How Does for Sale by Owner Work?

"For Sale By Owner," or FSBO, is a property that an owner sells himself rather than through a real estate agent. According to the National Association of Realtors, 9% of homes sold in 2013 were FSBO. Successfully selling your own home requires a combination of the right price, marketing plan and negotiating strategy.

Agent or FSBO?

The big attraction of selling your own home is that you avoid paying the agent's commission, which is typically up to 6% of the selling price. If you're on the fence about going with an agent or selling it yourself, the best time to choose FSBO is when the economy is booming and there are plenty of potential buyers, according to an article on CBS MarketWatch.

Choosing FSBO requires thinking ahead. Start doing the prep work necessary to sell your home two months before you plan to list it, suggests ForSaleByOwner.com, a website that lists FSBO homes. Prep work includes evaluating the condition of your home and property and making necessary repairs. Also, be prepared to work with the buyer's agent and pay her commission if you want to sell your house quickly. Otherwise, tell the buyer's agent you don't want to pay the full commission. In this case, you can either recommend that the buyer pay it or offer to split the commission with the buyer, suggests Owners.com, a FSBO resource and listing service.

Pricing

People who sell their homes on their own typically get about 98% of the asking price, says the National Association of Realtors. The key is taking the time to price your home right. Start with finding out how much similar homes sold for in your area. Obtain this information from real estate listing websites such as Zillow, Trulia and ForSaleByOwner.com. Add in the value of remodeling projects, such as upgrading a bathroom or kitchen. Use Remodeling Magazine's Cost Versus Value report to determine how much of a return you can expect to get. For instance, Remodeling Magazine's Cost Versus Value says you can recoup the national average of 67.8% of the value of a major kitchen remodel as of 2015.

Paperwork

Gather the paperwork necessary to share with potential buyers, including

  • a survey that indicates property boundaries
  • all loan documents
  • recent property tax and utility bills
  • certificate of homeowner's insurance
  • homeowner association agreement, if applicable
  • receipts and warranties for recent appliance purchases

You also need a Property Condition Disclosure Statement. Check with your State Department of Licensing Services or Real Estate Commission to find out what's required in your state.

Finally, you'll need a seller's contract that explains the terms of the sale between you and the buyer once you get an offer. Forms are available from sites such as ForSaleByOwner.com, or you can hire a real estate attorney to draw up a final contract.

Marketing

Get ready to market your home by taking attractive photos and creating a flyer that highlights your home's features. Place "For Sale" signs on the road leading to your home and in the front yard. Place an ad in the "Real Estate For Sale" section on Craiglist.org. List your home on FSBO websites such as ForSaleByOwner.com and HomesByOwners.com. For a fee, these websites market your property by adding a searchable listing to their sites. You can also sign up for a flat-fee multiple listing service to post your home on local Realtor.com and MLS listings.

Negotiating

When a buyer makes an offer, first request verification of his financial qualifications, says Perri Capell, senior correspondent for RealEstateJournal.com, in a column for The Wall Street Journal. Be prepared to offer a home warranty to counter any objections about the shape of the home as a way to ease the buyer's worries, suggests ForSaleByOwner.com. Share your research about comparable home sales in the area to help the buyer see how you arrived at the sales price.