Should I go FSBO?

If you’re like most of us, you probably already have a rough idea how much your home is worth. You’ve browsed ads for similar homes and peeked at the fliers on some nearby For Sale signs to gauge the old homestead’s estimated market value.

Now, you’re ready to sell and thinking about what you’ll do with the money. Maybe you’re planning to put it towards the kids’ college fund or a condo overlooking the ocean. Or maybe you’ll be buying a new home while yours is for sale, in which case, any proceeds are already more or less spent.

Regardless of the reason for selling, there’s one more thing you may want to think about: Is there any way to make sure that there’s more money rather than less?

Absolutely, which is what FSBOs (pronounced "fizz-bos") are all about. Short for For Sale By Owner, it simply means that you handle the sale yourself instead of hiring an agent, and either keep the money that would otherwise pay an agent’s commission, or offer a lower price to entice a buyer.

It’s probably not small change, either. Consider: With a standard commission of, say, 6 percent, that’s $6,000 for every $100,000 of home value, which can add up in a hurry. An extra $12,000–$18,000 sounds pretty good, doesn’t it?

Good? Yes. Easy? Not really. The fact is, the FSBO process can be time-consuming, stress-inducing, and mind-numbingly confusing — and there are no guarantees it’ll pay off in the long run. And the sales process is not exactly free; it may be called "by owner," but the reality is that the homeowner really ends up acting more like a general contractor: He has to hire a team of people, including a real estate attorney, title insurance company, etc., and manage them all. That said, though, if you’re up for the challenge, selling your home yourself can be exciting, empowering, and very, very lucrative.

The Four-Point Plan

Obviously, you’ll need to do the work that agents ordinarily do. At the very least, your sales plan should cover four main bases, each of which comes with its own set of challenges.

Pricing

Setting an appropriate price is crucial — too high and potential buyers won’t even bother looking; too low and you leave money on the table. The trick is to be objective and consider how your home compares to the rest of the market — not how it looks in your mind’s eye. Look around your house and around the neighborhood and ask yourself:

Does my house have the features and amenities that buyers are looking for? If not, what will it take to bring it up to snuff?
How much are comparable homes in the neighborhood selling for? You can get a good sense via the Internet, local papers, and nearby For Sale signs.
Are prices rising or falling? In a softening market, for example, it may be worth setting a lower price in order to come in under the competition.
What do the experts think? Hire an appraiser, and ask a real estate agent for a Comparative Market Analysis (CMA) .

The fact is, given the emotional attachment most of us invest in our homes, it’s all too easy to overprice when selling. Or, to put it another way, you won’t be selling the memories you have of living in the house, so you shouldn’t let them be a factor in the price.

Preparation

It should be obvious: If your house is rundown, in need of repair, or just plain messy, buyers won’t find it appealing. Before you even consider showing people your home:

Make any necessary repairs. Your buyer’s inspector will almost certainly find any flaws, so you might as well get them fixed beforehand.
Clean the place up. Clutter makes people uncomfortable. Uncomfortable people go elsewhere.
Pack it up. It’s weird, but true: The emptier the room, the bigger it looks, so consider putting some of your furniture in storage.
Break out the brushes. When it comes to the cost vs. benefit ratio of various home improvements, nothing beats a fresh coat of paint.

If it sounds like a lot of work, well, that’s because it probably is. Simply put, your house needs to look as good or better than others on the market, and as a FSBO seller, you won’t have an agent working on your behalf. As the saying goes, you don’t get a second chance to make a first impression.

Promotion

It’s called marketing, and it’s all about getting the word out that your house is for sale. Because they’re not tied into the network of real estate agents, FSBO sellers typically have to work even harder to attract potential buyers. A comprehensive marketing plan is crucial and should include some or all of the following:

Signage: A For Sale sign for sure, but consider adding a box with fliers that highlight your home’s features and amenities. Good color photos are well worth the cost of printing.
Advertising: Newspaper ads, local real estate magazines, even the bulletin board at the local grocery store can bring in buyers. Always include the price, square footage, and number of bedrooms and bathrooms to eliminate buyers who really want something else.
Open houses: Truth be told, open houses rarely result in a sale — most agents use them to meet potential clients who they can later show other houses to — but you may want to consider holding one. Food, beverages, and staging can all help put buyers in the right frame of mind.
Other resources: Some FSBO sellers design their own Web sites to get the word out; others do a lot of pre-marketing to family, friends, and neighbors. At the same time, there are an increasing number of companies out there that will provide everything from yard signs to MLS listings — for a fee, of course.

That last one, by the way, raises an important point. While you can now buy an MLS listing for as little as several hundred dollars, you’ll still have to pay a commission to any buyer’s agent who finds your home via the MLS. (The higher the commission you offer — 2.5 to 3 percent is typical — the more likely agents will show your home.) Of course, that cash comes out of whatever you hoped to save by going the FSBO route.

Paperwork

With a valid offer on the table, many FSBO sellers feel they can take a deep breath and relax. But there’s still a lot of work to be done before closing, much of which entails managing the ensuing paper trail. Among the issues you may need to keep track of:

Counter-offers and contingencies: Are there repairs needed? If so, who will perform them — and who is going to pay for them? Is the offer contingent on the buyer selling their home or other issue beyond your control, and how will you handle it?
Disclosures : Most states require sellers to disclose whatever they know about their home, including any flaws or hazards. FSBO sellers need to make sure they’re adequately protected from liability issues and possible lawsuits.
Transferring title: You’ll need to hire a title company to make sure the i’s are dotted and the t’s are crossed and that the process moves forward in a timely manner. Having a real estate attorney go over all paperwork is also a good idea.

Clearly, going the FSBO route is not for the faint of heart, but it can be done. And with so many resources now available, you can decide just how much you want to do yourself and how much you’re willing to pay others to do. Either way, the potential savings can be substantial, which brings us back to the original question, but with a twist.

For FSBO sellers, it isn’t, "What are you going to do with the money?," but rather, "What are you willing to do for the money?”

Are You Type F?

Do you have what it takes to go FSBO? Even with all the assistance available, there’s a lot of work involved, and you’ll need to factor in the time involved in each step of the process. Even more important, perhaps, you need to consider your personality and ask if you’re up for the task. Consider:

How will you feel about having strangers troop through your house at all hours of the day?
How flexible are you going to be about late-night phone calls and last-minute requests?
How comfortable are you with face-to-face negotiations?
How proactive are you going to be about ensuring the deal stays on track all the way through closing?
How do you feel about managing the players to usher this through to closing.

There’s no right answer, of course, but the more honestly you approach the questions, the more likely you’ll make the right decision. Some home sellers prefer to leave the whole process to the pros; others go FSBO but lose heart and eventually hire an agent. And some discover that they actually enjoy the process and feel the money they save is well worth the time and effort they’ve invested.

Related links: How to Approach a FSBO Seller; How to Pre-Market a Home