Why Listing as ‘For Sale by Owner’ is a Risky Proposition

for sale by ownerPerhaps you are considering selling your home without the assistance of an agent or other real estate professional. This is known as a home being “For Sale by Owner” (FSBO). While such a plan may sound good in theory—no commission fees, etc.–the array of potential pitfalls makes it an extremely risky proposition for the real estate layman.

It’s actually extremely rare that a For Sale By Owner transaction is the best option. One of the few times it may actually work is if you’re selling a home to a family member or neighbor. Other than that, you’ll want to go with an experienced agent that’s an expert in your neighborhood.

Here are some of the reasons why:

For starters, the myriad of negotiations that are involved in the home-selling process can be problematic for the average home owner. While it may seem enticing to forgo the commission costs, in reality having a professional negotiator on your side can potentially add tens of thousands of dollars. Think of all the people you must negotiate with when selling a home—the buyer, buyer’s agent, home inspection company, appraiser, etc.–it can be an extremely tall order for the untrained.

One of the big issues when doing an FSBO is your home isn’t exposed to as many potential buyers. Recent studies have found 88% of house shoppers search online for a potential home. Any reputable agent will have an online marketing strategy and use Multiple Listing Service to promote your home and get it in front of as many eyes as possible. Chances are you don’t have this option on your own.

Next, doing an FSBO has become increasingly difficult in recent years because of the mountains of paperwork that is involved. This can be very risky. If you fail to disclose something that is legally required, even if it’s an innocent mistake, you can be sued and you’ll likely lose. This alone makes FSBO-ing a very risky undertaking, and is probably why the number of FSBO home has dropped from 19% to 9% during the last two decades.

Finally, and perhaps most importantly, studies have found that you actually make MORE money when using an agent, despite commission fees. One such study found that if a home sold by a home owner nets $175,000, it would have gotten $225,000 if sold by an agent. This is a big difference that more than makes up for any commission fees.

You can see that doing a For Sale By Owner transaction is a risky proposition and in vast majority of cases is not the way to go.