By Dan Miller, WCI ContributorIt’s true. Selling a home by owner is not nearly as difficult or complicated as most people assume. Why would one go to the trouble of putting a home up for sale by owner (FSBO) when there are plenty of professionals who would gladly list the house for you? Money. That’s why. Realtors’ fees add up, and the more frequently you move, the more painful they can be, substantially reducing your return on investment.
Truthfully, it’s best not to think of your primary home as an investment but as a necessary expense that may pay for itself and then some if all goes well. Selling by owner can significantly improve your odds of coming out ahead.
How to Sell Your Home by Owner
Every sale is different, so not all of the following might apply to each circumstance, but here are a few common things that you'll want to be aware of if you're selling by owner.
Before You List Your Home
Before you even list your home, you'll want to think about some of the following:
- Find comparable sales: Pay attention to home sales in your area. Try to find similar homes in your neighborhood (comparable sales aka “comps”) that have sold recently. Zillow lets you search sold homes by map, which can be helpful.
- Decide on a listing price: Similar home sales should be a primary consideration, but also think about how quickly you want or need the home sold, how low you’d be willing to go, and what competitive advantage your home may have over other homes currently for sale or recently sold. If you’re looking to get top dollar, take what you think would be fair and add 5%-10%. If you’re impatient and just want a quick sale, price it on the low side.
- Stage your home: If the home sells, you’ve got to get all of your stuff out anyway, so start before you even list it. Declutter, take down family photos, and box up anything that makes the home feel less spacious. You want people to envision making your home theirs, and that’s tougher to do when it looks crowded or has too many of your own personal touches.
- Take photos: If you don’t have access to a decent camera or don’t have an eye for photography, you may want to hire out this step to a professional. It may cost you a few hundred dollars, but that’s nothing to the tens of thousands you can save in realtor fees. If you decide to do it yourself, a wide-angle lens is helpful, especially for bedrooms and bathrooms. Also, make sure the home is well-lit with windows open and lights on.
Listing Your Home for Sale by Owner
You'll likely want to cast a wide net when deciding where to list your home—the more places you advertise it, the more chances you'll find a buyer. Remember, it only takes one buyer to make a successful sale. Here are a few places to consider:
- Zillow: Zillow is one of the most popular sources for people looking to buy and sell homes. It’s a very user-friendly website with great search functions and filters. They also own Trulia, so a listing at Zillow will also get your home listed on Trulia.com, a similar site. It costs nothing to list your home on Zillow, and it also has quite a few resources to help you understand the process of selling your home.
- Facebook Marketplace: A Facebook Marketplace listing is also free, and you can use the same description and photos that you’ve used elsewhere. Just be prepared for a deluge of questions from non-serious buyers like the Facebook default “Is this still available?” to “Will you rent to own (contract for deed)?” and other questions that wouldn’t have to be asked if the asker had read your full listing.
- Craigslist: The website hasn’t changed much in 20 years, and I’m guessing it’s not the first place many people go to find a home. Still, a listing on Craigslist is free; you don’t even have to have an account. You’ve already got the pictures and description from your Zillow/Trulia listing, and when you submit your listing to Craigslist, it will be live almost instantly.
- Newspaper: If Craigslist is fading away, the classified ads section of your local newspaper is a true relic. But it’s a relic that an older crowd who may have the means to buy your home is still browsing while sipping their morning coffee at the corner cafe.
- For sale by owner websites: There are several websites that specialize in FSBO listings. These are not free, but they won’t set you back much more than a classified ad, either. I think you’re better off with a free Zillow listing, but it may not hurt to check out FSBO.com or forsalebyowner.com, especially if your listing has been active without much luck elsewhere.
- Custom website: These days anyone can buy a domain and create a website. You could create a custom site featuring your home including all of the photos of your home, a list of favorite features, maps, HOA information (if any), and a way for potential buyers to get in touch with you.
- A yard sign: At a minimum, you should go to your local home improvement store and pick up a big For Sale By Owner sign to display in the yard. You might also create a flier with the description and photos you’ve taken and print a bunch off to be kept in a waterproof info box alongside the sign.
Scheduling Showings
Your listing should have your contact info so that people can reach you by phone, text, or email. It may also be a good idea to give people a way to schedule a showing without having to contact you. One option would be to set up a free account with Calendly, an online scheduling service.
With Calendly, there’s no back and forth (and back and forth and back . . .) communication, and interested parties can only book times that you have available. You decide what time slots to make available and how long they should be, and you can block off any period of time that you have a scheduling conflict. If you do things right, you’ll never be double-booked as long you require people to use Calendly or a similar calendar application, and the calendar will fill up automatically as interested parties book slots.
Showing Your Home
No one knows the home better than you. If you’re working and are worried that you can't accommodate most people’s schedules, remember that many potential buyers also work and will prefer nights and weekends. Ideally, you’ll get a number of showings scheduled over a short period of time. If you have kids and pets, it might be best for them to find another place to be when you’re showing the home.
I think it’s wise to point out both your favorite things about the home and its imperfections. The home inspection will unearth most of the home’s issues anyway, so be honest and transparent. When a buyer and seller work directly with one another, trust is important, and pointing out what’s wrong with the house can help you establish that trust quickly. Don’t dwell on the downsides, but don’t try to cover them up, either.
Just as you did when taking photos, make sure the home is clean, bright, and comfortable. Open the shades, turn on the lights, tidy up, and show your home in a positive light.
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The Savings from Selling by Owner
A traditional real estate transaction with a realtor or two realtors involved will typically cost the seller about 6% of the sales price, plus or minus 1%. How much that saves you will depend on the cost of your home, but it can turn out to be a pretty big chunk of money—as one example, 6% of a $1 million sale is $60,000.
In a sale where you are working with a realtor, it is typical that you agree to pay a 6% commission to be split between your agent and the buyer's agent. The real estate commission landscape is changing currently, but in most sales where you as the seller are working with a realtor, you are also paying the commission for the buyer's agent. If you sell by owner, who pays the commission of the buyer's agent (if they have one) will be up for negotiation as part of the sale process.
For Sale by Owner Paperwork
Make it easy for a potential buyer to make an offer, since they may be accustomed to having a real estate agent handle the process of making an offer. The paperwork is pretty straightforward, and you can even have pre-filled copies at each showing.
What’s required may vary by state, but you can find free PDF files to download for your state at eforms.com and other places. This might include a standard disclosure form stating what’s included, what’s not, and what problems we know about as well as a lead-based paint disclosure form.
A third form you’ll want to make available and perhaps partially fill out is a residential real estate purchase agreement, which is what the potential buyer will use to make an offer. This might be 8-10 pages that include the legal property description; who pays which closing costs; whether financing will be used; how property taxes due will be handled; and, most importantly, the offered sales price.
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Working with a Title Company
When you close, it will be with the assistance of a title company. That company will also do the title search and provide the title insurance. Title companies can be very useful, especially for the homeowner selling without a real estate agent. They can help answer questions, provide the disclosure and sale agreement paperwork outlined above, or at least help you locate the right forms. They'll also be the ones to ensure the documentation is in order prior to and during the actual closing of the sale.
One option might be to work with the title company that was used when buying the property to let them know it is being sold. The company will have done a title search recently, so working with them again should save some time and possibly save you some money, at least theoretically. If you're not sure which title company was used as part of your purchase, ask trusted friends or family for a recommendation.
Working with a Real Estate Attorney
In addition to working with a title company, it's not uncommon for home sales to involve a real estate attorney. This is especially true in certain states and jurisdictions or if a sale is complicated in some way. Representation can be valuable, especially when you don’t have the services and experience of a realtor to rely upon.
Trust is important when making a transaction of this dollar amount with someone else. If you have any reason to question the motives or sincerity of the other party, it may be a good idea to hire an attorney to double-check everything and provide counsel in the event that some part of the transaction doesn't go according to plan.
Alternatives to Selling a Home by Owner
While selling with a realtor and selling FSBO are two of the most common ways to sell homes, there are a few other home sale alternatives:
- Flat-Fee MLS: Using a flat-fee MLS company can put your home in front of thousands of realtors and on the main page of Zillow via the Multiple Listing Service. This can be a great compliment to an FSBO listing, especially if you’re willing to work with buyers’ agents.
- Redfin: Operating in 80-plus markets in the US and Canada, Redfin agents charge 1%-1.5% to list and sell a home. That beats 3%-6%, which is what many traditional agents will charge when representing one or both sides of the transaction.
- Sell to Zillow, Redfin, or others: There are several companies whose business model involves buying houses and selling them to others. This might range from the “We Buy Houses” guys who are likely trying to lowball you to relocation companies who might pay a higher price. It doesn't hurt to get offers from some of these companies to see if it might be worth it to you.
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The Bottom Line
While it's common for people to buy and sell homes by working with a real estate agent, it's not the only way. There are situations where it makes sense to work directly with a realtor when selling your home, but if you’ve got some time and a willingness to do some legwork, you can save tens of thousands of dollars in fees when you sell your home yourself. It’s not as difficult as you might think to make this a do-it-yourself endeavor.
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It is interesting that there aren’t realtors on here defending their value like the life insurance salespeople were a few days ago.
Realtors seem to be in a similarly entrenched industry/lobby to the financial services industry. I feel like the realtor’s 6% commission is similar to an AUM pricing model. Does it really take 10x more time and money to sell a $1million house than it does to sell a $100,000 house?
True. Negotiating is always an option. Our realtor cut his fee in half when a we had to sell our first home less than 3 years after buying because of a dream job offer in another state. This changed a break-even transaction into a slight “profit”.
It’s an industry ripe for disruption. Homie is the local company around here doing the disrupting, but it’s been a surprisingly resilient industry to attack.
We have sold five flip houses with an online MLS broker. Costs only a few hundred bucks. You write your own listing, price your house (we use comps, easy to find on Redfin), take and upload your own pics, pay them a few hundred and they upload it on the MLS, then when Realtors call you give them the lockbox code and they show the house to their clients. The buyer’s realtor does most of the paperwork, sends the Docusigns, etc. Very little paperwork for us, the seller, other than filling out seller’s disclosure and signing Docusigns. We are in NJ, which requires an attorney for closing, so we loop them into the Docusigns and they take care of their end. We have saved thousands of dollars using online MLS brokers.
We sold our first house, purchased in residency for $97,850 in 2001 and sold for $116K in 2004. We used a local ‘For Sale By Owner’ group to help with the listings, a yard sign, etc. It was probably $200-300. We also did the closing at a real estate attorney’s office. It seems like it was only $300 or so as well.
We did for sale by owner on our second house ($145K in 2004, sold for $165K in 2010).
It worked great both times. One thing that you don’t initially anticipate is how many realtors call you and want to be your realtor, tell you why you shouldn’t be doing such a complex transaction on your own, etc.
Very much like insurance salesmen, travel agents and car dealers. Occasionally they are worth what they charge, particularly for a very complex or unique situation. And in some scenarios, there’s a legal requirement to use them. But for most transactions, I can do it myself or hire someone for the bit I don’t know.
The biggest place they can make up their fees is in making sure you are paying/charging a fair price. It doesn’t take much of a mistake there to lose more than the commission. So if you go FSBO, make sure you get that part right!