 — sort of. Keep in mind that the commission is usually wrapped into the sales price, which means the buyer ultimately pays the fee. Of course, with no commissions to worry about, the seller can ask for a lower price — and the buyer can get a better deal.
Special Considerations
Savings thousands of dollars in commissions can be tempting. Still, it's important to remember that when a seller doesn't employ a real estate agent, the seller assumes all the responsibilities of completing the transaction.
If the seller is unfamiliar with the homebuying and selling process, any mistake can be quite costly. If the seller sets the listing price too high, for example, fewer buyers will consider the home. Likewise, too low an asking price means the seller could leave money on the table — potentially more than was saved by selling FSBO.
Also, selling a home via FSBO can pose legal risks if the sale's legal documents are not drawn up properly or if the home has issues that aren't adequately disclosed. Depending on the experience of the seller, avoiding the commission could be a wise financial decision. However, sellers with little knowledge of real estate transactions can find the situation stressful and may be better off working with a qualified real estate agent.
Related terms:
Absorption Rate
Absorption rate is the rate at which homes are sold in a market during a set time. Rate of absorption in accounting helps calculate a firm’s overhead costs. read more
Affidavit Of Title
An affidavit of title is a document provided by the seller of a piece of property showing the status of the property, including ownership and legal issues. read more
Best and Final Offer
A best and final offer is a prospective homebuyer's last and highest offer, submitted in a bidding war for a property. read more
Broker and Example
A broker is an individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor. read more
Capital Improvement
Capital improvements are permanent structural changes or restorations to a property that enhance its property value, increases its useful life, or allows for a new use. read more
Closing Costs
Closing costs are the expenses, beyond the property itself, that buyers and sellers incur to finalize a real estate transaction. read more
Commission
A commission, in financial services, is the money charged by an investment advisor for giving advice and making transactions for a client. read more
Comps
"Comps" refers to the comparison of similar businesses, sales figures, or properties to quantify performance or value. read more
Exclusive Listing
An exclusive listing is an agreement in which one real estate broker is authorized to act as the sole agent of the seller. There are two types of exclusive listings. read more
For Sale by Owner (FSBO)
For sale by owner means selling a home without a real estate agent. FSBO sellers don't use listing agents, but they may work with buyer's agents. read more