For sale by owner (FSBO) vs real estate agent

FSBO_vs_real_estate-agent_Judi_Wright_Team

If you are thinking of selling your home, you might be wondering if it is best to hire an agent or sell it yourself. After all, you’re smart, hard-working, and would much rather put the commissions the agent earns into your own pocket, right?

What is FSBO and when is it a good idea?

FSBO means ‘for sale by owner.’ This is when a seller decides to skip the services of a real estate agent to list their home and handle the selling process. For some home sellers, it may seem like an intriguing idea, especially for those with some real estate experience or the DIY personalities.

In some cases, FSBO might be the perfect solution. But, before you run out and buy the yard signs, review the information below. We’ve outlined a few facts and trends regarding For Sale by Owner situations to help you decide. Armed with this data, you’ll be able to make a more informed decision based on your situation, your capabilities, and the market conditions where your home is located.

FSBO Facts

To get the facts on FSBO, we tapped the expertise of the industry experts National Association of Realtors (NARS) and looked at their latest research & reports. Here are a few highlights:

89% of sellers in 2016 sold with the assistance of a real estate agent
8% of completed real estate transactions were FSBO sales
The percentage of FSBO sales compared to all home sales is the lowest since 1981
Of all FSBO transactions, 38% knew the buyer
The average ‘time to close’ for FSBO vs. real estate agent transactions is roughly the same
Majority of FSBO homes fit one or more of these criteria: located in small towns or rural areas, resort properties, mobile homes, or lower priced homes
Median sales price comparison*
- Agent-assisted home sales – $245,000
- FSBO home sales- $185,000
- FSBO home sales where buyer knew seller- $168,300

*For complete transparency, NAR does note in the research that FSBO homes are typically lower priced homes and this data does include the sale of mobile homes. These factors could have a slight skewing impact on the numbers above, especially in areas dominated by homes for sale under the $150,000 price.

Most Common Reasons Sellers Consider FSBO

Next up, we looked at common reasons why sellers wanted to consider selling their own home versus using a realtor. Here’s what we found:

Agent’s commission
The number one reason most FSBO listed is the desire to skip paying the realtors’ commissions. This can be up to 6% of the selling price so obviously an understandable concern.
Have buyer lined up
Often, in the case of FSBO, the buyer may already know the potential buyer. Maybe a friend or family member, or they’ve been approached directly by an interested buyer.
Sellers’ market
In some markets, there are many buyers and not enough sellers. In this case, the seller may think that finding a buyer quickly will be easier, and thus decide to go it alone.
Low home value
If a seller has a home that is lower priced or has flaws or many needed repairs, they may decide to sell on their own. The logic often is that the price of the home isn’t enough to pay a realtor’s fees and still walk away with enough cash in their pocket.
Control
Another reason listed for FSBO motivations is the desire to be in control. From setting the listing price, to deciding how to market or show the home.

So, now you have the list of common reasons why sellers are considering FSBO versus using a realtor. And one or more of these scenarios may fit your situation. But, the real estate process can be overwhelming and time-consuming.

Although the motivations above all seem logical, we wanted to take a deeper dive into the reality of these transactions. Do FSBO transactions provide the benefits above when all is said and done?

Or, does something else happen along the way that results in a different outcome?

What we found, according to NAR, is that over 90% of all FSBO transactions fail.

Most Common Reasons FSBOs Fail

Why is this number so high? Not surprisingly, it turns out selling your own home is more difficult for sellers who don’t have time and experience. Here are the top reasons why the majority of FSBO transactions fail:

Homes priced incorrectly
Setting the listing price too high or too low can be disastrous to a seller. This is true for agent-assisted transactions and FSBO transactions alike. But, far less likely when using an experienced professional real estate agent. Also, buyers are savvier. They know comps often include a 6% commission. And, they expect FSBO sellers to sell for 3% less (if they have a Realtor) or 6% less if no Realtors involved.

Experienced agents have many tools at their disposal to determine the right price. These tools take into consideration the location and condition of the home, amenities that are in demand, selling trends for neighborhoods, as well as competition.

Online home estimating tools don’t provide the deeper analysis and expertise of an experienced agent. And, when used in FSBO situations, can lead to a seller leaving money on the table by pricing too low. Or, result in a home that sits on the market too long due to overpricing. Either one can cost a FSBO seller thousands of dollars.

Failure to prepare and market properly
When selling a home, the marketing plan and tactics are the second most important factor in a successful outcome. This is true in a buyers’ market or a sellers’ market. Even with the numerous online tools and websites for FSBO sellers to list their home, these usually pale in comparison to the marketing network and tools available to the professional real estate agent.

Where you market the home makes a big difference in attracting qualified buyers. But, how a home is marketed can mean thousands of dollars difference in the selling price. Home staging, photography, advertising, and marketing promotional materials can rack up a hefty price tag. These expenses are paid for by the listing agent and are part of the commissions paid to the realtor. Even when a Seller tries to copy the preparation of a real estate agent (staging, photos), it isn’t the same. FSBO sellers simply lack the ability to market to the same channels that a licensed real estate agent does.

Lack of time to dedicate to process
The commissions paid to realtors is generally around 6% of the sales price, although it can vary. This is split between the listing agent and the buyer’s agent. That number may seem high to the seller who wants to pocket as much profit as possible. But, as many FSBO sellers soon discover, that 3% seems like a bargain when you understand the amount of legwork that goes into the process.

Selling a home requires a considerable amount of time dedicated to the process. Filling out legal paperwork correctly, such as the required Disclosures, Inspections, lining up repairs, getting photography, staging, handling phone calls and showings from dozens of interested parties – all take time. Many FSBO sellers find this out too late.

Unexpected legal challenges
The real estate process is complex and can be confusing for those without considerable experience. There are many state and local regulations that can cause unexpected delays in the process, or worse, open the seller up for litigation in the future.For example, disclosure laws can be tricky. Failure to disclose a leaky roof or water tank, for example, could end up costing the seller big bucks in litigation or big delays in the transaction.

Licensed, professional real estate agents are there to protect the seller from these delays and financial risks. They are required by law to maintain continuing education that ensures a comprehensive expertise in the legal ramifications of the real estate process.

Buyers’ agents unwilling to work with FSBO homes
As mentioned before, the real estate commission is usually split between the buyer’s agent and the seller’s agent. Many buyer’s agents are unwilling to show a FSBO property to their buyer because they see FSBO sellers as difficult to work with or it takes extra time to contact them to schedule and confirm showing appointments.

And, because FSBO sellers don’t have real estate experience, buyers’ agents feel like they spend extra time educating the seller and end up doing double the work for only half of the commission.

Unqualified buyers and negotiation failures
Many FSBO homes attract bargain hunters who specifically look for FSBO homes. This is because they understand the FSBO homes may be incorrectly priced, and/or the seller may not have the negotiation skills to get the best offer.

Additionally, FSBO sellers may not know how to ensure the prospective buyer is qualified for the mortgage. This could result in last minute drop-outs at closing causing the seller to start the whole process again to find a new buyer.

Real estate agents not only help the seller list the home at the optimum price, they are also expert negotiators to achieve the optimum price, as well as experts at ensuring the qualifications of buyers.

Is using an agent to sell your home worth it?

So, you’ve seen the facts on FSBO and what others experience through the process. As you consider your situation, here are a few important points to consider about the benefits of using a professional, licensed realtor.

Experienced realtors can help you set the price and market the home to ensure you are getting the best value — and walk away with more money in your pocket.
Having a realtor means they do all the legwork involved in the home selling process.
Realtors have expertise in the real estate process and complex legal regulations. They can help protect you from costly delays and legal issues down the road.
FSBO properties have decreased steadily from 19% in 1991 to 8% in 2016 as the complexity of the selling process has changed over time. There is a reason this number is so low in a Seller’s market – Sellers have proven they don’t want to take the legal or financial risk of listing without a professional agent’s help.

Your situation is unique, and selling your home yourself may be the perfect solution for you. Especially if you have expertise and knowledge of real estate transactions. And, have plenty of time and patience for the heavy leg work.

If you’d like to learn more about how an experienced real estate agent can help you, give us a call at 469-634-0932. We’d be happy to have a friendly chat about our process and how we deliver value to you. No obligations- just friendly conversation to help you make the decision that is best for you.

Getting ready to sell? Check out these Home Seller Resources just for you.

About the Judi Wright Team

Judi Wright/The Judi Wright Team is a real estate group specializing in the suburbs of Frisco, Plano, and surrounding areas. Named the “Best Realtor in Dallas,” by D Magazine eleven times and a Five Star Realtor with Texas Monthly, Judi is also a Company-Wide Top performer with Ebby Halliday and the #1 Top Small Group for Ebby Halliday Frisco.