The Pros and Cons of For Sale By Owner

8% of sellers in 2020 sold as for sale by owner, which invites pros, such as potentially quicker sales, and cons, such as a lower sales price.

Amber Martinez
Amber Martinez

While it is indeed the norm for sellers, not all homeowners choose to work with a real estate professional when selling their homes. Rather than hiring a real estate agent or broker, homeowners who choose to list and sell their homes on their own are choosing to sell as for sale by owner, or FSBO.

For sale by owner remains a possible selling method for homeowners that comes along with both appeals — such as reduced selling costs — and drawbacks — such as lack of an agent’s expertise. Here are some of the positives and negatives associated with FSBO sales.

Three Positives of For Sale By Owner

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#1. For sale by owner homes may sell faster. FSBO homes in 2020 sold more quickly than agent-assisted sales, with 77% of listings remaining on the market for less than two weeks. Sellers who want to sell their homes in a short period of time may benefit from representing themselves in the sale. However, it is possible that this quicker sales time is the result of a less critical evaluation of buyer offers.  

#2. Sellers who already personally know the buyer that made an accepted offer on their home are likely to choose to sell on their own. If you already know someone who is seriously interested in buying your home, you may not need to market your home or vet potential buyers. This straightforward approach may be a reason why 51% of FSBO sellers knew the buyer that purchased their properties.

#3. Homeowners who sell their homes do not need to pay for an agent’s services. The typical agent’s commission is 5% to 6% of the home’s purchasing price. 5% of a $250,000 home is $12,500. 6% of the same home is $15,000. Sellers who are looking to reduce the costs of selling often choose to sell their homes independently rather than working with an agent.

Three Drawbacks of For Sale By Owner

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#1. For sale by owner may reduce the profitability of the sale. FSBO homes typically sell for less than the selling price of comparable, agent-assisted homes. The median sales price for FSBO homes in 2020 was $217,900. The median sales price for agent-assisted homes was $242,300.  This difference in average prices of $24,440 is likely due to the fact that an agent’s expertise is not helping sellers maximize their investment potential.

#2. Homeowners who forego an agent are not guided in their transactions. Selling a home is a multi-stepped process that takes time. Sellers choose to work with agents in order to get help navigating each step of the transaction. When an agent guides the experience, sellers can be confident that their risks are mitigated and their rewards are maximized.

Sellers who work with agents will not need to be worried about making any mistakes, forgetting something important, or falling behind on schedule. Agents keep the deal flowing smoothly, while an inexperienced seller may not be able to deliver the same quality of self-service.

#3. FSBO sellers lose access to an agent’s strategy and negotiations. The ability to leverage your value as a seller is fundamental for increasing your home’s investment potential at the time of sale. Sellers who opt to carry out an FSBO sale will not have a professional to consult with regarding their sale’s long-term and short-term strategies.

When it comes time for negotiations, FSBO sellers will not have a professional on their team to represent their interests. Agents are best suited to negotiate for sellers as they realize the broad implications of each negotiation point. When working with an agent, sellers can be assured that their negotiations are in their best interest.

The Value of an Agent During Uncertain Times

In 2020, the National Association of REALTORS® reported that only 8% of recent home sales were for sale by owner sales. This marked the lowest share of FSBO sales since 1981, which is an interesting development considering the increase in the accessibility of real estate transaction tools online. While sellers have more real estate tools at their disposal than ever before, most are choosing to partner with a real estate professional for an agent-assisted sale.

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One of the reasons behind this shift towards an increased dependency on real estate agents may be the market uncertainty experienced in 2020 as a result of the pandemic. During uncertain times, an agent’s knowledge and experience were elevated to essential elements for the majority of sellers who chose to hire an agent to guide their transactions.

If you’re interested in finding the best agent to represent your sale, click here to get connected.

Amber Martinez

Amber Martinez