Selling a Home? Breaking Down FSBO
By: Jeff Brown

With prices down, it’s worth some extra effort to get every cent you can when you sell your home. So the FSBO, or “For Sale by Owner,” seems like a natural.

Sell a $300,000 home without the help of a real estate agent and you’ll save $18,000 in commission, assuming a standard 6 percent.

The FSBO option gets easier every year with a proliferation of online services to help sellers set prices and advertise.

There are even services, like MLS My Home, to place your property on the real estate industry’s Multiple Listing Service, for as little as $295. The MLS is the mother lode of for-sale listings consulted by buyers.

FSBO is a good option for homeowners who have some market savvy, thick skin and patience, but it’s definitely not for everyone. The National Association of Realtors says about 13 percent of homes are sold by owners without agents.

Consider the issues:

  • Do you have the time to show the property yourself? It means committing a lot of weekends. It could take longer to sell on your own because most buyers use agents, and agents won’t show your property if you offer no commission. FSBO is not for sellers on tight deadlines.
  • Are you a good negotiator? All sellers have to haggle, but most are buffered from buyers’ harsh comments by their agents. In a FSBO, you have to deal with the buyer face to face, not be intimidated and still know when a concession makes sense, all without professional advice.
  • Are you willing to pay the buyer’s agent? If you say “agents welcome” in your ads, you’ll get a lot more traffic from buyers working with agents. Generally, the buyer’s agent gets half of the commission, so you could pay 3 percent instead of 6 percent.

Agents have long provided valuable guidance in setting the seller’s asking price. Now the tool they use, data on sales of comparable properties nearby, is available to sellers through services like Zillow.com and Realtor.com.

Use figures no older than six months, since prices have been changing rapidly in many parts of the company. Of course, you can start with an asking price on the high side and gradually lower it if you don’t get any offers.

In most parts of the country, paperwork such as sales contracts and property-condition disclosure forms are standardized. You may find them online or get them from a title company, the firm that confirms you are the legal owner and that there are no liens or other obstacles to the sale.

It is the title company, rather than the real estate agent, which does the tricky legal work to prepare for the closing. Title companies can be found in the Yellow Pages or with an online search. Often, their fees are set by state law.

It’s generally a good idea to have a real estate attorney as well, and to require that prospective buyers agree to a credit check and provide a lender’s pre-approval to show they can afford the property. Online sites like FSBO.com (http://www.fsbo.com/) and ForSaleByOwner.com offer a lot of guidance.

Because you will be negotiating on your own, it pays to have a good idea how things look from the buyer’s perspective. Also, offers are generally contingent on the buyer obtaining a mortgage for a given amount at a maximum rate, so you need to know current market conditions.

Use the BankingMyWay.com search tool to find loan rates in your area. With the Mortgage Required Income calculator you can find what income would be needed for a buyer to be able to afford your property.

With a 30-year fixed-rate loan at 5 percent from JPMorgan Chase (Stock Quote: JPM), for example, a buyer would need annual income of at least $55,000 to borrow $240,000 on a $300,000 purchase. For a 15-year fixed loan offered for 4.5 percent by Wells Fargo (Stock Quote: WFC), the buyer would have to earn at least $78,000.

—For more ways to save, spend, invest and borrow, visit MainStreet.com.

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