• Home
  • Learn
  • For Sale By Owner: Understanding FSBO Homes
New yellow house

For Sale By Owner: Understanding FSBO Homes

6-Minute Read
Published on Month Day, Year
Share:

The purchase or sale of a home is a major life event, in part because so much money is at stake.

One way buyers and sellers sometimes look to reduce expense is by avoiding real estate agent commission. To do this, they forgo using an agent altogether and, instead, sell their home or buy one for sale by owner (FSBO). But is going that route the best way to save?

Read on to learn what FSBO is, what its pros and cons are and what you need to know if you plan to buy or sell a house using this method.

Apply for a Mortgage with Quicken Loans®

Call our Home Loans Experts at (800) 251-9080 to begin your mortgage application, or apply online to review your loan options.

Start Your Application

What Is For Sale By Owner (FSBO)?

As the name suggests, “for sale by owner” refers to a property that’s sold by the homeowner without the assistance of a real estate agent or realtor. 

While that sounds simple enough, there are a few differences when it comes to buying or selling a FSBO (pronounced “fizz-bo”) home versus an agent-sold home. For example, FSBO homes cannot be listed on a multiple listing service (MLS), which provides exposure to thousands of real estate agents and buyers. That means a FSBO home will be harder to find and harder to market. And if this is the first FSBO home you’re buying or selling, there will be a learning curve, opening both parties up to common mistakes, like too-high or too-low pricing.

So why do people choose FSBO? Along with not having to pay an agent’s commission, they may also believe that the process will be easier, due to a hot market or having a home that “sells itself.” However, the experience can be a little more challenging. That’s why it’s important to know what to expect before you dive into the FSBO market.

Buying A House For Sale By Owner

Buying a FSBO home is like buying an agent-sold home in that you can still get a mortgage, work with a buying agent (and should), walk through the home, make an offer and close.

However, there are some differences you should consider before getting started. These include the pros and cons of buying a FSBO home, and important things to remember if you choose to do so.

Pros Of Buying A FSBO House

Here are some of the main advantages to buying a FSBO house:

  • You have direct communication with the owner.
  • There’s potential for direct negotiation.
  • The owner has insider knowledge of the home and neighborhood.
  • You may be able to purchase the home at a lower price.

Cons Of Buying A FSBO House

Here are some of the main disadvantages to buying a FSBO house:

  • The owner may inflate the home value due to a lack of experience or an emotional attachment to the home.
  • The owner may have little knowledge of real estate.
  • The seller may not disclose everything, and a lawsuit would be a long, expensive process.
  • The seller may not agree to help pay the commission of a buyer’s agent if you have one.
  • The seller may not want to spend more money on the property if there are issues.

3 Tips To Remember When Buying FSBO

Some parts of the FSBO buying process differ from the standard home buying process. Despite these differences, remember that many best practices for buying from an agent still apply to purchasing FSBO properties.

1. Do Your Prep Work

A FSBO home sale can be a little more complex than a standard home sale – and that’s just one of many reasons you should hire an agent, particularly one who is experienced in these types of transactions. Whether you work with an agent or not, you should familiarize yourself with the process and prepare yourself for working with this type of seller.  

2. Learn To Negotiate

Negotiating the sale price of a home that’s for sale by owner can be tricky when you’re dealing directly with the seller. For one thing, sellers often overvalue their property due to lack of experience and the emotional connection to the home. It’s often recommended to offer less than the listing and work from there. When you start lower, you have some room to negotiate. Remember, very rarely can you go lower than your initial offer.

You’ll also need to negotiate fees and responsibilities along with the purchase price of the home. 

3. Double Check Your Paperwork

If you aren’t using an agent, it’s imperative to familiarize yourself with the paperwork you’ll be reviewing throughout the transaction. Along with studying on your own, you should also consider having a professional review everything and offer advice.

One important document you’ll want to make sure you know well is the purchase agreement

Apply for a Mortgage with Quicken Loans®

Call our Home Loans Experts at (800) 251-9080 to begin your mortgage application, or apply online to review your loan options.

Start Your Application

Selling A House By Owner

Selling your home without an agent may be more complex than you may think. For one, you’ll need to take on all the work that comes with the process, including marketing your home, showing your home and handling negotiations and closing. 

Along with that, a lack of knowledge could lead to some mishaps that could cost you – like pricing too low or too high or making a legal error. Before putting that “for sale by owner” sign on your lawn, find out if selling your home on your own is worth it.

Pros Of Selling A House By Owner

Here are some of the main advantages to buying a FSBO house:

  • You won’t have to pay commissions to a seller’s agent, which means you’ll keep more profit from the sale.
  • You have control of the sale process and your property.
  • You know your home better than anyone, which could be an advantage when showing it to prospective buyers.

Cons Of Selling A House By Owner

Here are some of the main disadvantages to buying a FSBO house:

  • Lack of experience could cause you to sell your home for less than it’s worth or price it too high.
  • Since you can’t list your home on an MLS, it will have less visibility than one sold by an agent.
  • You’ll need to handle the paperwork and legal responsibilities yourself.
  • You’ll need to research and educate yourself on the real estate market, pricing your home, marketing your home and negotiating a deal.

3 Tips For Selling A House By Owner

When you sell your home independently, you’ll need to take on the role of a seller’s agent. Follow these tips to help with the process:

1. Learn How To Price Your Home

It can be hard to remain objective when deciding on a price. But when it comes to pricing your home, you need to take the emotion out of it and focus on the facts. Here are some good ways to help figure out how much your home is worth and determine a reasonable asking price:

  • Perform a comparative market analysis by researching similar homes in your area that have sold in the last 3 months.
  • Determine whether the local trend is toward a buyer’s market or seller’s market.
  • Have your home appraised, which will give you the best idea of the value of your home.  

2. Become Your Home’s Spokesperson

Because you won’t be able to get your home listed on an MLS, you’ll need to do more of the work yourself to get exposure. Consider using sites like ForSaleByOwner.com, which provides a customizable listing and pricing tools for free, along with other paid services and resources, like “For Sale By Owner” signs, necessary legal forms and professional photos.

3. Do Your Research

When it comes to selling your home without an agent, we can’t emphasize enough the importance of making sure you have a high level of familiarity with the sale process and what local laws require. Make sure you know how to price your home fairly and negotiate with buyers. 

Most importantly, know the ins and outs of the paperwork and processes involved in the transaction and the legal implications if you don’t. Make sure you are honestly and accurately filling out your seller’s disclosure form for your buyers and following your state-specific regulations. Strongly consider working with a real estate attorney to make sure you have and understand the correct forms, including your purchase agreement.

Is For Sale By Owner Right For You?

Now that you know what you need to do when selling a FSBO and what to expect when buying one, you can make a more informed decision if this option is right for you. Whether buying or selling, it’s a good idea to learn more about both sides of a FSBO transaction before diving in.

If you’re a home buyer, check out our current mortgage rates and get a head start on the buying process with an online mortgage preapproval.

Apply for a Mortgage with Quicken Loans®

Call our Home Loans Experts at (800) 251-9080 to begin your mortgage application, or apply online to review your loan options.

Start Your Application

See What You Qualify For