Traditionally, home sellers have two options—use a real estate agent or conduct for sale by owner (FSBO) sales. Because most home buyers work with real estate agents, who have no incentive to show for-sale-by-owner properties, FSBO sales can be tough to do.

Meanwhile, using a listing agent who works with and markets homes to a buyer's agent is expensive, costing typically 5% to 6% of the sales price of the home. There is a "hybrid" approach as an alternative to the traditional FSBO sales method, which allows the seller to pay a 2% to 3% commission to the buyer's agent and removes the seller's agent from the picture. This approach gives the buyer's agent incentive to show the home but saves the home seller expensive listing agent commissions.

Key Takeaways

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

How to Reduce Commissions

Selling a home yourself requires some time and effort, but it's 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 a home on the Multiple Listing Service (MLS) and do the marketing and paperwork on their own to save the 3%.

Step 1: Determine the Right Asking Price

After making the home attractive to potential buyers, the right asking price needs to be determined. 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. The seller 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. Then 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 a 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 potentially 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.

Step 4: Put the Home on the Internet

Several popular websites let borrowers search for homes. Put the FSBO home on as many of them as possible, including Zillow.com and Trulia.com, for free. Put up 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 that 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 the home adequate exposure and includes at least one picture.

MLS listing services can range between $50 and $500 but 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 the buyer and agent present an offer, it will most likely be in the form of a standardized contract that has them fill in the blanks and choose between a few different options. 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. The seller should stick to their target price if their market research as been diligent, but be aware of what market conditions dictate.

Miscellaneous Items

Keep the house in showing condition and be ready for spur-of-the-moment requests by 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, but it should include information about the neighborhood and details about features.

Bottom Line

Remember, 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.