What Does For Sale By Owner (FSBO) Mean? A Guide For Sellers And Buyers

Molly Grace

10 - Minute Read

UPDATED: Apr 14, 2023

Share:

A house that’s “for sale by owner” is listed on the market without help from a real estate professional, with the sellers performing the standard duties of an agent themselves.

If you’re a faithful DIYer, there’s nothing more satisfying than completing a job on your own and saving the money it would have cost to hire a professional.

It’s this feeling of satisfaction that drives many of these same people to sell their home without assistance, but how exactly does this work? Let’s take an in-depth look at the for sale by owner, or FSBO (pronounced “fiz-bo”), process for home sellers and prospective buyers.

Table Of Contents

For Sale By Owner (FSBO) Meaning

As noted, the acronym FSBO in real estate means “for sale by owner,” which happens when a homeowner sells their property without the help of a real estate agent. This process slightly differs from the traditional method of selling a home through a dedicated listing agent.

One of the most common reasons a seller chooses the FSBO approach is to try to maximize their profit when they sell their home. Real estate agents are paid commission fees on the homes they sell, so, you as the seller get to keep that money for yourself if you pass on getting a listing agent, otherwise known as a seller’s agent.

However, hiring a professional real estate agent comes with its share of benefits, and going without one can actually end up costing you more in the long run. We’ll discuss this in greater detail later on.

Another reason a seller may choose FSBO is that they already know their home buyer. So, if this is the case, they don’t need a seller’s agent to help them market the property.

Pros Of Selling FSBO

What are the benefits of selling your house on your own? Let’s explore some of the pros of selling FSBO.

Savings On An Agent’s Commission

When a home sale is completed, the seller is typically required to pay the commission of their listing agent – as already mentioned – along with that of the buyer’s agent. The total commission is often around 6% of the sale price, 3% of which goes to the buyer’s agent, with the listing agent pocketing the other 3%.

This commission comes out of the seller’s proceeds from the sale. So, if you sell your home for $250,000, the agents involved in the process will get a combined total of $15,000.

This commission is why many sellers opt for the FSBO method rather than using a listing agent. Though you’ll likely still have to pay the commission of the buyer’s agent, you’ll reduce the amount of money you have to part with in commission fees by half.

More Control Over The Selling Process

If you aren’t relying on a real estate professional, you’ll have more control over the decision-making throughout the home sale process. For example, you’ll have the freedom to list and advertise your property as you see fit, and you can set the asking price and accept the offer you want without facing any pressure from anyone.

You’ll have to juggle a few more tasks than you would with a real estate agent – but if you want to take a more hands-on approach, FSBO might be the best option for your home sale.

Cons Of Selling FSBO

Now, let’s consider some of the downsides to selling your house FSBO.

A Likely Lower Sale Price

Consider this: Though making more money is often the goal of FSBO sellers, they often net less than those who work with an agent. According to the National Association of REALTORS®, the “typical” FSBO home sold for $225,000 in 2021, while the “typical” agent-assisted home sold for $330,000. So, even after the agent-assisted seller paid a 6% commission, they’d still net $310,200 on average.

Extra Work

While it can be nice to have control over the entire home sale process, more control means more work. Unlike most homeowners looking at the FSBO option, real estate agents receive training on how to effectively market and sell homes. They know how to price homes to sell, how to stage a home for showings, how to vet potential buyers, how to negotiate contracts and how to navigate your state’s laws concerning real estate transactions.

Because it’s their job, real estate agents can give a home sale they’re responsible for much more attention than the average FSBO seller, who likely has a full-time job and other responsibilities taking up most of their time. Professional real estate agents prioritize answering calls or emails from potential buyers and coordinating showings or open houses.

Some help in these areas can make a big difference when attempting to sell your home for its full market value.

How To ‘For Sale By Owner’ Your Home

If you think you have what it takes to successfully sell your home independent of a real estate agent, you’ll benefit from learning how the process will typically look. Keep in mind, however, that the requirements for selling a home vary a bit by location. You may have to take additional steps not mentioned here, depending on the state you live in.

1. Set The Asking Price

One of the first and most vital steps you’ll need to take when listing as FSBO is deciding your home’s selling price. The selling price, or asking price, should be based on the average selling price for similar homes in the area.

When a professional agent prices a home, they usually create a report called a comparative market analysis (CMA), which sheds light on the sale price of recently sold homes similar to yours. These similar homes are known as real estate comparables, or comps, and they’re the key to correctly pricing your home to sell.

When pricing your home, take time to do a lot of research and find as many real estate comps as you can. This will provide a full picture of how much homes like yours are selling for. Only look at houses that have recently sold, because a home’s listing price can differ quite a bit from what it ends up actually selling for.

Once you’ve found some solid comps, you should have a better idea of your home’s market value. If you have any additional features – like an upgraded kitchen or brand new windows – that make your home stand out from other nearby properties, you can adjust your price to reflect this. Just be careful about overestimating how much value your upgrades add.

To get an idea of how much your home is worth, check out the Rocket Homes℠ Home Value Estimator.

2. Market And Advertise The Property Listing

Thanks to the internet, attracting prospective buyers to your FSBO home is easier than ever, with endless online resources for sellers looking to quickly market and sell their homes.

When you sell FSBO, it’s crucial to get the word out about your home. Since most buyers are conducting at least part of their home searches online, it’s important to list your home on all the websites that shoppers are searching on and make your listing as attractive as possible. This means taking great photos of the house and potentially giving video tours of your property.

3. Host Tours And Appointments

When you choose not to work with a real estate agent or REALTOR®, you’ll be the one responsible for making sure buyers get to see your home in person.

Above all, you should keep your phone on you and make yourself available to answer calls from potential buyers. The greater the number of interested buyers you can give showings to, the more likely you’ll be to find a buyer who wants to make an offer.

You should also consider creating fliers to hand out to anyone who tours your home. Include basic information about the house and some photos highlighting its best features.

Always take proper safety precautions when showing your home, too. Be careful about what information you share and put away personal belongings when people are visiting. Only allow buyers accompanied by a licensed real estate agent to tour your home.

As for safety in the post-pandemic world, you might also consider wearing a mask and having masks available for prospective buyers when they come to view your home so everyone feels more comfortable.

4. Negotiate And Finalize The Offer

Once a buyer has submitted an offer, you can reject it, negotiate it or accept it as written.

You should only consider bids submitted with a mortgage preapproval letter or proof of sufficient funds to purchase in cash. This addition shows that the buyers are serious and able to complete the sale.

If the offer is lower than expected, you can always negotiate for a higher price. Be careful not to get too emotional about your home’s sale price, though. It’s natural to feel a little defensive if a buyer tries to lowball you, but it’s wise to remain as objective and realistic as possible.

At this stage, it might also be a good idea to hire a real estate attorney. Selling a home is a legally regulated process that involves a lot of paperwork and certain disclosures. Having a lawyer who can ensure you’re following your state’s laws and that your interests are represented in the contract can potentially save you a lot of money and headaches down the road.

Take the first step towards buying a house.

Get approved with Rocket Mortgage® to see what you qualify for.
NMLS #3030
Rocket Mortgage-Stacked-Logo

How To Buy A House For Sale By Owner

Buying a house that’s for sale by owner isn’t much different from purchasing through a seller’s agent, but there are some differences to keep in mind.

You and your real estate agent will be communicating directly with the homeowner, which can speed up the negotiation process. You’ll also likely receive more information about the history of the house since the person you’re buying from has been personally residing in it.

This can be especially helpful for first-time home buyers who may have numerous questions about homeownership.

While the differences between a home that’s for sale by owner versus a home with a listing agent can be beneficial, purchasing an FSBO home also has drawbacks. For example, FSBO homes are sometimes listed at a higher price than expected. It can also be harder to convince the seller to make repairs to their home. Most FSBO sellers are trying to keep their costs down, so many may refuse to spend additional money on home renovations.

FSBO Home Buying Process

To give you a better idea of the FSBO buying process, here are the main steps you can expect to follow:

  1. Get an initial approval, otherwise known as a preapproval, from your mortgage lender. Sellers will want to know you have the means to purchase their home, and the best way to prove it is with a Verified Approval Letter (VAL).
  2. Find a knowledgeable buyer’s agent. Even though the seller is forgoing the help of a real estate professional, you as the buyer shouldn’t necessarily do the same. You might want to look for a real estate agent who has experience with FSBO homes.
  3. Search for the perfect home. Most FSBO houses won’t be listed on the multiple listing service (MLS), so you may need to look for homes on a FSBO-dedicated platform or try websites like Craigslist.
  4. Submit a home offer. Once you find a home, work with your agent to craft an attractive bid. Consider what contingencies you want to include or if you want to make an earnest money deposit.
  5. Prepare for closing. After your offer is accepted, you’ll need to prepare to pay your down payment and closing costs.

For Sale By Owner FAQs

Do you still have questions about listing your property as for sale by owner or buying a FSBO property? Let’s walk through some frequently asked questions.

How does for sale by owner work?

FSBO is the process of selling your house without the assistance of a real estate agent. This involves establishing the asking price, marketing your property listing and hosting open houses and home tours. It also means you decide which offer to accept and finalize, with no outside pressure to go in a certain direction.

How do I negotiate buying a house FSBO?

The seller of a FSBO property might come back to you, the home buyer, with a counteroffer or try to negotiate the sale price. If this happens, you can try to get your offer accepted in a few ways.

One strategy is to research the FSBO process and try to understand how the seller came up with the asking price. Because the seller doesn’t have a real estate agent, they may not have gotten a comparative market analysis to inform the property’s list price.

Take a look at real estate comps and do some research into current market conditions when coming up with a counteroffer on the home.

Of course, you can always rely on your real estate agent during home price negotiations. It’s their job to help you get the best deal possible on a house. If a FSBO seller isn’t budging on an asking price, it might be in your best interest to walk away from the home sale and pursue other opportunities. 

Who holds earnest money in a FSBO transaction?

If you’re the buyer in a FSBO home sale, you may be instructed to give the earnest money deposit to a third party who’s helping facilitate the transaction. This may be your real estate agent, a real estate attorney or a title company.

Who prepares the contract in a FSBO home sale?

If you’re the home seller, you may have to rely on the expertise of the buyer’s agent to draw up the real estate purchase agreement. Or, you might be interested in hiring a real estate attorney to prepare the contract and iron out the details.

Is it worth it to sell my house FSBO?

Selling a house FSBO can require a lot of time and energy, so whether it’s worth it will depend on your particular situation. Remember, you’re responsible for the selling process from start to finish.

You might be interested in selling FSBO if you want to be more involved in making key decisions like how to advertise your property listing or how to set the asking price. If you’re trying to reduce the amount you pay in home sale commissions, you may also consider taking the FSBO route. Although you’ll still likely be responsible for fees due the buyer’s real estate agent, you won’t be responsible for paying commission fees to a listing agent.

However, you won’t necessarily make more money from selling your house FSBO versus the traditional way with a real estate professional. A real estate agent, who might happen to also be a REALTOR®, will have expertise in the field and have your best interests in mind when guiding you through the home selling process.

If you’re looking for support throughout the process, a FSBO home sale might not be for you.

The Bottom Line

Selling your house on your own can be challenging. Though it gives you control of every aspect of the marketing and selling of your home, it also comes with a lot of responsibilities. And, if you’re not careful, you could end up selling your home for less than it’s worth.

FSBO home buying can seem just as intimidating, but it doesn’t have to be. Make sure to first consider all pros and cons, and ensure that you’re able to put in the effort needed to successfully find and purchase the perfect property for you.

Are you ready to put your house on the market? Get started today and learn the total costs of selling a house.  

Headshot of Mary Grace Schmid, staff writer for Rocket Mortgage.

Molly Grace

Molly Grace is a staff writer focusing on mortgages, personal finance and homeownership. She has a B.A. in journalism from Indiana University. You can follow her on Twitter @themollygrace.