The Unspoken Problems with "For Sale By Owner" (FSBO)

Aug 22, 2022
5 min

A lot of people assume that selling their homes themselves, that is, without the services of a real estate agent, can be a good idea. 

The common notion among these homeowners is that not having to pay sale commissions to their listing agents can save them some money. 

However, selling a home without professional guidance or assistance comes with many hidden pitfalls.

In this article, we will discuss in detail the meaning of “For Sale By Owner,” the problems associated with it, and how to land an FSBO client as a real estate agent.

What Does “For Sale By Owner” Mean? 

“For Sale By Owner” (FSBO) is a method through which homeowners sell their property without the representation of a real estate agent or broker. 

FSBOs can be very complicated and time-consuming, and although some homeowners still prefer this sales method, only a few percent succeed. 

Due to the workload involved in selling their homes themselves, many homeowners would only opt-in for this sales method when they already have a lineup of potential buyers. 

According to the National Association of Realtors, only 7% of home sales in 2021 were FSBO sales this year. This shows that FSBOs do not happen very often, and for good reason too. 

Problems That Come With “For Sale By Owner” 

The typical real estate agent's commission on any transaction is 5% - 6%, so selling your property yourself may seem like an incredible way to save money. 

This may not be entirely true as, in most cases, the risks that come with “For Sale By Owner” listings outweigh the benefits. Here are six problems that affect FSBO deals.

#1. Guessing the Home Value

It isn't uncommon for homeowners who sell their homes themselves to significantly undervalue their property because they do not have enough real estate knowledge to estimate the value of their homes correctly. Guessing the value of a home is a two-edged sword; on one end, the homeowner could realize substantial financial losses from underselling, and on the other end, a price that is too high can scare off potential buyers and keep the house unsold for a long time. 

This is where the expertise of a real estate agent comes into play.  A real estate agent’s understanding of the local market and their experience selling similar houses can help sellers allocate realistic listing prices to their property.

#2. Falling Victim to Scams

When selling a property as an FSBO, homeowners either market their property or utilize the services of online listing companies rather than the conventional Multi Listing Service (MLS). 

Since these sellers have complete control over the home listing and are not made to follow the MLS rules and guidelines, it is not unusual to find the information provided on “For Sale By Owner” homes wrong and misleading. This is one of the biggest issues buyers come across regarding FSBOs.

Although there are quite a number of legitimate sellers out there, many people still regard all FSBO listings as scams. This is a problem that hinders the success of most FSBO sales. 

Without an agent, there are huge chances that someone may try to sell a property they don't own. Buyers don't want to go through the stress of having to fix issues like this, so they’d rather just avoid them.

#3. Legal Liabilities

When listing a “For Sale By Owner” property, it is vital to understand that the homeowner is liable for everything and anything listed. This means that if a seller gives wrong information on the house, that seller will be held accountable by law. 

And while some homeowners provide inaccurate information on purpose, others do it out of sheer ignorance.

If you are uncertain about specific details of your home, it is advisable to work with a real estate agent. This way, you can be sure that all details about your property will be professionally researched and accurately listed. 

This would eliminate the possibility of your clients being disappointed during inspections and any legal problems arising further down the line.

#4. Poor Marketing Since the Homeowner is Doing it Themselves

“For Sale By Owner” properties often have awful marketing. This is because only a few online marketing companies allow FSBO property to be listed, and the homeowners themselves have little to no experience in real estate marketing. If a property listing isn't placed in front of the people, it may never be sold.

A real estate agent has the knowledge and experience to get property listing right and market to the right people better than the homeowner would. This makes real estate agents who typically have access to Multi Listing Service (MLS) indispensable tools to sell a home successfully.

#5. Balancing Your Time with Work and/or Family

There is no doubt that trying to sell an FSBO property can be strenuous and time-consuming. When selling your home yourself, you have to take up all the responsibilities of a real estate agent and even put in more hours than a professional normally would. This can make balancing time with work and family challenging for the homeowner.

#6. Selling Below the Home’s Real Value

If a “For Sale By Owner”  seller is lucky enough to find a buyer, chances are the property would be sold below the home’s actual value. 

According to the National Association of Realtors, FSBO homes sold at a median of $260,000 last year, which is significantly lower than the median of $318,000 that agent-assisted homes sold for. 

This is because the search for an FSBO buyer is stressful enough for any homeowner to forget about negotiations. However, with a real estate agent looking out for your best interest, you can be sure that the value of your property will be correctly estimated and a worthy price negotiated with potential buyers.

How to Get a “For Sale By Owner” Client

As a real estate agent, the most efficient way to get an FSBO client is by pointing out the flaws of FSBO sales to the homeowner and showing how much value you can offer them. 

“For Sale, By Owner” sellers advertise their homes on platforms such as Facebook, real estate sites, or with just yard signs because they lack access to the Multiple Listing Service(MLS). You can point out that this doesn't do much good as their property remains unsold for long periods.

You could also point out to them that they run the risk of not achieving the maximum price by selling FSBO. 

Let them see that even though they might be saving some cash by avoiding a listing agent’s commission, they will still have to offer a buyer’s agent commission. This, coupled with the chances of them underselling, and in the end, they might not end up saving anything. 

Additionally, you could make them aware of all the processes they need to take to complete the transaction successfully – drafting up documents, handling showings, negotiating with buyers, overseeing the closing – and how stressful these processes can be. 

The basic idea is to show them how much of the behind-the-scenes work you can help them with to ensure they are safer and can sell for more.  

Final Thoughts on “For Sale By Owner”

“For Sale By Owner'' is used by homeowners who prefer to sell their property themselves. Although the main reason for this sales method is to save money on real estate agents’ commission fees, it is usually not worth it, and things could easily go wrong at any time.

TL;DR: For Sale By Owner properties might save the seller a little bit of money, but they miss out on legal protection, marketing, someone handling the paperwork, and negotiating for the best price possible. In short, it's easier to sell a house with a real estate agent and can pay for itself.

Aug 22, 2022
5 min