What is the Truth Behind FSBO?

Welcome again to the second blog of this website. I’m so excited to share more with you. We’re entering a different segment in the real estate industry. We have information and resources available at our fingertips. Buyers are online, and sellers are online. What’s left? 

The connection or the matchmaking process. So, you can either hire an agent or sell yourself. Both are complex options. In this blog, I’ll focus on FSBO. 

How do I sell my house by owner while saving money? This question appears a lot in the real estate industry. I will try to provide a comprehensive answer to this question. We’ll cover details like: 

• How can I sell my home by myself? 
• Is selling your home by owner a good idea? 
• How easy is it to sell a house by owner? 
• Marketing tips to sell your house fast
• Pitfalls to avoid when selling home by owner

How Easy Is It to Sell My House by Owner? 

It’s as easy as convincing the buyer!

Please don’t get me wrong. Selling a home by owner is easier than you’re thinking. You just need to shift your perspective. Right now, you’re analyzing the situation like a seller: how do I sell my house fast? How can I present my house in better condition? How much will I get for my property? 

You need to think like a buyer. 

• How can I buy a house with poor credit? 
• How can I get pre-approved for my mortgage? 
• How can I find a home that doesn’t require too many repairs? 
• How can I find a suitable location? 
• How can I find a friendly seller who has taken care of the property? 

Asking these questions will put you in a better position. Now, you know what your potential buyer is thinking. You need to address those concerns to sell your house fast for the price you want. 

Sell My House by Owner: How Can I Save Money?

The whole point of trying FSBO is to save money. I have made a detailed comparison in this article. Here, you can find out how much money you can expect to save if you sell without an agent. Most people think that they will save 6% of the sales price. However, my calculations showed that the actual saving is around 2.5%. 

In this article, we’ll expand the discussion. We want to save more money. We want to make more money by selling our home in our local market. We’re not talking about overpricing a property. However, we want a fair/genuine price. You can receive a reasonable price in multiple ways. We’ll speak of cost-effective marketing and other strategies. 

Create a Website with a Homepage that Sells

A good start is creating a website that features a home page that sells your home. You must ensure that your home page has a clear call to action (CTA) that tells visitors exactly what they need to do next.

Build Your Real Estate Home Website

This might surprise you, but this strategy works. So let’s step back into the buyer’s shoes and see what your potential buyer is doing. 

Location always comes first. Your buyer is not searching for your property. The prospective owner is searching for a good location. Let’s say the buyer is searching for a 3-bed house in Florida (Jacksonville, 32244). That’s your house. 

Now, what will be the search term? I am talking about the keywords. Your buyer will search online using keywords like:

• Homes for sale in Jacksonville, 32244
• Houses for sale in Jacksonville, 32244
• Homes for sale in Jacksonville, FL

Now let me show you what you can do here.

You go to a domain name provider like Godaddy or some other platform. You reserve your domain name: homesforsalejacksonville32244.com. 

Yes, your domain name will have the entire keyword plus the zip code of your city/neighborhood. The cost of this domain name will be around $10 for a year. We won’t need it any longer after the sale. 

Next, you’ll use the same domain name provider to host your name. Then, you can use the free hosting plan to host your newly created website. There is no need to use a separate host. I don’t want you to spend more money on this website—just the $10 for your real estate domain name registration. 

Most domain name providers will give you a free 1-page website hosting plan. You can use that page to create your real estate property listing. Create your real estate listing. Talk all about your property. You’re not restricted by space or word count. Add your professional photos and click publish. 

Your real estate website is ready! I hope it doesn’t sound complex. If you have any questions, let me know, and I will try my best to answer. 

There is one thing left. We need to ask uncle Google to index this website so we can rank on the first page for our keyword. This website might help. 

You must log in to your Google account and fetch your website as Google. This link will take you to the right page, where you can ask Google to bring the website. Afterward, it will be shortly indexed and will start ranking in 2–3 days. Of course, that’s not the fastest way to advertise your home. However, it’s a unique way to rank on Google and precedes all online searches related to your zip code. 

Add Photos and Videos

If you’re selling a house, you’ll probably want to add some photos and videos to your site. These will help potential buyers visualize themselves living in your home.

Include a Map

A Google map is one of the easiest ways to show off your property’s location. It also makes it easier for people to find directions to your house.

What’s the next way to save money if you want to sell your home by owner? 

Work with Buyers With a Poor Credit Score

The approximate cost of selling a home in the US is around 20%. Here is a breakdown of the cost: 

• 5%–10% price negotiation
• 5% repairs
• 2% closing costs
• 6% realtor commissions

You can set a selling price, but you need room for negotiations. You can expect to reduce the listing price unless you’re in a hot seller’s market. Repairs are also part of the journey. You might have to make repairs before listing your home or before closing. The same goes for commissions and closing costs. Now, when you sell by owner, all these costs remain the same except the commissions. Your commission will be 3%. 

However, you can save a lot of money if you offer owner-financing. That’s not necessarily the easiest road, but it works. 

How does Owner Financing Work? 

Owner financing deals are for individuals with a low credit score. Life happens; sometimes, unfortunate circumstances lead to a low credit score. Now banks won’t lend you money if your credit score is below 600. In the ideal scenario, your perfect score should be 800. Now, how will you buy a house without a mortgage? 

You will search for owner-financed deals. You’ll find a seller who is willing to work with you. However, there won’t be price reductions because the seller is accepting a risk. 

Here is the structure of an owner-financed deal: 

• Down payment: 15%-20%
• Interest Rate: Fixed
• Repayment Term: 5 Years

Suppose your home’s value is $200,000. The buyer is willing to make a down payment of 15%. That’s $30k. So, you’ll lend $170k at a fixed-interest rate of 8%. The buyer will make monthly mortgage payments, but a balloon payment will be due in the next five years. During that time, the buyer must improve their credit score to qualify for a traditional mortgage. 

The sale happens through a “deed transfer.” You will retain the title of the property. In the event of non-payment, you can foreclose the property. 

You must meet certain conditions if you want to offer owner financing: 

• Your home needs to be clear & free. Most mortgage companies will object to owner financing. 
• You need to be familiar with local foreclosure laws and have an attorney review the documents. 
• You must have time because you won’t recover your investment until the next five years. However, you’ll be earning an interest rate over the years. 
• There can be tax implications. A slight chance exists that the buyer might damage the property. 

You can also try the “rent-to-own” strategy. Rent-to-own is a more popular option than owner financing. However, the terms are similar.

What are the pros of owner financing? We’re discussing owner financing to see how much we can save if we sell by owner. 

So if you sell your home by owner and offer owner financing: 

• You don’t have to lower the price of your home. Instead, you’re offering a unique opportunity to buyers with a low credit score. 
• You don’t have to pay any commissions. The deal is between you and the buyer. 
• You might (should) have to hire an attorney for proper legal documentation. 
• You earn an interest rate. 
• You don’t have to make expensive repairs. In many cases, you can sell your home as-is. 

Now, let’s count the savings. First, you don’t have to negotiate the price. (5%–10% savings compared to traditional sales). Second, you don’t pay a commission. (6% saving). Third, you can avoid repairs (almost 5%). That’s a 15%–20% savings plus the interest rate. Given the amount, owner financing might be worth the risk. 

How to Pre-Qualify Buyers for Your Sale? 

You’re going to sell your home without a realtor. So we need to screen potential buyers. It doesn’t matter if you’re using owner-financing or not. 

Here is how you go about it:

You need to invite people to your open house event. Let’s say a buyer calls you. You talk about the number of bedrooms, location, and some features. Don’t reveal more than that. Invite them to the open house and build curiosity. You need to take the lead here, and the easiest way is to ask questions. 

• Ask if the buyer needs help with financing. (Very important if you’re offering owner-financing.)
• Ask when you need to move out
• Where do they live, and what’s their current mortgage payment?
• Ask about the downpayment
• Maybe tell that you’re concerned about the credit score. But, you want to work with good people. 

You want to sell your house fast. You know what timeline works for you. When you ask about the moving date, you’ll get an idea of the buyer’s timeline.

Asking about the current mortgage payment, property tax, and downpayment gives you an idea of the financial capabilities. Can the buyer afford your house? You need a sounding yes for this question. If not, keep searching for more buyers. 

Find Out What’s Selling In Your Area

Which homes are currently listed for sale in your neighborhood? It will help you determine whether your home is worth listing at its current price or whether you should lower the asking price.

How Much is My House Worth? 

Let’s do a CMA (Competitive Market Analysis). Here is what you’ll need: 

• Recent sales data in your area/neighborhood
• Comparable houses (similar number of bedrooms, covered area, lot size, and construction times). Take note if these homes were updated within the last 2 years. 
• Market trends: Are local sales going up or down? 
• Special features of your property

You can find recent sales information on websites like Zillow. Please ignore homes that are currently listed for sale. Here are some ways to understand your home’s value. 

Home Appraisal: 

A home appraisal costs $300–$600. You can hire a professional appraiser to look at your property and give you an estimated price. You can also post this appraisal price so that people know you’re selling for a reasonable price. 

Investor Cash Offer: 

Want to know how much your home is worth? Get a cash offer from a “we buy houses” company in your area. You might have seen “sell your house fast” signboards in your neighborhood. 

I am not asking you to work with an investor. Instead, we’ll do some calculations with the cash offer to understand how much your home is worth. You might want to check this article: should I sell my house to an investor? 

Let’s say you receive a cash offer worth $140,000 from a real estate investor in your area. Real estate investors don’t offer more than 70% of the final sales price. So, in that case, you can sell your home for $185k–$200k after making repairs and updates.

Repairs, Home Staging, and Professional Photos

I will not vote for a DIY approach here. However, if you want to sell your house fast, you need an adequately updated & cleaned property. In addition, you need the best photos for online marketing. 

Choose a professional marketing company that can help with this task. It will cost you a few hundred dollars, but it will give a professional touch to your listing. 

Craigslist & FSBO Websites:

You want to sell your home by owner, but we can’t ignore the popularity of MLS. Therefore, we will need to list our property on the local MLS. Fortunately, FSBO websites give you access to this platform. 

You have the photos and the website. Now you can publish your listing. 

Another option is to post your listing on Craigslist. (Fair warning: it’s a crowded platform. So you will have to pre-qualify buyers.) 

Sell Your Home Without a Realtor 

We’re reaching the end of this post, but I want to share two more tips with you: 

First of all, you can choose to hire an agent for a discounted price if you need help at any stage. You can also hire an attorney to review the documents and help with negotiations. 

Second, you can offer a competitive buyer’s agent commission. Now that seems counterintuitive. Most people will avoid paying a higher commission. However, that’s an important marketing strategy. You don’t want your property to sit on the market. You want to sell your house fast for a good price. Now, let’s answer the question: 

Why should a buyer’s agent work with you? Because: 

1. They are searching for a suitable property for their client. 
2. They want to earn a commission. 

Let’s give them an incentive to sell your home. Even a 0.1% increase in buyer’s agent commission will make your post stand out. 

Should You List a Damaged Home On the MLS or Sell by Owner?

Distressed properties can benefit from FSBO. In fact, you have better chances of making a sale if you avoid listing on the MLS.

I had a client who owned a single-family home that had suffered significant fire damage. They were hesitant to list it on MLS due to the high costs associated with repairing and staging the property for showings. After discussing their options, they decided to sell it as an FSBO instead. This allowed them to market the property as a “fixer-upper” with lots of potential, rather than focusing on its current damaged state.

Adam New, Principal Owner, The Cash Offer Company

Do you own a damaged property? Do an honest review and make a note of all the repairs required. How much will it cost to renovate the property? Take an estimate for both time and money. The analysis will help you connect with the right buyer.

As a construction professional, I recommend FSBO for damaged properties. You have more control, while buyers get a lower price that accounts for needed repairs.

I once helped a client do an FSBO for a property needing foundation repairs. We were upfront in disclosing issues to all interested parties. It took time but ultimately sold for a fair price to a buyer planning to do repairs. FSBO isn’t for everyone, but for damaged or distressed homes, it can work if you go in with the right mindset.
Jimmy Hertilien, Senior Project Manager, Herts Roofing & Construction

FSBO is not just limited to residential properties. Basically, any type of real estate can qualify for a FSBO transaction. Think about commercial space, warehouses, and multifamily properties. You have to practice patience because it can take a while before the right buyer shows up.

I hope this post was helpful. Any questions or comments? Please let me know, and I will be happy to help you. Selling your home by owner is a learning journey. You are learning about market conditions, prospective buyers, negotiations, paperwork, and marketing. You get to sell your home yourself, and you have more control over the process. Stay optimistic, maintain a professional tone and communicate with buyers. Some buyers (and their agents) are hesitant about working with homeowners. You can eliminate their worries by welcoming their agent and maintaining top communication. And please don’t worry: A few weeks down the road, you’ll look at this journey with surprise. You’ll sell your home successfully and will also learn from this experience. 

FSBO: Frequently Asked Questions

How do I Get the Best Price for My FSBO Property?

Stay persistent. Competition is fierce. While you can go without representation, you can’t go without extensive marketing. Be patient if you want to get the best deal for your situation. That’s the first point. Invest in a marketing package and consider paying a standard commission to the buyer’s agent so you actually attract offers.

Will I Attract a Lower Price for My FSBO Property?

FSBO sellers typically net 3-7% less than working with an agent. But the problem is not with FSBO. The issue lies in the strategy. Without professional representation, sellers often lack the expertise and leverage to maximize their sale price.

For example, a few years ago I helped a client sell their office building for $8.5M. They had tried selling FSBO for $8M but received no serious offers after 6 months. By hiring me, we properly positioned and marketed the property, attracting multiple offers and an additional $500,000.

Buyers agents typically charge 3-4% in FSBO deals to represent their clients’ interests. While FSBO can work for highly motivated or experienced sellers, most leave money on the table. My advice is to consult an agent to determine if FSBO makes financial sense based on your specific property and local market conditions.
Joe Stance, Owner, Stance Commercial Real Estate

Can I Sell My FSBO Property for a High Price?

Yes, you can. Here I will give you a real life example from an experienced investor.

The outcome in a FSBO transaction varies. The answer is not as black and white as one would think. In some cases, an experienced agent can help you command a higher price. I have seen FSBO properties sell for the same or even higher prices than agent-listed properties in certain neighborhoods or markets where there is high demand.

Keith Sant, Founder & CEO, Sell Mobile Home Park

Why FSBO Properties Sell for a Discounted Price?

FSBOs are typically either

• Extremely motivated sellers who get hit with some low offers and end up taking one out of desperation.
• Or they price their homes for significantly over market value until they eventually become very motivated and sell for much less than market value (irrationality sinks in). 

They often try to save on commissions rather than understanding the true value of their home and achieving that as a sales price. 

Many people don’t give any sort of buyer’s agent commission which reduces their potential buyer pool. Those that are informed about the market and about the incentives of commissions for buyer’s agents, will typically provide a full buyer’s agent commission.

Sebastian Jania, Real Estate Expert, Alberta Property Buyers

That’s it friends. Please let me know if you have any questions about selling your home by owner.