FSBO, pronounced “Fizz Bo,” is a standard real estate acronym – “For Sale By Owner.”
FSBO refers to the process of selling a property without a real estate agent or broker. In a FSBO situation, the homeowner accepts responsibilities usually handled by a real estate professional. For example: assessing, pricing, marketing, negotiation, contract, and transactional administration would now be handled by the homeowner.
What process is required to sell your home?
- Pricing: While it may seem easy to punch up Zillow.com and use their “Zestimate,” it would be far from accurate—research comparable properties in your area to understand the price per square foot. Adjust the price by comparable sales in the acceptable area.
- Prepare documentation: You would need to have the contract available along with seller disclosures for the transaction.
- Preparing the home requires understanding curb appeal and home presentation. You must address all aspects that make your home visually appealing.
- Marketing the home: Online listings like www.zillow.com and www.realtor.com are common places to show your home. You will still need to obtain high-quality photos, and staging will help when people visit your home.
- Open houses and showings: Schedule showings with potential buyers or their realtors. Obtain necessary email addresses to manage follow-up communication and explanation of any issues from the seller’s disclosures.
- Evaluate the offers as they come in. As offers come in, the owner must consider the difference between a good offer and a great offer. For example, one offer could be from a conventional mortgage, and one could be from an FHA mortgage. One is usually better.
- Management of the transaction. Once an offer is accepted, the owner must decide which title company or attorney to use. This is to ensure title insurance and legal document preparation are appropriately managed. This information is essential for the completion of the transaction.
- Handle the inspection items. One of the hidden hurdles in any purchase is managing the negotiations regarding the requests from the building inspection. There are structural things like roof repair and foundation issues to cosmetic requests that the owner will need to manage.
- Handling the closing on the property. Ensuring any last-minute details are addressed, including the transfer of money and deeds.
The list of tasks involved in selling a home may seem overwhelming. Fortunately, there are services available to assist with the administrative tasks. These services will make the entire process much easier. For example, FSBO.com and ByOwner.com are websites that will (for a fee) help coach you with the above list.
The Pros of a FSBO
The primary benefit is the cost saving of the real estate commission. Most commissions for real estate agents range between 6-7% of the home’s sale price. For example, if you were to sell a $300,000 home, you would save approximately $21,000.
The Risks
While the potential commission savings can be compelling, navigating the 9-step list above can leave many downside risks. Sellers must understand their experience with each step. They must also know what to do in case the process goes wrong.
There is also the consideration of not executing the list properly or making the wrong decisions which lead to serious consequences. Here are just a few examples we have witnessed:
- Pricing is important. An overpriced home can result in a home that sits too long on the market. Even worse, it could be priced too low, and the seller will miss out on top dollar.
- How should you best prepare your home to market? A realtor will have an understanding of what trends are happening in the market. It would not be wise to spend money on home improvements that buyers would not value.
- Negotiating during the initial offer or through the inspection window are things very few of us have experience doing. The result can be an overreaction, one way or another.
- In evaluating offers, the highest offer is not always the best. Some offers may be for cash. Some people may finance their purchase, which can be as good as cash. Accepting an offer from an unknown mortgage company can be a substantial financial loss if the financing falls through.
- The handling of the transaction can be intricate. While under contract, something always comes up. Some issues may be important; some may not be important. Again, you would need enough experience to know.
Conclusion
Should you sell your home as a FSBO? The process of selling a home requires a wide range of skills or access to a wide range of skills. For someone with a great deal of experience in real estate and its related fields like construction, appraisal management, maybe. Selling your home FSBO (For Sale By Owner) is only recommended if you possess a great deal of knowledge in those areas.
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