FSBO stands for “for sale by owner.” Essentially, it refers to a seller selling a home without a real estate agent. Instead, the owners are trying to handle the sale themselves.
In most cases, homeowners go the FSBO route in an attempt to avoid real estate agent commissions. Since commissions take a small bite out of profits, it’s not surprising that many people find FSBO enticing. In other cases, sellers assume that selling a house without an agent just isn’t that difficult, causing them to believe that they can manage it all themselves.
Most sellers don’t understand how challenging handling the sale can be in the end. Plus, they don’t realize that for sale by owner mistakes can cost far more than the commission.
If you’re wondering exactly why FSBO is a bad idea for both sellers and buyers, here’s what you need to know.
Why FSBO Is a Bad Idea for Sellers
The Home Selling Process Is Complex
Selling a house isn’t a simple undertaking. There are mountains of paperwork to complete and complicated negotiations. Even arranging for showings, appraisals, and inspections is startlingly cumbersome in many cases. That’s why selling a house without an agent can be so challenging.
With a real estate agent, sellers get an expert who can help them navigate the process. Plus, they’ll have an advocate during negotiations, ensuring they end up with the best price possible.
Getting the Price Right Is a Skill
One of the biggest for sale by owner mistakes is assuming that choosing the right sale price is easy. An FSBO seller might think they can hop online and learn everything they need in a few clicks. In reality, choosing a price point is a skill, one that can take years to hone.
There’s far more to consider than the original purchase price and a handful of recent sales. Instead, a deep dive into current MLS records is usually a must, as well as a thorough market analysis. Researching comps and assessing the pros and cons of the property are similarly critical and very easy to get wrong if you’re not experienced.
Plus, sellers often have an emotional connection to the property. This can cause them to over or underestimate a house’s value, depending on the nature of the feelings.
Essentially, by not working with a realtor, the odds that a seller will set the wrong price are incredibly high. As a result, they may set the price too low, leaving money on the table. They could also choose a point above market norms, leaving them without offers or requiring a price reduction when an appraisal doesn’t support the price.
Marketing Isn’t as Easy as It Seems
Another one of the bigger for sale by owner disadvantages involves marketing the property. Some sellers think that plopping an FSBO sign in the yard is all they have to do. In reality, that won’t get much attention from traditional buyers, even if you’re in a hotter market. Instead, you may only get interest from investors and other buyers looking for deals, leading to lowball offers.
Even if you’re willing to do extra advertising, that isn’t as simple as it seems. While sellers may assume that simply taking a few pictures, writing a simple description, and posting an ad is enough, that isn’t usually the case.
Creating an effective listing requires the right approach. Ads need to stand out from other listings for the right reasons. Otherwise, buyers may simply pass a property buy.
With a real estate agent, you get marketing expertise. That increases the odds that your listing will get noticed, making it easier to find a buyer quickly.
Selling a House Is an Emotional Process
If you’re wondering, “How hard is it to sell your own house?” the answer is usually, “Surprisingly difficult.” Selling a home isn’t just a financial transaction; it can be an incredibly emotional journey.
Since you have a connection with the property, you may react in unexpected ways during the sale process. For example, a lower offer may feel like an insult – even if it isn’t meant as one – leading to hostility. If you need to sell, your desire to find a buyer may cause you to come across as desperate, while dealing with a rejection directly might feel devastating.
Even if things are going well, it’s normal to feel conflicted about leaving a house you once loved. By having an agent by your side, you can deal with the emotional impact privately, ensuring it doesn’t impact the sale.
FSBO Homes May Not Getting Showings Through Agents
When real estate agents choose houses to present to aspiring homebuyers, they typically focus on traditional listings and forgo FSBO properties. In many cases, that’s because agents understand that there won’t be a real estate professional on the seller’s side of the equation. That makes the deal harder to navigate and riskier overall.
Since the vast majority of aspiring home buyers turn to real estate agents to navigate the market and trust their expertise, they won’t typically push back hard if the agent recommends skipping FSBO properties. As a result, you can end up with far fewer showings by selling a house without a real estate agent involved.
Even if a real estate agent is open to showing the home, they may require the seller to sign a commission agreement. That way, they are guaranteed to get their typical fee if the house sells.
Why FSBO Is a Bad Idea for Buyers
Dealing Directly with the Seller Is Challenging
When both the buyer and the seller have real estate agents, all communication filters through the agents. This allows the real estate professionals to serve as a buffer. They’ll ensure that all participates ultimately communicate calmly and professionally. Additionally, they’ll make sure that crucial points are clarified along the way, keeping all involved parties properly informed.
One of the for sale by owner problems is that the buffer isn’t entirely in place. Instead, either the buyer or the buyer’s agent has to communicate directly with the seller. Confusion and frustration can occur since the seller isn’t as familiar with real estate processes and requirements. Additionally, the seller may respond emotionally to attempts to negotiate, creating a hostile environment.
For Sale by Owner Scams Are Shockingly Common
While many FSBO sellers are honest people, for sale by owner scams are incredibly common. Some FSBO sellers won’t provide all of the necessary disclosures, intentionally not informing buyers about serious known issues like mold.
Others may pose as the owner of a property when they really aren’t. Then, they may insist on earnest money deposits or wire transfers to secure the home, only for you to later discover that the house wasn’t theirs to sell. If that happens, you’re not just out of a home, but you may never recoup the fraudulently collected funds.
Those are just some of the scams that can arise when buying an FSBO house. As a result, it’s usually best to skip buying FSBO and go with a traditional listing.
Your Agent May Not Assist with the Purchase
Another reason why FSBO is a bad idea for sellers is potentially losing support from their real estate agent. Even if a buyer is working with a real estate agent, there’s no guarantee that an FSBO seller is willing to agree to a buyer’s agent commission. If the seller refuses to guarantee that payment in writing, the real estate agent may feel that working on the deal is too risky, causing them to decline to move forward.
If that happens, the FBSO buyer is essentially on their own. You won’t have an advocate to assist with negotiations, paperwork, and other parts of the process, leaving you at greater risk of a bad deal.