Real Estate Guide: How Does for Sale by Owner Work?

Written By Beth Weber
Last updated August 17, 2021

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August 17, 2021

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You’ve seen the signs: Home for Sale by Owner. You may wonder why homeowners would choose to take on this huge sales task without professional help. While there are risks to this method, sellers will enjoy significant benefits from it as well. For instance, the realtors’ commission is usually 6% of the sale price, which is $6,000 on a $100,000 home split between the seller’s and buyer’s agents. Also, many sellers prefer to keep control of the sale process.

When planning to sell your home, you should consider FSBO. Before choosing this method, however, you need to understand the entire process. How does for sale by owner work? Read on!

For sale by owner, or FSBO, not only saves you from paying a listing agent’s commission, but it also allows you to completely control your listing. You decide on price, strategy, and listing details. Also, you can set up all the showings to suit your availability. You won’t have to clean up frantically and exit because of a last-minute appointment.

Although you save money on commissions, you may still make less on your home sale when you DIY. Studies show that homeowners who use a real estate agent generally get a higher price for their property, often high enough to more than cover the realtor’s cut. During an FSBO, you must manage all the marketing efforts, which takes time and money. You need to get your listing online, create flyers and signs, and purchase newspaper ads, etc.

If you are not experienced in selling property, it is easy to make mistakes, such as pricing your home too high or too low. And if your buyer uses a real estate agent, you may have to pay their 3% fee. An FSBO is not a simple sales method.

If you decide to sell your home by yourself, you will need to take the following steps.

Prepare the House

A listing agent will usually identify items you should either fix or freshen in your home before showing it. When you sell it yourself, you need to be just as meticulous. Clean, fix, and paint until your home looks its best. (Remember that many potential buyers really want a convenient kitchen and nice bathrooms.) Then, stage it for photos to post online. Without attractive photos, it is difficult to get people inside your home to look, much less get them to close the deal.

Set the Price

Setting the right price is critical to your success. If it’s too high, you eliminate potential buyers. Set it too low, and you won’t make a decent profit. You’ll need to do your research on home prices in your town and neighborhood. You should consider getting a comparative market analysis (CMA). And since you’ll need an appraiser at some point, hire one before you list the property. You’ll be better able to set a competitive price for the current home market in your area.

Market Your Property

You will need to invest in several marketing sites, including the MLS (multiple listing services). The MLS is the primary listing tool of real estate agents, and although you are going without an agent, your buyer may have one. You will have to pay to get your listing on an MLS, and you may want to use sites that only list FSBO properties as well. The cost of these sites can add up, so budget for them carefully.

Show Your Property

Showings are inconvenient, stressful, and essential to your success. You will need to make all the appointments, prepare the home, and get your pets and children out of the way for the showings. You can use video tours to lessen the number of in-person showings, but you will have to show your house in person at least a few times.

Handing Negotiations and Paperwork

Many home sales involve counteroffers and at least some negotiation. Your buyer may insist on contingencies if problems arise during the inspection. You have to deal with deposits and, possibly, buyers who change their minds. You should hire an attorney to make sure everything is legal and binding.

Selling your home requires the following documents:

  • Property survey
  • Receipts and warranties for new appliances and home upgrades
  • Plans and permits for upgrades
  • Certificates of occupancy to prove the home complies with municipal codes
  • Loan documents
  • Most recent utility bills
  • This year’s property tax bill
  • Home title
  • Homeowners associations covenant (if applicable)
  • Floor plan or blueprints (if possible)

The FSBO Closing

Once you and the buyer have come to an agreement, you have to set the closing date. Nothing is official until you’ve successfully completed this step. The closing should take place at the office of the title company, the buyer’s lender, or your attorney. The closing includes:

  • Reviewing and signing all the necessary documents.
  • The buyer providing proof of home insurance, the deposit, etc.
  • Collecting the sale payment from the buyer’s lender.

An attorney should look over all the documents to make certain that there are no errors. Once the documents are signed by both parties, your sale is complete. You simply need to vacate your home per your agreement with the buyers. Many will want to take possession of their new home the day of the closing.

The real question is not “how does For Sale by Owner work?” but “how well does For Sale by Owner work?” Of course, the answer depends on the current housing market and your efforts. Some sellers begin an FSBO process but end up hiring a realtor to get better results. Others sail through the process and make a nice profit.

An FSBO sale to a relative or other known buyer often makes sense because you don’t have to market your property or deal with multiple showings. Other FSBO efforts can save you money and frustration as well. Just be certain that you have the time and determination to handle all the sale details.

About the Author

Beth Weber

I am an experienced freelance writer with a rich background in teaching, ad creation, and healthcare publications. I have served as an editor of the historic Monroe County Appeal newspaper, been a contributing editor to Maine St. Magazine, and written articles for numerous websites, including Doctor Wise and 50plus-lifestyle.com. My specialties include legal issues, health care, insurance, 50-plus lifestyle concerns, and cybersecurity. Humor is important to me, and I can write satirically as well as seriously. I earned my MFA in creative writing from Spalding University and my MA and BA in English from Truman University.

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