What is for sale by owner?

FSBO or For sale by owner is when the homeowner decides to sell their own home on the market without the use of an agent or brokerage.

Why do homeowners provide this?

Primary reasoning of FSBO is to save money by not giving commissions to a sales agent. 
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What are the benefit(s) of FSBO?

• Saves on commission being charged from the brokerages.
• There are cheaper methods/resources to sell your home.
• You have complete control over the sale.
• You can sell it to your friend or family without the hassle of another party being involved.
• Can easily inquire assistance with a 3rd party inspector just like the real estate agents.

And the downsides of FSBO?

• House pricing is not accurate, oftentimes FSBO listings are under sold.
• Cannot receive professional advice from the agent for any means.
• Because you are working alone, you have all the control over the paperwork, this means that all paperwork needed is handled by the owner (There is a lot!).
• Despite there being multiple resources for advertisement, FSBO listings take longer to sell and lack market exposure. 
• Legal documents required for a transaction to take place are difficult for the owner to handle, and the owner needs to be aware of all legal documents required for closure and mortgage discharges. 
• Home tours and showings have to be done by the owner, which requires the owner to be at home at all times. 
• Qualifying a buyer is often difficult, especially when the owner has no skill or knowledge for it. 
• FSBO listings often lack security and require the owner to safeguard the house and protect all visitors. 
• Pro-longed FSBO listings can become a  target for low ballers and bargain shoppers.
• FSBO owners are not knowledgeable on how a house is presented. 
• Agents will not go to FSBO listings as they do not appear on MLS listings and FSBO’s offer no benefit for their buyers. 

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Okay but I can solve a lot of the advertisement problems if I become a customer at a brokerage right? I wouldn't have to pay commissions and I will be able to get my listing at MLS.

This is true to some degree, yes your house will be on MLS and will have agents bringing their buyers to your house. That still won't help you with getting useful advice from an agent, you’d still have to do your own due diligence which requires time and work. You may not pay commissions to your selling agent but you would still have to compromise with the buyer that will try to bargain with you. Did I mention the paperwork problem is still on your hand? I didn't? Well it is, and so is the legal stuff (yikes).

Stats for nerds

Although monitor of FSBO data in Canada is limited, here’s our neighbour below (U.S) showing the fruits of FSBO. 

As of 2018, 8% of all real estate sales were by FSBO, the sell price of FSBO was $217,900 whereas the agents sold for $295,000. Difference of $77,000. (Listing agents would take 1-3% off selling price, 3% of 295,000 is $8,850, buying agent would take 2-5%. 5% of $295,000 is $14,750. $8,850 + $14,750= 23,600. Selling difference of $77,000 - the commissions of $23,600= $53,400 which the seller could have made with the agent as profit, and sell the house at a much quicker time without the hassle of paperwork and full time duty. 

Methods of FSBO sellers to market their homes:

Yard Sign: 25%

Friends, relatives, or neighbours: 22%

Open House: 11%

Social networking: 14%

MLS: 6%

Online classified ads: 5%

FSBO websites: 5%

Video: 2%

News paper: 1%

Direct Mail: 1%

No advertisement: 46%

Most difficult tasks for FSBO home sellers:

Getting the right selling price: 9%

Selling within planned length of time: 6%

Understanding and managing paperwork: 10%

Preparing the house for sale (decor, cleanliness, visual appeal etc.): 12%

Time to devote to selling: 5%

Source:  2020 National Association of REALTORS® Profile of Home Buyers and Sellers

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