Selling for sale by owner in 2022?

Question

I've always heard that selling for sale by owner is a bad idea, but is it true? When is it a good idea to sell for sale by owner?

Bob Stevens · Answer

Of course, FSBO if you know what you are doing, Why use a realtor?  They will call you anyway. So save the 3% and list it yourself

Scott E. · Answer

No in that example I find somebody to sell it to without rehabbing. It's kind of like wholesaling, except I have actually closed on the deal.

This strategy worked great when the market was appreciating at a crazy rate. I doubt it will work as well now, unless you buy at a very deep discount.

Scott E. · Answer

I have a few FSBO signs in my shed that I've used over the years. I only use these when I've already bought the deal, and I want to test the water on a quick flip prior to starting a rehab.

So for example I buy a deal for $400k. Within a week or two of closing I put the sign out front with my phone number and see if I can get $425k for the house.

The reason I do this is because it requires no money and almost no effort to try to make that quick $25k. And in this example I couldn't afford to hire an agent because if I had an agent list the deal at $425k, I would net less than $400k after commissions, so I'd actually lose money if the agent got me $425k.

Sometimes it works, sometimes it doesn't.

Jonathan Minerick · Answer

It's important to know the difference between FSBO and flat fee - they are often confused. FSBO is hard, flat fee works. Below is from a BP blog I wrote about this. If you decide flat fee makes more sense, here is a BP blog about what to look for.

1. FSBO and Flat Fee MLS are Different Things

A “FSBO” listing means that a seller is not working with a listing agent. When a seller does a Flat Fee MLS listing, they are no longer FSBO, as they are using an agent to list them on the MLS.

The above point is very important.

When agents see that a seller wants to do a Flat Fee MLS listing, they incorrectly point to a report by the National Association of Realtors (NAR) that claims FSBO sales makes less money than agent sales. But the NAR study includes Flat Fee MLS listings with agent listings, not with FSBO listings.

2. There is a Massive Difference in Exposure Between FSBO and Flat Fee MLS

FSBO Listings appear on:

• - Craigslist
• - Zillow, in the “Other listings” section, which are hidden by default

Flat Fee MLS Listings appear on:

• - MLS, with all other agent listings
• - Zillow, with all other agent listings
• - All major real estate search engines (Redfin, realtor.com, etc.)
• - Brokerage websites (Compass, Keller Williams, Coldwell, ReMAX, etc.)

In addition, the Flat Fee MLS listing will go out to the agent’s clients via new MLS listing notification emails.

3. The Compensation Mechanic is Completely Different

A Flat Fee MLS listing gives sellers the ability to display a binding offer of commission to buyer agents on the MLS. This is a primary function of the MLS, which also has mandatory rules, including arbitration, when the commission offer is not honored.

This is much different than a FSBO seller stating they will pay a commission on Craiglist or some other website.

Having to negotiate a commission in advance of showing a FSBO home to a buyer means work for the buyer’s agent, without even being sure their buyer wants to purchase the home. If the agent waits until after showing a FSBO home to discuss the commission, the agent is in a poor spot to negotiate.

For the above reasons, buyer agents will generally avoid listings where there is no binding offer of compensation. The MLS solves this issue.

87% of buyers have an agent.

4. Studies Show That Agents DO NOT Make Sellers More Money

Going back to the NAR claim that FSBO sales make less than Agent sales. Here is what the NAR report says:

• - FSBO sold for a median of $260,000, lower than the median of agent-assisted homes at $318,000

So the NAR claim is that FSBO homes sold for a whopping 18% less ($58,000) than agent listed homes. Read that again.

The truth, that you can ask anyone involved in real estate, is that FSBO homes are usually significantly overpriced. Does that make sense that a FSBO seller would go from being significantly overpriced to being 18% underpriced?

But how can the NAR finding be so wrong?

Aside from the obvious answer that they are a trade group for real estate agents, and they would not be around for long if they said that using an agent doesn’t make a difference, here are a few reasons, which NAR acknowledges as not being factored in to their finding:

• - Lower priced properties are more likely to FSBO (e.g. commission costs are high relative to price, agents aren’t as interested in selling low prices homes).
• - Rural homes are 3x more likely to FSBO than urban homes. Rural homes are $104,000 less, on average, than urban homes.
• - The NAR finding is not an apples to apples comparison. For example, a small home sold FSBO in the midwest compared to an custom home in Los Angeles are going to have very different price points. The NAR study treats them the same and tries to compare them against each other.
• - 57% of FSBO homes are sold to someone the seller knows (e.g. family, friend, etc).

Can we find any independent studies on FSBO vs agent listed homes? Yes, two studies from private research institutions:

• - Northwestern University "FSBO sellers ended up with a significantly enhanced net sale price because they didn't have to pay the brokerage commission that real estate agents charge seller” https://www.northwestern.edu/newscenter/stories/2007/06/fsbo.html
• - Stanford University: “The use of a broker does not significantly affect either the average initial asking price or the average selling price of a home” https://drive.google.com/file/d/1IdAEb6LJC6DH7BUltgOtIStkUYUvjnZW/view

The truth is that real estate is a market like any other. It is driven by supply and demand. Agents do not make homes sell for more money - which would also infer that while a buyer would significantly overpay by buying a home listed by a real estate agent.

Real estate agents are useful for many reasons, but the myth that they will make a seller more money is not one of them.

Allan Smith · Answer

The hotter the market, the more you can get away with FSBO. but if you don't get a buyer at a great price within 2 weeks, upgrade to a flat rate broker (no listing agent commission).

right now is a bad time for fsbo

Eliott Elias · Answer

Depends on your market and how realistic you are as a home owner. Most FSBO listings I call are delusional, they have no clue what their property is worth and not easy to talk to. Let the experts handle it

Fili Aguirre · Answer

@Scott E. So, basically, if you find someone to sell it to for 425k then you don't rehab it and you sell it as-is? Or you still rehab it?

Selling for sale by owner in 2022?

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