One of the biggest pain points for home sellers is real estate commission. The average home selling price in the U.S. recently hit an all-time high at $408,800. If sellers pay the typical 6% real estate commission, that’s $24,528 — about what you’d spend for a nice used car or dream wedding.

 

So it’s understandable that if you’re selling a home, you would want to trim that cost as much as possible — even possibly cut it to zero. You might be able to save a ton on commissions with a FSBO (for sale by owner) transaction. Or you could drive yourself crazy and even lose money.

 

This article covers the pros and cons of FSBO, alternatives to FSBO, and who should and should not attempt to sell their homes themselves.

Pros of FSBO

Commission Savings

The obvious pro of a FSBO transaction is the commission savings. That’s the primary motivation for most home sellers. But it’s not the only reason people choose to sell their homes themselves. Some homeowners want very much to protect their privacy and would prefer to sell through a network of personal contacts. In fact, many FSBO sales are to friends or family members.

More Control

Selling your home yourself means you have more control. If you want to host a party one weekend and not show your home, you can do that. You can control what’s said in your ads and what pictures are shown. You will know exactly who enters your home, and you can establish whatever security measures make you comfortable.

Ability to Negotiate

Finally, you may be able to negotiate a better price. Economists Stephen Dubner and Steven Levitt wrote in "Freakonomics" that agents make money by closing deals quickly and closing a lot of them, not by painstakingly squeezing the last dollar possible. Negotiating $20,000 more for you gets an agent about $300. That’s probably not very motivating, especially if pushing for more money could blow the deal.

Cons of FSBO

The potential savings of going FSBO are compelling. But it would be foolish to sell your home yourself without first considering the drawbacks.

Legal issues

Licensed real estate agents are trained to know the disclosure requirements in your state. They should also help you evaluate offers and the implications of addendums submitted with them.

Time

How much time are you willing to devote to selling your home? Most buyers want to view homes on weekends and after work — exactly the same times you’d probably like to be unwinding, socializing and recreating yourself. Would you really want to spend that time showing your home?

Expertise

A real estate agent is a marketing and sales professional. He or she should present a marketing plan when seeking your business, and that should include advertising, promotion, pricing, and home preparation. If you price your home badly, you could turn off buyers in that golden period when the listing is new and people are eager to see it.

Exposure

The biggest weapon of licensed real estate agents is access to the local Multiple Listing Service, or MLS. That’s the go-to source for most agents and buyers, and being shut out of the MLS may put you at a serious disadvantage, especially in slower markets.

Unexpected Cost

It’s a myth that selling your home FSBO won’t cost anything. First, you’ll incur advertising costs. Signs, flyers, newspaper ads, real estate magazine ads, a web page for your home, etc. Most buyers will be represented by their own agents, and it’s customary for those agents to be paid by you, the seller. Unless you want to shut out the majority of your potential buyers, you must cooperate with their agents and pay their commission, which will probably be somewhere between 2% and 3%.

Should You Go FSBO?

The decision to go FSBO can be complicated. Before deciding, check the condition of your local market. Is it white hot or ice cold? In a hot market, you might be able to stick a sign in your yard in the morning and be fielding offers by nightfall. If that’s the case, prep your home for sale, put out that sign and see what happens. If it doesn’t work out, you can always hire an agent later.

 

If your market is less than white hot, you may still decide to FSBO. It depends on your temperament, background and resources.

 

Ask yourself these questions before deciding to sell your home yourself.

What’s My Home Worth?

Home sellers often overestimate their home value. And overpricing is one of the biggest mistakes FSBO sellers make. Before listing your home, research local sales and trends online. Make sure you look at actual sales prices, not just “optimistic” list prices.

 

You may even want to pay for an appraisal from a licensed appraiser. In addition to the home appraisal, there are three more sources of home value. They are, from least to most accurate:

 

• Automated Valuation Model (AVM)
• Comparative Market Analysis (CMA)
• Broker Price Opinion (BPO)

 

The AVM is what you see on real estate sites. Put in your address and get a value estimate. Understand that it may be off by 10 – 30 percent.

 

Real estate agent marketing presentations usually involve a CMA. However, understand that it IS a sales pitch. An agent's main business is not appraising, and some might overstate your value to get your listing.

 

Brokers with BPOR certification from the National Association of Realtors have special training, and only they are allowed to perform BPOs. The BPO is sort of a mini-appraisal and typically costs between $50 and $250, a lot less than an appraisal.

Am I Willing to Work With Buyer’s Agents?

Although you may decide not to use an agent, many buyers still choose to work with one. And that person expects to get a commission, usually from the seller. It’s traditionally how real estate sales work.

Expect to pay 2.5 to 3 percent of the sales price if an agent brings you a buyer. Although you can refuse to pay the commission, it will probably shrink your pool of potential purchasers.

How Much Do I Like Sales and Marketing?

Some FSBO sellers are surprised by the amount of time and effort selling a home can take.

Part of doing it yourself includes:

• Taking excellent, clear pictures and writing good advertising copy
• Putting up your “for sale” signage with your contact information
• Getting your property online with a web page
• Creating fliers and ads
• Making a video for interested buyers — even more necessary during COVID.

Try to avoid misleading pictures or over-enthusiastic descriptions. Because all that will get you are people coming to your home who will be disappointed when they see it in-person — and agents who are annoyed at the wasted time.

Will I Hate People Touring My Home?

Unless your home is a stunning Architectural Digest showpiece, buyers will say things you don’t like. Some may even put down your home as part of a strategy to get a better price. Can you stand to hear it?

There is a reason most real estate agents have their sellers leave when buyers tour their homes. For one, buyers are freer with their opinions if you’re not there. This is valuable information.

If you have fragile floors, offer clean socks or slippers to visitors and ask them to remove their shoes. Make the atmosphere inviting by turning on lights, setting the temperature to a comfortable level, and keeping things neat and clutter-free.

Finally, FSBO selling can be a challenge if you have pets. Most agents recommend that pets not be present when buyers are viewing the property.

Am I Willing to Screen the Buyers?

Professional agents supervise home tours and make sure your belongings don’t walk out the door. And they only let serious, qualified buyers come in. If you FSBO, this becomes your job.

 

Check potential buyers’ identification when they enter your home, and write down their names and addresses in a guest book. This should make them think twice about damaging or stealing anything.

 

Your first line of defense is the mortgage pre-approval letter or proof of funds to close (usually a bank statement). Make that a condition of touring the house, because anyone who has not taken that first step probably isn’t serious or qualified. At a minimum, require a prequalification letter from a lender.

Alternatives to FSBO

If you decide that FSBO is not for you, you do not necessarily have to engage a full-service agent with a 6 percent commission.

 

Traditional agents usually split a 6 percent commission between the listing agent, the selling agent, and their respective brokers. Each party may grab a 1.5 percent share of your sales price. Even if you sell FSBO, you may still end up paying 3% to a selling agent.

 

Advertising that you’ll cooperate with selling agents can help you attract buyers who have buyer’s agents. And the other agent may help you with some of the paperwork, but remember that he or she represents the buyer, not you.

 

You may choose to hire a hybrid service or discount real estate brokerage. These services can get you into your local MLS, and that’s absolutely worth doing, according to the American Economic Review. It claims that, “the probability of a quick sale is higher for houses initially listed on the MLS.” Many hybrid model platforms offer free trial periods and pay-as-you-go options.

 

The highest-end hybrid sales packages offer professional signage, online or phone support, state-specific real estate forms and national and local MLS exposure. And discount real estate brokerages even offer full service or close to it for a lot less money.

 

If you’re considering a FSBO, understand your options and get real about how much you’re willing to do. If you answer the questions above and feel confident about your ability to sell your home, it can’t hurt to try a FSBO. If it doesn’t work, you can always upgrade to a discount brokerage or hybrid model.