Definitions

For sale by owner

For sale by owner

For Sale By Owner, or FSBO is the process of marketing, buying and selling of real estate without the representation of a real estate broker.

Many sellers who choose to sell via FSBO do so to avoid paying a commission to a broker, typically 6% of the selling price of the property in many parts of the US. Commissions can range between 5% and 7% in different markets across the U.S. as well as in Canada.

The mechanism of bargaining

When homeowners decide to sell their home without a real estate agent, they enter the world of the FSBO sellers. If a seller markets a home as a FSBO, and a buyer who is not working with an agent wants to buy this home, the seller pays no commission because no real-estate agents are involved. If a buyer who is represented by an agent is interested in a FSBO home, that buyer's agent may request the owner to pay him or her a commission or finder's fee for bringing the buyer.

In many states, brokers have appropriate pre-printed forms in place for agents to pre-negotiate a "one time showing" with a negotiated commission rate. This ensures that agents can represent their clients' best interests and consider all available homes in the decision-making process.

In order to protect themselves, sellers typically arrange to have the necessary forms at hand or have them drawn up for them. Lawyers will normally draw up an agreement for a fixed fee often as part of legal representation for the purchaser. In parts of Canada (e.g. Ontario), office supply stores carry legal kits that can also be used. While these kits are relatively inexpensive, a poorly constructed purchase document could result in a transaction falling through or even in litigation.

Industry review

More and more owners selling their own property are using online marketing companies to advertise their properties. FSBO web sites are now a real part of the real estate market, as the Internet becomes vital in the home-selling process.

According to a NY Times article from December 2007, "Nationally...real estate companies are spending 26 percent more on online advertising this year, even as total real estate ad spending declined 3 percent, according to Borrell Associates, a research company."

The owner of an English site called ByTheOwner estimates his revenues at $2 million in 2007. According to the last report, 16,700 properties have been sold to date through the website with an average success rate of 64 per cent.

According to a press release by the National Association of Realtors (NAR) regarding their most current annual survey of real estate consumers, 2005 Profile of Home Buyers and Sellers :

  • 12% of 2006 US real estate transactions were FSBO.
  • 13% of 2005 US real estate transactions took place via FSBO (down from 14% in 2004).
  • The record percentage of 20% of US real estate transactions (since tracking started in 1981) took place in 1987.

This trend of declining FSBO transactions, as included in the same National Association of Realtors report, has been described as misleading by Steve Udelson, CEO of Owners.com. since NAR also reports that flat-fee MLS has grown to 10% of transactions, and flat-fee MLS sellers are in substance FSBO sellers. Unlike traditional real estate agent clients, flat-fee sellers are not committed to paying a commission and still advertise their homes by owner. Therefore, the true size of the FSBO market is closer to 22%; the sum of the "pure" FSBO sellers (12%) and the quasi-FSBO sellers.

The Canadian Real Estate Association says 75-80 percent of homes in Canada are sold through brokers each year; the remaining 150,000 homes are sold without brokers.

Internet services

Multiple Listing Service (MLS)

Main articles: Multiple Listing Service, Flat fee MLS

One service often provided by commercial FSBO websites is a connection to the publicly accessible portion of the Multiple Listing Service (MLS), which is the main source of information for Realtors.

If a broker lists a home in the local MLS, the broker offers a portion of the commission to any other broker who can bring them a buyer. The flat-fee MLS option allows the seller to cut out the listing broker's commission completely, thus reducing the seller's payment either completely or in half.

According to the statistics of ByTheOwner.com, consumers saved close to $237 million in commissions with this service.

Some services such as Craigslist.com allow sellers to list without a fee.

See also

References

Further reading

External links

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