If you're considering the "for sale by owner" (FSBO) route to save money, you might wonder what an FSBO commission looks like. After all, there's no commission if you list the home yourself and find your own buyer. Of course, that can be hard to do. So, many FSBO sellers opt to compensate one agent only, paying just an FSBO buyer's agent commission.

Key Takeaways

  • Home sellers can save thousands of dollars in commissions by using the "for sale by owner" (FSBO) method. 
  • The FSBO process involves staging a home, marketing it, and negotiating with buyers or their real estate agents. 
  • One particular FSBO approach utilizes a buyer’s agent but avoids a seller’s agent, saving sellers about 2% to 3% in commissions. 
  • FSBO sellers can pay a flat fee to list their home on the Multiple Listing Service (MLS) themselves.

How 'For Sale By Owner' (FSBO) Works

Traditionally, home sellers have two options: Use a real estate agent or conduct for sale by owner (FSBO) sales. Of course, 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.

But listing your own property—and finding the right buyer—can be difficult and time consuming. That's because most home buyers work with real estate agents, who have no incentive to show for-sale-by-owner properties.

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 buyers' agents incentive to show the home, while the home seller avoids the expensive listing agent commissions.

How to Save on Commission Fees Using 'For Sale By Owner' (FSBO)

Selling a home yourself requires some time and effort, but it can be well worth it. Saving 3% in sales commissions on a $300,000 home is worth $9,000. On a $500,000 home, the 3% savings is $15,000, and on a $700,000 home, $21,000. 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 3%.

Step 1: Determine the right asking price

After making the 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 be searching the internet and driving 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. Next, determine a target price for the home, and mark it up by a small amount (around 1%) to leave room for some negotiation.

Step 2: Put up a "For Sale" sign

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 will be driving through, so it's important to let them know your home is for sale.

Putting the asking price on the sign draws the attention of interested and qualified borrowers. Also including the words "Buyers' Agents Welcome" or "Will Work With Buyers' Agents" on the sign lets both agents and buyers know the seller is willing to pay a commission to the buyer's agent. Put a phone number on the sign and a website where they can learn more about your home.

Step 3: Make a flyer about the house

Flyers are important; many buyers direct an agent to the homes they themselves want to see. A flyer should include lots of pictures. Put your phone number on the flyer, and like the sign, put the words "Buyers' Agents Welcome" or "Will Work With Buyers' Agents" on the flyer too.

Step 4: Put the home on the internet

Numerous popular websites let buyers search for homes. Put the FSBO home on as many of them as possible. Include lots of pictures of the home and keep them current. Take pictures of the home throughout the year and show the most attractive seasonal pictures.

Step 5: List the home on the MLS

The 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 $50 and $500, but they are usually $100.

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 of an incentive to get those agents to show the home.

Step 6: Navigate contracts and negotiations

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. The buyer should write a check for the appropriate amount of money and provide a pre-approval letter from a lender.

A 1% markup from the target sales price allows room to negotiate. Most buyers are afraid to lowball but will try to get a deal. As the seller you should stick to your target price if your market research has been diligent, but be aware of what the market conditions dictate.

Miscellaneous Items

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 that real estate agents give a business card when showing the home.

Don't spend too much time talking to prospective buyers looking at the home. Buyers will likely feel more comfortable if the seller is not present. 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. Providing an informational flyer as buyers walk in can also be useful. It should include information about the neighborhood and details about the home's features.

The Bottom Line

Don't be intimidated by the process of listing a home on the MLS, marketing and staging it, and negotiating with potential buyers. While 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.