For sale by owner
For Sale By Owner, or FSBO, is the process of selling real estate without representation by a real estate agent. There are many factors to weigh when considering selling FSBO v. hiring an agent. Will I price it right? Who will prepare the documents? Do I really have the time and patience for this? Will I get in legal hot water? One of the primary reasons owners choose to sell on their own is to avoid paying the real estate commission which can amount to a hefty sum. In the US the agent's fee is, on average, 5 to 6% of the selling price of the property which for a $290,000 home is between $14,000 and $17,000. These facilitators are state-specific and are becoming more common as more owners choose to sell on their own.
Many Options Including Multiple Listing Service Access
There are many options open to the FSBO seller. Many companies both online and brick and mortar offer various levels of services and price points. These include:
- Do it all yourself and pay no commission. For the solo job, thanks to the internet the creative seller can obtain all kinds of help. Some trusted sources provide step-by-step instructions to set a price, get the house ready for sale, hold an open house, open escrow and even transfer the keys. You can put up a free website with one of the simple and free website companies. Get a professional looking sign with a mailbox attached to it. Make your own Flyers. List on For Sale By Owner websites. And, when you bring in a buyer who is not working with an agent, you pay no commission. The two parties can obtain contractual assistance from their own lawyers or hire one lawyer to facilitate the entire transaction.
- Get a Little Help and Pay a Little Commission. There are several flat fee listing services that for a nominal fee will put your property on the Multiple Listing Service so your property is marketed to all the real estate agents in the area and is listed on the nationwide MLS Realtor.com. In exchange for this valuable market share, the FSBO Seller must agree to pay a commission to the agent that brings a buyer. The end result is that you end up paying about half of what you would have paid with a regular listing. The agent who brings in the buyer will also prepare the vast majority of the paperwork for the sale. Since the agent is representing the buyer, not you, you may want to hire an attorney to review the transaction and to make sure all required Seller disclosures are made.
- Flat-fee and hourly home selling. Alternatively, a home seller can either pay a flat-fee or hourly fee to a real estate agent. This can be a one time payment, or an ongoing hourly home selling agreement. These allow the FSBO seller to avoid commissions and still receive a-la-carte real estate agent help.
Legal Disclosures and Documents
The home sale transaction used to be simple. Now it involves a huge stack of documents and legal requirements which can make selling FSBO a challenge. For this reason, the FSBO Seller is wise to hire an attorney who specializes in FSBO transactions. While they will incur a fee for this, it will be far less than the amount saved by not paying a real estate commission. In most states, there are detailed legal requirements pertaining to sellers and disclosures they must make. In California alone, a stack of disclosure disclosure forms are required to be completed when the seller is offering a home for sale to the public. These forms that are within the bailiwick of the real estate agent is nearly impossible for a seller to come by. Real estate lawyers have all of the required forms, documents and expertise necessary.
Interesting FSBO Statistics
Some interesting FSBO statistics can be found in the National Association of Realtors (NAR) 2015 Profile of Home Buyers and Sellers. The median age for FSBO sellers is 54 years. Seventy-seven percent of FSBO sales were by married couples that have a median income of $104,100. FSBO homes sold more quickly on the market than agent assisted homes. All FSBO homes typically sold in less than two weeks—often because homes are sold to someone the seller knows. Seventy percent of successful FSBO sellers were satisfied with the process of selling their home. Nine in 10 FSBO sellers who both knew and did not know the buyer were satisfied with the home selling process.
Since the market recovered following the 2007 real estate recession, there has been a steady increase in FSBO sales, up nearly 30%. According to a 2016 report by the National Association of Realtors (NAR) regarding home buyer and seller trends, Home Buyer and Seller Generational Trends Report 2016, 8% of surveyed real estate transactions between July 2014 and June 2015 were FSBO. The record percentage of 20% of US real estate transactions (since tracking started in 1981) took place in 1987.
Some critics of the National Association of Realtors' report believe those statistics may be misleading and suggest that the true size of the U.S. FSBO market is higher than these numbers lead you to believe because flat-fee MLS now makes up 10% of transactions. They argue that flat-fee MLS sellers are in substance FSBO sellers.
Separate reports from the Canadian Real Estate Association and CTV Consumer Reports state that between 20% and 25% of homes in Canada are not sold through brokers each year (as of 2004). MSN Money suggests that 30% of homes are sold without using a real estate agent. More than half of the homes sold in Quebec are sold without an agent.
In the UK, the average commission rate is significantly lower than in Canada or the US. Properties for sale by owner are less common. By law, all sales of property have to be supervised and handled by an independent solicitor who acts as a mediator and holds the buyer's money until the purchase process is finished.
In Australia, the FSBO is still relatively niche market. According to RP data, privately sold houses in Canberra are spending about 34 days on the market - the second least amount of time in the country. Canberra houses sold by private treaty spent the same time on the market as those in Melbourne - a week longer than Sydney, where houses are on the market for an average of 27 days. Privately sold units in Canberra spend an average of 54 days on the market, third only to Sydney (23 days) and Melbourne (37 days) when compared with other capital cities.
- "Do You Really Need a Real Estate Agent?". Homebuyer.com. Retrieved April 2, 2016.
- "Hiring a Realtor vs For Sale By Owner". Fox Business News. April 2, 2016. Retrieved April 2, 2016.
- Ian Rose (2006-11-23). "BBC News Can you beat the estate agent". Retrieved 2009-09-06.
- "For sale by owner: Homeowners ditching brokers". CNN Money. April 2, 2016. Retrieved April 2, 2016.
- "Real Estate Guides, For Sale By Owner". Realty Trac. April 2, 2016. Retrieved April 2, 2016.
- "Nationwide Search of Listings". Discover Your Perfect Home. National Association of Realtors. April 2, 2016. Retrieved April 2, 2016.
- "Residential Home Sellers in California Disclosure Obligations". Residential Home Sellers in California Disclosure Obligations. Nolo Press. April 2, 2016. Retrieved April 2, 2016.
- California Civil Code Sections. 1102, 1102.2, 1102.3. State of California, Civil Codes. 2016.
- "Highlights From the 2015 Profile of Home Buyers and Sellers". National Association of Realtors. December 2016. Retrieved April 2, 2016.
- "FSBO: Pros and Cons of Selling a Home Without a Real Estate Agent". Yahoo Finance. April 2, 2016. Retrieved April 2, 2016.
- "Home Buyer and Seller Generational Trends Report 2016". National Association of Realtors. March 9, 2016.
- "Trelora founder promises a real estate industry shake-up". Denver Post Newspaper. November 3, 2013. Retrieved April 2, 2016.
- Akin, David (2004-09-25). "Conducting the ultimate yard sale". The Globe and Mail. Retrieved 2014-06-10.
- Kerry Gold (2009-12-12). "Do you really need a real estate agent?". MSN Money. Retrieved 2014-06-10.
- Peter Diekmeyer (2009-11-16). "Realtors feel the heat - A Competition Bureau investigation could force changes on the real estate industry.". Retrieved 2009-11-17.
- "Private house sales in Sydney quickest in country". Seek Estate. 1 June 2014.