7 Reasons Why FSBOs (For-Sale-by-Owner) Don't Actually Work

For-Sale-by-Owner, more commonly known as FSBO (pronounced “fizbo”), is used to describe a homeowner who is selling their property without the help or representation of a real estate agent. This kind of transaction is commonly seen in the seller's market. The most common reason why homeowners attempt to sell on their own is that they want to save money or maximize their profit by not having to pay for real estate agent commission.

However, in the NAR 2017 Profile of Home Buyers and Sellers, FSBOs remain at an all-time low of 8%. Home sellers continue to work with real estate agents to sell their homes, as statistics remain at historical highs of 89 percent.

There are many reasons why FSBOs fail in real estate, especially if a seller doesn’t know how to price his or her home correctly, or if property inquiries were handled inefficiently. Here are the top reasons why we think FSBOs don’t actually work, and why it is best to hire a real estate agent who can help with the selling process.

1. They fail to properly screen potential buyers

One of the biggest reasons why FSBOs don't actually work is because most homeowners don’t know how to properly screen potential buyers. Many sellers don’t know the right questions to ask to ensure only qualified buyers are walking through their home, which could save them from wasting countless hours and effort. The first thing they should know is whether the potential buyer is pre-approved, which can prove their capability to purchase the home.

Also, if you decide to FSBO, there are other people you must be prepared to negotiate with, not only the potential buyers who want the best deal as possible. Some of those people include the buyer’s agent, the buyer’s attorney (if needed, in some states), the home inspection companies which work for the buyer, the appraiser, and sometimes even your bank, in case of a short sale.

With the help of a realtor: Potential buyers can be properly screened and accommodated. An experienced real estate agent will recommend the buyer to talk with a licensed mortgage consultant to know their capacity before the buyer insists on viewing the home. He/She can also negotiate on behalf of you and will act as a messenger for both sides so they can properly communicate their concerns and preferences about the property.

2. They aren't always available to handle property inquiries

If you decide to FSBO but have a full-time job, who will handle the incoming property inquiries throughout the working day? Oftentimes, the homeowner doesn’t always have the time and availability to handle property inquiries and showing requests.

Homebuyers and buyer agents mostly want a quick response to their inquiries, so it’s possible that they will proceed to the next potential property if their concerns were not accommodated immediately.

With the help of a realtor: The buyer's inquiries on the listings can be handled appropriately. Realtors can prioritize those inquiries and can coordinate and schedule the showing requests to accommodate all potential buyers.

Furthermore, buyers can also be quite pressured when the seller is around, as they couldn’t speak openly about the property without worrying. Real estate agents will let buyers have space so they can view the house on their own. They can also share some insights and stories about the neighborhood while showing the house, which could greatly help buyers decide.

3. The home may be priced incorrectly

It's common for FSBOs to price their home too high, which could decrease the chances of the home getting sold. This is one of the biggest reasons why FSBOs fail in the market. Most sellers only use a free home valuation tool to set a price for their property, when actual market knowledge is needed in pricing a home for sale.

Likewise, FSBOs generally sell for less than the selling price of other homes. FSBO homes were sold at a median of $190,000 last year, and was significantly lower than the $250,000 median of homes assisted by agents. There’s a big $60,000 difference, so to speak!

With the help of a realtor: The correct listing price of the home can be determined. Real estate agents do a Comparative Market Analysis (CMA) to provide an accurate home valuation. They will know how to price your home right so as not to turn off potential buyers or leave money on the table.

4. They have limited marketing

FSBO sellers can't post their homes on the Multiple Listing Service (MLS), which is the number one source for sellers to list their home and a database where both buyers and sellers can view thousands of listings. Certainly, some websites allow sellers to pay to market their properties, but those websites don’t get as much traffic as the MLS. Sellers may also place an ad in their local newspaper, but it may even cost them more without attracting the necessary audience. Another typical FSBO method of selling a home is putting up a yard sign, which on its own is very limited.

With the help of a realtor: The home can be listed on the MLS, as only licensed real estate brokers and agents can list homes on the MLS online. And unlike FSBOs, they have the tools and the necessary expertise to provide tons of market exposure to a home, whether it's online or in their local area. Most realtors have a comprehensive marketing plan and an internet strategy to promote the sale of your home. They can also promote your house to fellow agents, who can also share it with their clients.

5. Homes take longer to sell/homes stay on the market for longer

FSBOs take longer to sell in the market than most agent-assisted homes unless the seller already knows someone who wants to purchase the home. In the NAR report, at least 58% of FSBO homes were sold in less than two weeks — more quickly than homes listed with an agent — often because these homes are sold to someone the seller knows. Most of the time, FSBOs were unable to sell because they can't get the selling price right. And when a home stays on the market for a long time, it’s more likely that buyers will assume there’s something wrong with the house, the neighborhood or location, or its pricing.

With the help of a realtor: The home can be listed on the market with the correct price and can have proper exposure for it to be sold within the average of three weeks. It goes without saying that the home can even be marketed to potential buyers that the seller doesn't personally know.

6. They don't have a full understanding of a real estate contract

Real estate contracts can be confusing and extremely difficult. Most sellers don’t have a strong understanding of a real estate contract and don’t know how to negotiate specific parts of the contract with potential buyers.

With the help of a realtor: The real estate contract can be handled properly and professionally. A realtor can significantly negotiate specific parts of the contract and could address any possibilities or contingencies included.

7. Can't handle the daunting and tricky task involving paperwork

The paperwork involved in buying and selling a home became more daunting and tricky as industry disclosures and regulations have become mandatory. Understanding and performing paperwork is one of the most difficult tasks for many FSBOs. The closing process itself can involve lots of pages of complicated paperwork, including the contract itself. Some states also require addenda that are designed to cover specific conditions regarding the property. A seller who doesn’t know the required paperwork in their local area and state can also be open to lawsuits.

With the help of a realtor: The necessary disclosures, paperwork and documentation will be handled properly. Letting the agent handle the complicated paperwork can also help alleviate the legal and financing stress for both the seller and the buyer. The agent can also provide much-needed advice and support throughout the process.

Bottom Line
Before you decide to put up a “For Sale” sign in front of your yard and take on the challenges of selling your house on your own, take the time to talk with a real estate professional in your local area and see how they can help you.