Barry Nielsen is the owner and operator of MortgageGraphics Inc. He has 20 years of experience in the mortgage and lending business.
Updated August 28, 2024 Part of the Series Guide to Selling Your HomeGetting Ready to Sell
Real Estate Agents
The Owner-Seller Option
The Selling Process
If you're considering selling your house, one strategy you can choose is a for sale by owner (FSBO) route. By choosing not to use a real estate agent for the sale of your property, you take on more work - but save on commission fees.
Traditionally, home sellers have two options: use a real estate agent or conduct for sale by owner (FSBO) sales. Using a listing agent who works with and markets homes to buyers' agents can be expensive, typically costing 4% to 5% of the sales price of the home.
Listing your own property—and finding the right buyer—can be difficult and time-consuming. That's because most homebuyers work with real estate agents who have no incentive to show FSBO properties. Real estate agents working with homebuyers will often prefer to work with more experienced agents who represent sellers.
There is a "hybrid" FSBO option in which the seller pays a 2% to 3% commission to the buyer's agent and removes the seller's agent from the picture. This approach gives buyer's agents an incentive to show the home while the home seller avoids the expensive listing agent commissions.
Selling a home yourself requires some time and effort, but it can be financially well worth it. Saving 3% in sales commissions on a $500,000 home is $15,000. A seller can pay a flat fee to list their home on the Multiple Listing Service (MLS) and do the marketing and paperwork on their own to save that money. If you're interested, here are some useful steps.
After making your home attractive to potential buyers, sellers must determine the right asking price. In addition to relying on the market expertise of a real estate agent, buyers will search the internet and drive through neighborhoods scouting and researching homes.
Sellers should do the same. It pays to keep track of what homes in nearby neighborhoods sell for over time and find out the asking price of any homes currently for sale. Sellers should search internet real estate sites for homes for sale in the area and drive by those homes to get a better understanding of their location and appeal.
Another item to consider is an appropriate mark-up. Houses are strategically priced to incite interest from a buyer; however, the buyer may make an offer lower than asking or base their offer on what you're listing for. Depending on your market, it might make sense to intentionally build in a small target price increase (around 1%) to leave room for some negotiation.
A general rule of thumb is not to price your house 10% higher or lower than the average home price in your neighborhood. This rule is contingent on house condition, house amenities, and house age.
Because you are not using a real estate agent, you must ensure your property still appears professional, well-kept, and ready for sale. Ensure you've done the proper repairs and maintenance you wanted to accomplish before the sale and consider hiring a cleaning crew prior to open houses or major showings.
Although your overall intention to skip the use of an agent is to save money, there are other vendors worth considering. Home staging companies can present your home in fantastic ways, helping prospective buyers envision the property fully furnished and complete. In addition, photographers can portray the beauty of your home. Your goal is to entice buyers with high-quality showings, whether in-person or digital.
The for-sale sign is an important part of an FSBO marketing strategy. Homebuyers typically direct their real estate agents toward the homes they want to see. Regardless of whether there are other homes for sale in the neighborhood, potential buyers may be physically visiting neighborhoods they are interested in. In addition, for-sale signs attract the attention of neighbors, who may start word-of-mouth advertising.
Putting the asking price on the sign draws the attention of interested and qualified borrowers. Also, including the words "Buyer's Agents Welcome" or "Will Work With Buyer's Agents" on the sign lets both agents and buyers know the seller is willing to pay a commission to the buyer's agent. Make sure you include contact information where interested parties can reach you.
An industry trick when buying or selling a house is to create a brand new e-mail address specific to the transaction. This cuts down on potential spam in other e-mails and helps track correspondence and receipts you might need in the future.
Numerous popular websites let buyers search for homes. Put the FSBO home on as many of them as possible. Include plenty of pictures of the home, and make sure any photographs used are current, clean, and accentuate the strengths of your house.
In addition to visuals, you'll need to develop written content to describe your home. Consider what makes your property unique, and craft a truthful listing description. This description should be informative and honest, but it should still pique the interest of the reader.
Once you post your listings, consider sharing them on social media. Even if people within your network are not personally interested in buying a home, it makes sharing the information easier for your network. By leveraging people you know, you're already getting the word out that your home is for sale.
The multiple listing service (MLS) is the database that real estate agents use to find and research homes. Several online vendors will essentially act as the seller’s listing agent by putting the home on the MLS for a flat fee. A quick internet search will turn up several listing agents who are licensed in the area. They'll have several listing options with different levels of exposure and service and different prices. Choose an option that gives your home adequate exposure and includes at least one picture.
The cost of MLS listing services can range between $20 and $50 a month, depending on the MLS.
One piece of information included on the MLS is the commission the seller is willing to pay the buyer's agent. A buyer's agent commission of 2% will generate traffic and is enough incentive to get those agents to show the home.
When a buyer and agent present an offer, it will most likely be in the form of a standardized contract. This should provide some reassurance that there is nothing questionable going on. The seller should read through and understand the contract.
When reviewing changes to any contract, use red-line commentary. This tracks the original contract language and terms and makes a note of what changed and who changed it. Instead of having to review the entire contract every time, digital copies with red-line notes let you only review what's different each time.
There are seemingly limitless terms and conditions you or the buyer may include in their negotiation. Some common contract terms include:
Keep the house in showing condition and be ready for spur-of-the-moment requests from real estate agents to show the home. Frequently, those requests come from potential buyers who are in the neighborhood with a real estate agent looking at other homes. For security reasons, and to solicit feedback, require real estate agents to give you a business card when showing the home.
Buying or renting a lockbox can be an advantage, giving real estate agents access to the home so the seller doesn’t have to be there. This strategy gives prospective buyers more privacy as they look at your house and could make them more comfortable when honestly discussing the home as they tour it.
A FSBO transaction is a deal led by the seller, not an agent of the seller. Instead of hiring a real estate agent, a seller manages the aspects of the sale in an effort to save on commission costs.
Typical real estate commissions are 3% for the buyer and 3% for the seller. Depending on the market and company they work for, these fees may be slightly lower or higher.
No, it is entirely possible and common to sell your own home without a real estate agent. It may be more difficult, require more time, and leave you with a lower selling price, but sellers can easily sell their own home.
Don't be intimidated by listing a home on the MLS, getting your home ready for sale, and negotiating with potential buyers. Though selling a home via FSBO will require some time and effort, the payoff could be saving thousands of dollars in sales commissions.
Still, an FSBO sale is not for everyone. The time commitment, logistics, negotiations, and legal and regulatory requirements that come with selling a home could be more than you are willing to undertake. If that's the case, paying a seller's agent commission could be a good investment.