Sometimes a seller who wants to save money lists a house as “for sale by owner,” or FSBO. That means the owner decided to sell the home without the assistance of a real estate agent in order to avoid paying a commission. If you see a house listed as FSBO, it may be worth considering, but you should be aware that the list price may be higher than the home’s market value.
An FSBO Seller Can’t Benefit from an Agent’s Expertise
One of a real estate agent’s most important jobs is to set a reasonable asking price for a house. The price should be based on the amounts that comparable properties in the area have sold for recently. That can help attract the attention of potential buyers.
Homeowners who list their own homes don’t have the assistance of a real estate agent and don’t have access to the same detailed information that agents use to set prices. Sellers who research recent sale prices online may find information that is inaccurate, or they may only find estimates.
A seller may set a list price based on the amount that the seller paid to buy the house. If the real estate market has gone down since then, that price may be completely out of line with the house’s current market value.
The Seller May Have Unrealistic Expectations
An FSBO seller may find it difficult to be objective when it comes to setting a price. A seller may overestimate how important certain factors will be to buyers. For example, a homeowner may have remodeled the master bedroom and may love the new design, but it may not be that important to prospective buyers. In other cases, a seller may overlook a house’s flaws and underestimate how problematic they will be for potential buyers.
When homeowners make repairs and renovations, they can expect to get back a percentage of the cost when they sell the house. That percentage depends on the type of upgrade and the current real estate market in the area. A seller may expect to recoup an unreasonably high percentage and may therefore set an unreasonably high list price.
When a seller works with a real estate agent, the asking price takes commission into account. An FSBO seller who doesn’t understand that may set a price that would be reasonable if the house were being sold with the help of an agent, but that is too high for an FSBO property.
Discuss List Prices with Your Agent
When you review listings, you may come across homes that are listed as “for sale by owner.” Some may be priced reasonably, but others may have asking prices that are higher than the prices of comparable houses in the area. Your agent can discuss the price of a particular house and tell you whether it seems reasonable. If not, you can make an offer below the asking price and see if the seller is willing to negotiate.