For Sale By Owner (FSBO) - An Alternative to Foreclosures
In this chapter, we will discuss For-Sale-By-Owner or FSBO properties. With an FSBO property, the seller acts as the selling agent and handles the sales process directly with the buyer or buyer's agent. In this situation, the seller does not pay a listing commission. We have included FSBO listings on our website because they offer an opportunity to save on the purchase price of a home. The specific reasons why are discussed below.
The FSBO market accounts for approximately 10 - 15% of the national residential real estate market. The primary reason homeowners are attracted to selling their property themselves is to eliminate the sales commissions charged by Real Estate Agents. When a homeowner sells a property without an agent, he will immediately save up to 3% of the transaction price by representing himself (assuming the sales price is the same without using an agent). Due to the reduced transaction costs, FSBO owners are often times willing to pass on part of the savings in the form of a lower sales price. This can be a true win-win situation for both the owner and the homebuyer.
While selling a home without an agent can be a great way to save money, there are potential challenges to this approach for the seller. The good news is that these challenges can result in an excellent opportunity for you. Although many FSBO sellers are able to accurately assess the value of their property, some are undoubtedly unaware of the true value. In fact, according to the National Association of Realtors, 24% of for-sale-by-owner sellers thought that getting the price right was the most difficult task when selling a home. The bottom line is that by patiently sifting through FSBO listings, you have a good chance of finding an under-priced property.
Another challenge FSBO home sellers face is ensuring that their listing is reaching the widest audience possible. This is the number one benefit that a real estate agent is able to provide. They are able to include your listing in the Multiple Listing System (MLS), which provides worldwide exposure to your listing including being displayed on www.realtor.com. According to the National Association of Realtors, over 70% of prospective homebuyers begin their quest on the Internet. Unfortunately, unless a homeowner uses an agent, the property is unlikely to reach all prospective homebuyers in the market. As a result, the price is unlikely to reach the maximum selling price. Again, this is a great opportunity for the prudent homebuyer to save when purchasing a home.
While it is difficult to measure the exact savings of purchasing an FSBO, we believe you should always include these listings in your search to find a great deal on a home. According to the National Association of Realtors (which is probably biased), FSBOs sold for approximately 20% less than the median agent-assisted transactions. Although the data for the agent-assisted prices is skewed a little high because it includes a greater mix of more expensive properties, the data indicates that buyers can save money by purchasing FSBO properties.
