The Pros and Cons of a For Sale by Owner Property

Whether you choose to sell your home on your own or purchase a home that is for sale by owner (FSBO), then it’s important to think about all of the pros and cons of a for sale by owner property. We’ll break it down for both sides – being a seller and being a homebuyer interested in a FSBO property. 

Buying a For Sale by Owner Home

A home that is for sale by owner is directly sold by the homeowner without any help from a listing agent. Here are the steps to follow if you are buying a FSBO home:

• Find a lender and get approved for a mortgage
• Consider working with a buyer’s agent who can guide you through the process and look out for your best interest – this person will negotiate on your behalf and handle all the complicated paperwork for you
• Make an offer on the property – if you are working with an agent, they will guide you on putting together a competitive offer. If you are representing yourself, take a look at the comps in the area to guide you as you decide how much to offer
• Take your time looking around the property and be diligent about home inspections 
• If you are not working with an agent, be a strong negotiator to make sure you get what you ask for
• Be aware of the required paperwork to close and be thorough when filling everything out accurately

As there are with any other situation, there are pros and cons for buying a for sale by owner home, the pros include:

• You avoid paying real estate agent fees and commissions by buying direct from an owner
• You have the opportunity to be directly in contact with the owner, which can lead to a smooth negotiation

The cons of buying a for sale by owner home include:

• Unless you or the seller are licensed agents, it is likely that neither of you are experienced with the minutiae involved in a real estate transaction, including the paperwork and time necessary to navigate the process
• Misunderstandings during negotiations can lead to legal actions
• You can overpay for a property if you don’t do research into market comps
• You run the risk of the seller not being 100% honest about the property – especially for things that could potentially lower the value of the home

Buying a FSBO home isn’t always a great opportunity for a buyer – even though you may save on agent commissions, you may run into other problems during the home sale process. 

Selling a For Sale by Owner Home

There are many reasons why homeowners will choose to sell their own home without the help of a licensed real estate agent. In Texas, if you sell your own home you can save anywhere between two and six percent in commissions. FSBO is an option that allows many people to take charge of the selling process, call the shots, negotiate their own terms and who don’t want to pay an agent any commission. It may seem easy enough – you list your home, put out a yard sign, the offers start coming in, you pick a buyer, negotiate and close – right? Unfortunately, if it really were that simple then there wouldn’t be a need for the real estate agent profession, and everyone would be doing it their own way. Selling your own home can be considered as a viable option if you are an experienced home seller who is willing to put in the time and effort that it takes to do it right. Some of the key benefits of selling your own home include:

• Direct control over how the property is sold – including your pricing strategy, scheduling showings and negotiating with potential buyers
• You save on commissions and end up with more money in your pocket
• For sale by owner sellers who find a buyer that is not being represented by a buyer’s agent will save an additional amount of money – about 2.84%, which is the average buyer’s agent commission rate in Texas. 

While it’s very appealing to save money, FSBO does have some significant risks that are worth pointing out. Research shows that homes that are sold by the homeowner will usually sell for about six percent less than those that are listed with an experienced real estate professional. Additionally, it takes a lot longer to sell a FSBO home because homeowners are not equipped with the marketing tools or network connections that agents have, and it is more likely to fall out of escrow even with an accepted offer. 

Real estate laws and processes are different across the country so it’s important to be familiar with the local market and laws if you choose to sell your own home. Here are some details on what you need to do in Texas to complete a FSBO transaction successfully:

• Before you list your home for sale you have to prepare it by completing any necessary repairs, doing a deep cleaning and staging your home to make it stand out and look nice. 
• Once the home is ready to be listed for sale you will want to work on your pricing strategy by looking into comparable sales within the last six to 12 months in your neighborhood. This means that you need to see what other home similar to your own sold for in this time period. The comps you look at need to have the same bedroom and bathroom count and combination as your own home, be similar in size, have comparable upgrades and be within one mile of your own property. Accurately and competitively pricing your home is key to getting it sold quickly. 
• When your home is officially listed for sale on the market you have to be diligent about marketing the home with an attention-grabbing description, high-quality pictures, cross-listing it on different websites and promoting it on social media, in print ads and via word of mouth. You will also want to work on scheduling an open house for interested buyers and private showing appointments. Make sure to let your neighbors know that you are selling your home so they can share the information with their friends and family, etc. 
• When a potential buyer comes along with an offer, you have to vet them to make sure they are qualified and can afford the home. If you accept an offer from an unqualified buyer, the sale will fall through and you’ll have to start from scratch with marketing and showing the home. 
• The closing process can get really tricky if you are not experienced in the real estate process – there is a lot of paperwork that needs to be completed accurately, including:
  • A signed purchase agreement, as well as any addendums that list the agreed upon changes
  • A detailed statement of all the costs associated with the sale and who is responsible for paying them
  • A signed deed to legally transfer your property to the new owner (the buyer)
  • A bill of sale that is basically a receipt that includes your information and the buyer’s
  • A notarized document that states that you own your home and there are no liens on the property and that you are not trying to sell it to someone else
  • If you have a mortgage on your home, you will need to provide loan payoff information – if you don’t owe money on the property then you need documentation that proves that
  • If your home is part of an HOA, you will need to share the HOA codes, restrictions and financial information with the buyer
  • If you completed any major repairs or renovations on the home you will want to provide these receipts to the buyer, as well as contact information about who to contact if future repairs are necessary
  • A copy of the home warranty service agreement to explain what is covered and for how long

There are various other documents that may be required so you will have to be diligent about getting all the proper paperwork together and executed before closing. 

At the end of the day, buying a for sale by owner home or selling your own property without professional guidance is not for everyone. But now that you know what to expect, whether you are buying a FSBO home or choosing to sell your home by yourself you can feel confident about the process and the potential challenges you may encounter. In order to successfully complete a FSBO transaction you will need to make a plan, dedicate the necessary time, hustle and know when you need to seek out professional advice if you get stuck. Our team is always available if you are seeking guidance, please contact us if you have any questions about listing your home for sale or inquiring about a home that is listed for sale by owner. We look forward to working with you and assisting you with all of your real estate needs!