I’m a Realtor — Here’s What I Wish People Knew About “FSBO” Homes

published Aug 6, 2023
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Credit: Photo: Sidney Bensimon; Prop Styling: Carla Gonzalez-Hart

No matter if the market is hot or cold, they still pop up: For Sale by Owner listings, otherwise known to Realtors as “FSBOs.” These are houses put up for sale by the people who own them — without the help of a real estate agent.

Homeowners who eschew professional assistance can start the home-selling adventure on their own, but are often unaware of the DIY pitfalls. Here are the pros, cons, and everything else you need to know about these kinds of properties.

What to Know About FSBO Listings

As a Realtor, I’m very aware of those DIY pitfalls. Take, for example, my neighbor, who has his home back on the market as a FSBO. Third time’s a charm, right? 

Jeff and Linda Brandt of The Brandt Group in La Quinta, California, have tried to help the guy with pricing and listing advice over the years to no avail. “Jeff told him a realistic price he didn’t like,” Linda explains. Now, the house is languishing on the market with a high price tag.

My neighbor has ignored the cardinal rule of home selling: realistic pricing. If the asking price doesn’t reflect current market conditions, prospective buyers will quickly skip to the next listing.  Additionally, a solid online presence is now an integral element of marketing, another fact this DIY seller doesn’t understand. Realtors, for example, upload a new listing to their member MLS (multiple listing service) and their brokerage pays to broadcast that listing to hundreds of digital real estate sites like Zillow and Realtor.com, which then expose the listing to thousands of prospective buyers.

Even modest marketing efforts must be paid for by a seller working on their own. DIY sellers can pay a flat-fee, no-support company to list their home on the local MLS or directly pay Zillow to do the same. Sellers still need to write compelling verbiage and upload solid photos. These critical steps can prove difficult for sellers without the know-how.

My neighbor did advertise on the big Z (Zillow, of course), but did not put a sign in the yard for drive-by prospects. His amateur room photos were dark and blurry, underscoring the marketing importance of compelling images. He then cemented his doom by warning agents off from bringing a buyer by — he insisted on representing both sides of the transaction. Unfortunately, most people won’t be comfortable with that setup.

Realtors are naturally wary of such tactics, since they won’t be working with another professionally certified Realtor backed up by a reputable brokerage. Should they indeed bring a buyer, they’ll invariably shoulder most of the paperwork to ensure due diligence and legal compliance. So… it’s twice as much work for the buyer’s agent.

“I avoid FSBOs if I can,” says Mary Pat Anderson with Home Smart Professionals in Indio, California. “Homebuying is complicated enough without having to deal with inexperienced, uninformed sellers.”

There are also significant legal implications in every home sale since it’s a major financial transaction with plenty of opportunities for discord. Agents are required to buy insurance policies — called errors and omissions — to protect themselves from unhappy clients post sale. The significant deductibles naturally give pause from pursuing iffy transactions. 

Credit: Photo: Sidney Bensimon; Prop Styling: Carla Gonzalez-Hart

The Pros and Cons of FSBO Listings

Cutting out the sales commission is the biggest reason homeowners try to go it alone. A typical commission is 5 to 6 percent of the sale price, and the seller absorbs that cost. Unlike my neighbor, most sellers would welcome an agent with a buyer in tow. At escrow’s end, the seller still has to pay 50 percent of the commission to the buyer’s agent.

People with relevant skills and expertise can pull off the complexities of a large financial transaction. I have met folks who confidently sell their own properties. Naïve sellers may be in for an unpleasant surprise, though, once they experience the joys of negotiating, concessions, and copious paperwork. The expected savings may disappear when the final numbers are crunched. 

There are some sobering statistics to consider before planting the red-and-white ”Home for Sale” sign in the front lawn yourself. Not only do agents avoid FSBOs, but these properties also take longer to sell and net far less money. According to the National Association of Realtors’ data, 18 percent of FSBOs went unsold in 2021 — a year of skyrocketing home sales. Last year’s agent-listed home stats reported a median sales price of $345,000, versus $225,000 for FSBOs. Although there may be additional reasons for the discrepancy, such a startling difference certainly gives pause and outweighs any hoped-for savings from dismissing professional representation.

While my neighbor may be an extreme case of the “cons” when it comes to FSBO listings, there are a few benefits for savvy sellers out there. Naturally, the Realtor in me advises carefully weighing the pros and cons.