When Selling a House by Owner Actually Makes Sense
Interested in selling your home but put off by the high cost of real estate agent commissions? Many homeowners consider going the “for sale by owner” route and taking on the task of getting their property sold on their own. But as we’ve covered before, it’s not always the wisest decision. Selling a house by owner can be an incredibly difficult road to navigate, and oftentimes, it isn’t worth the money a homeowner could save on agent commission fees.
Still, there are always exceptions. Below, we’ll cover the basics of what it means to sell a house by owner, including when it might actually make sense to do so.
What does it mean to sell a house by owner?
For sale by owner, also referred to as FSBO, is when home sellers choose to list, market, and—hopefully—sell their home without the help of a licensed real estate agent. The motivation for doing this is almost always to save on costs, since home sellers are usually responsible for paying the commission of both their own agent and the buyer’s agent. Ultimately, that means a pretty big chunk of money lost out of the profit on the home.
While savvy sellers may think that selling a house by owner is an easy way to keep more money in their pocket, most of the time FSBO ends up being a waste of time, energy, and money. There can also be legal consequences that could otherwise have been avoided by handling everything through an agent.
But what about those times when for sale by owner makes sense? Turns out, while FSBO isn’t always the best option, sometimes it actually is a smart choice. Here are four situations where selling a house by owner is worth considering.
- When you already have an interested and viable buyer
Sometimes you get lucky and find an interested buyer before you even list your home on the market. It could be a friend of a friend who loves your home and heard you were considering selling it, or perhaps a neighbor who’s interested in combining their property with yours for a double lot.Many of the downfalls of FSBO come in the marketing stage. Real estate agents are pros at spreading the word about available homes and getting interested buyers through the door, whereas those who are selling on their own find themselves struggling to drum up interest. But if you don’t have the need to market your home, then you and your buyer can probably get by with just attorneys.Remember: interested and viable are not the same thing. Before you nix using an agent, you need to know that your buyer will be able to follow through. Make sure to request that they get a pre-approval for their mortgage, and start working with an attorney early on to protect yourself in case you run into problems.
- When you’re selling in a high-demand market
If you’re selling in a major city like San Francisco or Washington D.C., or in a particularly high-growth market, you may be able to gather enough momentum to bring in prospective buyers without an agent. This is especially true if you’re pricing to sell, instead of pricing to make as much profit as possible.Sellers have the power in a high-demand market. With so much competition among buyers, properties don’t tend to last long. Many are under contract in just a few days, meaning any new property that comes up is an extremely hot commodity.If you’re selling a house by owner in a hot market, your biggest objective is to show your property off in its best light. Get professional photos taken to highlight your home’s best features, and make use of print, digital, and word-of-mouth marketing tools to let people know it’s available. If you’re fishing in a busy pool, it shouldn’t take too much work to get a bite.Keep in mind, if you’re trying to get as much money as possible, FSBO might not be a good choice—even in a booming real estate market. Although you’re saving on some of your closing costs, real estate agents can typically negotiate more money up front. According to the National Association of Realtors, the median selling price for agent-assisted sales is $250,000, versus $190,000 for homes sold by owners.
- When you’re not in a hurry to sell
If time isn’t an important factor in your home sale, then the slower process of FSBO could work for you. Selling a house takes time. Before you get to the contract stage, you have to effectively market your home and show it off to buyers. An agent will typically require about 3-5 days to get your home listed and then 65 days to sell it. If you’re doing it on your own without the networking capabilities of an experienced agent, however, it’s likely going to take a whole lot longer.For sellers who aren’t in a hurry, it may be worth it to wait a bit longer if it means saving on fees. All the same leg work will have to get done, but without urgency a seller can afford to take the extra time required to do it on their own.
- When you’re selling a mobile or manufactured home
Selling a house by owner is 6x more common among sellers of mobile and manufactured homes than it is among other types of properties. That’s because the price for these types of homes is usually significantly lower than it is for other homes. It’s also a smaller market, with a much more defined range of buyers.If you’re going to go FSBO for your mobile or manufactured home, be sure to do your research on the best ways to price and market your property. Even though there are some pretty big differences with selling this type of home versus a standard single family home, you’ll still have to know what you’re getting into and how to make sure you the process goes as smoothly as possible.
Advice for selling a house by owner
If you’ve done your research and you truly think that FSBO is the right choice for your home sale, the next step is going to be ensuring that you list your home effectively and protect both yourself and your assets during the sale process. Here are some tips all FSBO sellers should keep in mind.
Don’t overprice. An overpriced home is difficult to sell with a real estate agent, and even more difficult to sell on your own. You can determine the appropriate price by researching recent comparable home sales in your area and seeing what they sold for. Keep in mind location, home size, and home quality when determining what can be considered a comp. If you don’t mind spending a little bit of money, you can also hire an appraiser to let you know your home’s fair market value.
Put together a high-quality listing. Many times, a listing is your home’s first impression with buyers. If it has poor (or worse, no) pictures and/or a lacking description you’re going to lose prospects right off the bat. Really take the time to perfect your listing so that you’re not sabotaging your sale from the get-go. Hire a professional to take photos of your home for you if you don’t have experience with house photography, and put a ton of detail into your listing. Have a friend take a look at it to point out any typos or areas that need more information.
Be completely honest in your disclosures. If the house is going to need a new plumbing system or there’s water damage under the carpet in the basement, you need to disclose these to potential buyers—even if you don’t want to. Sellers are required by law to reveal any known defects in the property, and a failure to do so could get you into some serious legal trouble later on.
Don’t turn down a showing. Say “yes” to every single showing request. Availability is just as important as marketing, since a buyer may not be willing to wait around. With FSBO, you need to jump on every opportunity that you get, which means planning your schedule around showings and not the other way around. It may not always be convenient for you, but it’s a big part of getting your home to contract.
Find a good real estate attorney. Have at least one professional in your corner who you really trust to negotiate for you and protect your interests. It’s best to hire an attorney early on so that you can be sure to avoid any legal pitfalls during the FSBO process. You will have to pay out fees to them during closing, but it’s definitely going to be money well spent.