What Is For Sale By Owner (FSBO)?

For sale by owner or FSBO is a term that refers to a specific method of selling a property. In an FSBO listing, the owner sells the property without the use of an agent or a broker. Sellers typically choose to sell their home on their own to avoid paying the real estate agent the commission for the transaction.

1:45

For Sale By Owner (FSBO)

Key Takeaways

  • For sale by owner or FSBO is when the owner sells their property without the use of an agent or a broker.
  • Sellers often sell their home on their own to avoid paying the real estate agent commission–which can be thousands of dollars.
  • However, in FSBO transactions, the sellers assume all of the responsibilities and legal risks of completing the sale.

Understanding For Sale By Owner (FSBO)

For sale by owner is when a property owner chooses to sell their property on their own without an agent or broker to facilitate the sale. FSBO transactions are most commonly associated with the real estate market. Sellers that choose to sell their home on their own can potentially save thousands of dollars in real estate commissions. Although selling via FSBO can be a daunting task, a seller can sell their home on their own. However, the seller assumes all responsibility and ownership of the selling process.

For Sale By Owner Process

Although each property and type of real estate transaction can have varying steps involved, below are a few of the most common responsibilities and tasks for the seller in an FSBO transaction.

  • The asking price must be determined and researched using property values in the neighborhood for homes that have similar features, such the number of bathrooms and square footage.
  • Marketing the home would include advertising, listings online, brochures, and fliers that need to be created and distributed.
  • The seller must schedule all of the showings or appointments.
  • Once an offer has been made and accepted, the seller must negotiate the price with the buyer and write up the conditions of the sale that was agreed upon.
  • The seller must prepare all of the legal documents, including the bill of sale showing the details of the transaction.
  • Once the seller and buyer sign the contracts, the closing of the sale can be completed and the seller signs over the deed of the home to the buyer.

There are services available that can help sellers through the FSBO process. For example, a Multiple Listing Service (MLS)–which is a service connecting brokers and sellers to show their listings for sale–can help an individual determine a sale price. The MLS also has information on marketing a home as well as how to deal with the legal paperwork and contracts for a flat fee.

Benefits of Listing as For Sale By Owner (FSBO)

When an individual homeowner chooses to sell a house, traditionally they hire a real estate agent or broker to handle the sale. Going through an agent or broker can save a homeowner a lot of time. However, commissions can reduce the seller's profits, whereby the average commission runs around 6% of the home's selling price.

For example, if you sell a home for $500,000, the buyer's and seller's agents would receive $30,000 of that sale (6% * $500,000). If you choose to handle the sale yourself, you will get to keep the entire $500,000. If a seller is comfortable with the selling process and knowledgeable about real estate transactions, they can potentially save thousands of dollars.

Special Considerations

Savings thousands of dollars in commissions can be tempting. However, it's important to remember that when a seller doesn't employ a real estate agent, the seller assumes all the responsibilities of completing the transaction.

If the seller is unfamiliar with the home buying and selling process, any mistake can be quite costly. For example, if when determining the asking price, the seller asks for too much, it could lead to a lost sale as potential buyers avoid the home. However, if the seller asks for too low of an asking price, the lost money that could have been earned from the sale might be more than the amount saved from avoiding the real estate commissions. In some cases, an appraiser might be needed or even requested by the buyer.

Also, there can be legal risks with selling the home via FSBO if the legal documents are not drawn up properly or if issues about the home aren't adequately disclosed. Depending on the experience of the seller, avoiding the commission can be a wise financial decision. However, those who have little knowledge of real estate transactions can find the situation stressful and may be better off using a qualified real estate agent.