The biggest reason to consider some form of FSBO is the money you may save. If your house sells for $300,000, a traditional real estate commission of 6 percent would cost you nearly $20,000. You can keep that money or drop your price to sell faster.

fsbo savings

While real estate writers often claim that professional agents are better negotiators than 鈥渃ivilians,鈥 research does not necessarily support this. Economists Stephen Dubner and Steven Levitt wrote in Freakonomics that agents who sell their own houses get better deals for themselves than they negotiate for their clients.

Harvard research: the future of home prices in 2017 and 2018

That鈥檚 because they have more incentive to move a property fast than to squeeze a few thousand more from a buyer. Negotiating $25,000 more for you gets them, after splitting commissions with the selling agent and their broker, about $375. Not worth the extra time and effort for them, but probably worth the effort from you when you sell yourself.

The other benefit is that you control the process. You decide if you want an open house. You decide how to advertise, if you want to have an open house, when to show your home to prospective buyers, and how you want to negotiate with them.

If you like being in the driver鈥檚 seat, you may prefer to DIY your home sale.

Full-service, DIY, or鈥︹
Today鈥檚 homebuyers can check out homes without spending hours in the back seat of an agent鈥檚 car. They can and do tour for-sale homes anytime they want. But how do you get your house out there in front of buyers?

You could build your house its own Web page. Or you could pay a national real estate firm 6 percent to take lots of pictures, print brochures and advertise your house on their site.

Real estate representation: buying agents vs listing agents

Or, you can choose another level of service and price for a custom experience. This so-called 鈥渉ybrid鈥 model blends traditional and DIY real estate sales, letting you save money by doing things you don鈥檛 mind doing, and save time by paying someone to do things you don鈥檛 like.

The hybrid model: all things to all people?
Traditional agents usually split a 6 percent commission between the listing agent, the selling agent, and their respective brokers. Each party may grab a 1.5 percent share of your sales price.

Making a sight-unseen offer on a home

FSBO sellers do not have to pay the standard commission, but may have to pay a selling agent and broker 3 percent in order to make the deal work. And FSBO selling can be a lot of work and aggravation for some.

FSBO sellers may miss out on buyers who have buyer鈥檚 agents. Their agents may prefer to avoid FSBOs, even those who will pay a 3 percent commission. They expect that they will be stuck with most of the work. A hybrid model can prevent this.

Pay only for what you need
Online self-help platforms offer different ranges of service, letting sellers decide how much service they want and what they want to pay.

how much can you save with fsbo

Paying for a listing in your local MLS is the minimum you should do, according to the American Economic Review. Researchers claim that, 鈥渢he probability of a quick sale is higher for houses initially listed on the MLS.鈥 Many hybrid model platforms offer free trials and low-priced options.

10 reasons your home sale didn鈥檛 go through

The highest-end packages offer signage, online or phone support, state-specific real estate forms and national and local MLS exposure. It may be well worth the investment if you save a ton and avoid the worst of selling stress by getting some professional help.

When it comes time to sell, think realistically about how much you鈥檙e willing to do. If you are confident, willing to put in the hard work, and perhaps have some real estate or marketing experience, FSBO may work well for you.

How to sell your home FSBO
Regardless of how much or little help you get from an agent or service, you鈥檒l have to complete these steps.

Preparing your home for sale
You may have learned to live with your home鈥檚 鈥渜uirks,鈥 but buyers will quickly notice deferred maintenance like peeling paint or sticky doors. And they will wonder what other problems are not in plain sight.

Walk through your home as though you鈥檙e seeing it for the first time. Enlist the help of a more objective family member or friend and ask them to be completely honest about any turn-offs. (Make sure you can handle the truth before asking for it.)

Staged homes sell 73 percent faster

Take care of obvious ugliness and health and safety issues, but don鈥檛 over-improve the place for someone else, or price yourself out of the neighborhood with too much fancy stuff.

Staged homes fetch higher prices. It鈥檚 a fact. If you don鈥檛 want to hire a pro, at least rent some storage space and stash a minimum of half of your belongings out of sight.

You may need to get rid of pet hair and odors, and even board your furry family members elsewhere until you close on the sale.

Be your own marketing department
Plan to spend some money for advertizing. Researchers claim that nine of ten buyers search for houses online. They need to be able to find you and yours.

Homeowner survey: more preparing to sell

It pays to spend what it takes to get your house listed on the local MLS. While the MLS is not available to consumers listing homes, there are brokerages or platforms that offer the service for a flat fee.

Make yourself available for showings and be as flexible as possible, You will probably have to put your life on hold while selling your own house.

Commissions, open houses, and other stuff
If you offer a commission to selling agents, make sure they know it. Your MLS listing should state this, as should your signage and advertising. Plan on putting a lockbox on the house, so selling agents can tour the home with their clients, and you won鈥檛 have to be there. Make them earn their 3 percent!

Should you hold an open house? Many believe that they are primarily used by agents to market themselves to your neighbors. If your house is on the MLS and you provide good pictures and / or virtual tours, you probably don鈥檛 need to hold an open house. And you avoid looky-loos and snoops prowling through your home.

open houses snoops looky loos

If you do open your home, it will be easier if you have some help 鈥 someone to sign in visitors and check IDs, someone to keep an eye on various rooms as people walk through, and someone to answer questions from potential buyers and agents.

Hire a good photographer to shoot a virtual tour. Most pros can also offer drone photography. Advertise the virtual tour link in your brochures and fliers.

How to evaluate and counter offers
Decide what鈥檚 most important to you. For example, an all-cash offer with a fast closing date may be better for you than a higher sales price contingent on buyers selling their current home. Understand your market 鈥 you鈥檒l negotiate differently in a seller鈥檚 market than in a buyer鈥檚 market.

The buyers or their agents normally draft the sales agreement. If there are multiple offers, you鈥檒l be responsible for communicating with potential buyers / agents. You鈥檒l evaluate the strength of each offer and perhaps counter them, eventually arriving at an agreement.

How long does it take to buy a house?

Learn in advance how to write a counter offer. You don鈥檛 have to accept the buyer鈥檚 offer, but you should always counter and give them the chance to do better. Many just automatically see what they can get away with on the first go-round.

Remember that price is just one factor. You may be able to make the deal more attractive to a buyer by paying closing costs or throwing in a snow blower. Incentives to buyers鈥 agents may also get the deal done while still saving you money.

Protect yourself
Make sure your buyer is prequalified by a lender to purchase your home.

Require an earnest money deposit that the buyer will forfeit if he or she does not adhere to your contract and close as agreed. Understand that contingent offers let the buyer out of the deal under some circumstances. For instance, most standard contracts allow the buyer to exit if a mortgage lender declines their loan application, or the home fails to appraise for the sales price.

How to avoid contingent offers on a home

If a buyer makes a contingent offer, make sure you can accept a better offer or force the buyer to remove the contingency. This is called 鈥渞ight of first refusal.鈥

The home inspection
There are two schools of thought about home inspections. On one hand, by getting one before putting your home on the market, you find out if anything needs to be fixed upfront. This can eliminate ugly surprises deep in the process.

Home inspection: What do they do and why should I get one?

On the other hand, most (if not all) states require you to disclose any defects you know about. So anything that turns up would have to be fixed or disclosed, and you may not want to do that.

Providing a copy of your own inspection may help put buyers at ease, and they may even waive their right to order their own. That鈥檚 not smart on their part, but an unrepresented buyer might not know any better.

Your sales agreement should set a limit on the amount of repairs you鈥檙e required to complete. For instance, you might agree to pay for repairs up to $2,000 without renegotiating the contract.

Are home warranties worth it?

But if the inspector comes up with $20,000 of repairs, you may not want to be forced to do that to close your deal. You may prefer to just kill the deal or negotiate a lower sales price based on the inspector鈥檚 findings.

FSBO home disclosures
Federal and state law mandates certain disclosures and material facts. You must give the buyer a copy of all required disclosures. Have your buyer sign a receipt indicating that you provided these things.
In many parts of the country, buyers ask for pest (termite) reports from the seller. The cost is negotiable, but many areas have traditions that dictate what people expect to pay for, and what they expect you to pay for.
If you live in a community, co-op or condo with a homeowners association (HOA), your buyers and their mortgage lenders will want copies of the covenants, conditions and restrictions (CC&Rs). That鈥檚 a set of rules homeowners must abide by.
What happens at your real estate closing

Know if your community is FHA, Fannie Mae, Freddie Mac, VA or USDA-approved. You can then advertise this fact to potential buyers.
The buyer will likely obtain title insurance, which again is a negotiable expense between the parties. You should order a preliminary title report before selling, so you鈥檒l know if there are issues you need to address. For instance, things like tax liens that might be on your title by mistake.
Smart sellers often offer to provide a home warranty. That costs a few hundred dollars for a year of coverage. And the buyer won鈥檛 be blaming you for every little thing that goes wrong after the sale, or call wanting you to fix anything.
Ordinarily, buyers get some amount of time to review these disclosures. Once that deadline passes, they don鈥檛 have the right to kill the deal because of anything on the forms. If your contract is set up correctly, you should be able to keep their earnest money if they back out at that point.

Should you offer seller financing?
If you have a significant amount of home equity, and don鈥檛 need to receive the entire proceeds of the sale at closing, consider seller financing. Lending some or all of the purchase price to buyers offers a couple of advantages: you reach a larger market and create monthly income.

How does seller financing work?
There are three ways to structure your sale. Your choice depends on your objective and how much you owe (if anything) on your home.

Mortgage or deed of trust

When you create a mortgage (or deed of trust, depending on your location), you become a mortgage lender. You and your buyers have to execute mortgage documents dictating the loan鈥檚 terms. You record a lien against the home with your county. Mortgages and home sales are public, and must be recorded to be enforceable.

Owner carryback

In this case, most of the financing is taken care of by a professional mortgage lender. You just finance part of the buyer鈥檚 down payment. This is called an owner carry or 鈥減iggy-back鈥 mortgage.

Lease options: the good, the bad and the ugly

One common structure is the 80/10/10, in which the buyer puts ten percent down, gets a ten percent carryback from the owner and an 80 percent loan from a mortgage lender. An 85/15/5 requires just 5 percent from the buyer and 15 percent from you.

Understand that the mortgage lender is in first position. This means if the buyer defaults and the lender forecloses, it gets paid first from the foreclosure sale. You get paid only if there is enough left over to cover what鈥檚 owed to you.


A 鈥渨raparound鈥 loan creates a new mortgage between you and the buyer. However, you continue paying your existing loan. Not all lenders allow this. In fact, many have an acceleration or due-on-sale clause that requires you to pay off your mortgage when you sell your home.

But assuming you can do a wraparound, they work like this:

If you owe $100,000 and sell for $150,000, you might accept $15,000 down, grant a $135,000 mortgage, and record the sale with your county. You receive monthly payments from your buyer, make monthly payments to your lender, and pocket the difference.

Pros of seller financing
There are several advantages when you finance a sale yourself. Not only do you receive your profit from the sale; you can take what a lender would get in interest and loan fees.

Higher price
Buyers who can鈥檛 purchase a home with traditional financing have less bargaining power than prime buyers. You鈥檙e more likely to get a better price.

Tax breaks
If you鈥檙e not able to legally exclude all capital gains on your property sale, you can minimize or defer tax liability by carrying a mortgage. The IRS calls it an installment sale, and only a small part of each payment is considered a taxable gain. Depending on your bracket, the savings can be substantial.

Financing a sale creates income streams. First, just like a traditional lender, you can charge closing costs for originating the mortgage. One percent of the loan amount is typical.

The second income stream is the return of principal, including the gain on your property sale.

The third stream is your interest income. Before setting an interest rate, know what mortgage lenders are charging someone with your buyer鈥檚 credit, down payment and income.

Lower costs
In many areas, it鈥檚 customary for property sellers to pay at least half of closing costs. Plus real estate commissions. As a financing seller, you might be able to skip expensive title insurance in addition to the services of a real estate agent.

Cons of seller financing
There are also disadvantages and risks when you provide financing. It鈥檚 up to you to decide if the extra money is worth it.

Legal fees
Unless you鈥檙e very experienced at selling and financing property, hire a real estate lawyer to set up the loan. An attorney should also draw the sales contract if there鈥檚 no agent involved. Lawyers don鈥檛 work for free, but not using a pro can be very expensive in the long run.

If the buyer fails to repay as agreed (either you or a mortgage lender in first position), you will be dealing with the foreclosure process. The legal fees, aggravation and potential property damage are major issues.

It鈥檚 critical to remember that a mortgage lender鈥檚 lien takes priority, and your carryback is a second mortgage or junior lien. This means the lender gets repaid first after the foreclosure sale. You get paid (maybe) from what鈥檚 left over.

Almost all mortgages have 鈥渄ue on sale鈥 or 鈥渁cceleration鈥 clauses, which means your lender can choose to call in the loan once the property changes hands. It doesn鈥檛 happen often, but it鈥檚 possible.

Your lender might okay the wraparound after the fact, but increase your interest rate. If you create a wraparound mortgage, consider all contingencies and have an out, just in case.

Avoiding problems with seller financing
Unless you鈥檙e an experienced private lender, get professional help. Have a real estate attorney help you set the terms of your sale and loan. Do not rely on forms from your office supply store.

Hire a note servicer to collect monthly payments. It should also collect and pay property taxes and homeowners insurance premiums. It鈥檚 not expensive, and much of the time, the buyer pays it anyway.

What to expect after your home closing

Act like a lender, because you are one. Have your buyer complete a Fannie Mae Form 1003 (mortgage application). Pull the buyer鈥檚 credit, verify income, and set your down payment requirement based on the strength of the borrower.

If your buyer needs you to carry the loan because his credit report looks like a rap sheet, don鈥檛 make yourself the next victim. Experienced 鈥渉ard money鈥 lenders set upfront fees and down payments very high. So high that they won鈥檛 lose money if the buyer defaults early on. You should look after yourself like the pros do.

FSBO mistakes to avoid
face palm frustration fsbo

There is a reason that states don鈥檛 just hand out real estate licenses to anyone. Agents must complete a certain amount of training and pass at least one exam to get their licenses. And they must pass continuing education classes every year.

You probably don鈥檛 have that training. So here鈥檚 a crash course in what not to do when you FSBO.

Just throwing a sign out there
Whether you are selling on your own or with an agent, in order to attract buyers, clean your house, get rid of clutter, and maximize your curb appeal. However, beware of spending too much and over-improving your property for its neighborhood.

Put your money where it will do the most good 鈥 on inexpensive improvements like fresh paint, a weed-free yard, an inviting front door, and clean baseboards and walls.

Sellers who FSBO must do their own research on what similar houses in their area are fetching Look at the most recent sales you can find, and also check out the listing prices of competing properties in your area.

5 steps to take before making an offer on a home

Remember, your house will sit on the market longer, costing you time and money, if you overprice it. All you鈥檒l be doing is helping other people sell their homes, because they will look better in comparison. In fact, agents often show overpriced houses first, then show their own listings to their clients. Your bad decision helps everyone but you.

鈥淔orgetting鈥 to get a home inspection
Savvy buyers will require an inspection. They are likely to find some (hopefully minor) repairs needed. Sellers who have a home inspection before putting their home on the market can prepare to pass a buyer鈥檚 inspection. Or you could just hope a silly buyer shows up and buys 鈥渁s is.鈥

Getting eaten alive by a buyer鈥檚 agent
Selling your home without an agent won鈥檛 save you the entire 6 percent unless your buyers are also unrepresented.

If you want to attract the attention of buyers who are working with a real estate agent, you鈥檒l have to offer a commission in the traditional range of 2.5 to 3 percent, and maybe more to compensate the agent for the extra work your FSBO deal implies.

Seller concessions: paying the buyer鈥檚 closing costs

On the other hand, don鈥檛 just let the buyer鈥檚 agent control the whole process, or push you to accept less than you should. If you can鈥檛 negotiate comfortably, get your own representation.

Putting too few (or just bad) pictures online
Since nearly all buyers start their home search online, they are used to checking out photos before touring houses in person. Make sure you have multiple photos with your listing.

And be smart about what you showcase: if you say you have a great view, show the view.

How emotions affect the home buying process

Incredibly, even professionals sometimes make this mistake. They put up 20 pictures of the bathrooms and none of the outside. Highlight your home鈥檚 great points.

Make sure the rooms are clean, clutter-free, and well lit. No blurry, dark or ugly pictures, please.

This is one area in which professional staging and photography may offer a lot of bang for your buck 鈥 especially if you鈥檙e selling an upscale property.

Not using your local MLS (multiple listing service)
It鈥檚 easy to find FSBO services that can put your home on the local real estate listing service for a flat fee. It鈥檚 just a few hundred dollars (almost nothing compared to the value of your home).

You can market your property to thousands of buyers, probably the most cost-effective help you can buy.

Being hard to reach or meet
Selling your home is a pain, plain and simple, and it鈥檚 even worse when you have to do all the work yourself.

If you can鈥檛 be available to show potential buyers on their schedule, hire someone who can. Unless your house is so desirable or well-priced that you can make everyone come at 6 am on Sunday, you鈥檒l either have to put up a lock box and pay a 3 percent commission or take a lot of time off work to show your house.

Blowing off potential buyers
Respond to emails and phone calls immediately, because any of them could be from a potential buyer. Remember that serious buyers want to narrow down their list quickly, view those homes and complete the process ASAP.

If you wait a few days to make contact, they may already be under contract elsewhere.

Dealing with unqualified purchasers
Don鈥檛 take your home off the market until you get proof that the buyer can follow through. This means a mortgage pre-approval letter or bank statement showing the buyer has the cash to close.

Don鈥檛 rely on mere pre-qualification. In most cases, pre-qualification does not involve underwriting, proof of income or even necessarily a credit report. You could lose a lot of time and money if your sale fails at the 11th hour.

The bottom line
There is money to be saved by selling your home yourself. In some cases, big money.

However, don鈥檛 be surprised if you save less than expected, and have to work a bit harder for it.

Show Me Today’s Rates (Oct 12th, 2018)