Learn the ins and outs of real estate transactions when the property is "For Sale by Owner."
"For Sale by Owner" is the real estate term used when the owner of a home attempts to sell it without assistance from a licensed real estate agent. The homeowner usually assumes responsibility for establishing the price of the home, advertising, showing the home, fielding offers, negotiating and closing the sale. Some homeowners may choose to use a real estate agent for some of these services, however, such as performing a comparative market analysis of recent home sales to help set the listing price. According to the National Association of Realtors, in 2006, 12 percent of homes on the market were for sale by owner.
For Sale by Owner is a good option for homeowners who have an understanding of real estate and the current real estate market in their area, know a great deal about their home or can conduct the necessary research to answer buyers' questions, and have the time to devote to marketing and showing their home. Owners who possess these qualities can save thousands of dollars on real estate agent commissions. The average agent commission is between five and eight percent. On a $150,000 home, the owner would save a minimum of $7,500 in commission.
Homeowners typically begin the process of selling a For Sale by Owner home with an inspection of the property to determine whether repairs are needed first. Owners often hire a professional inspector to inspect the home and a professional contractor to make the repairs. An appraisal, sometimes in combination with a comparative market analysis, performed by a real estate agent, helps homeowners set the price. The owner usually markets the home with the use of yard signs, fliers on community message boards, Web site listings and open houses. For contract negotiations and closing arrangements, a real estate attorney is generally hired.
Although For Sale by Owner homes are sometimes priced below comparable properties, the buying process can be more work. For Sale by Owner properties are sometimes more difficult to find. The Organization of For Sale by Owner Publications recommends looking at For Sale by Owner properties without a real estate agent unless the buyer is willing to pay the agent's commission. The organization also warns against making contracts with agents who lock buyers into purchasing a home through a specific agent. Under this arrangement, buyers will have to pay a commission on a For Sale by Owner home, even if they find the home themselves.
If owners possess the necessary qualifications to sell a home themselves, there are advantages other than simply avoiding paying real estate commission:
• Full control over all aspects of the sale.
• Always being present when prospective buyers are viewing the home's interior.
• Direct negotiation with buyers rather than through a third-party agent.
However, For Sale by Owner homes may take longer to sell than a home with a listing agent. Additionally, sellers need a flexible schedule that allows them to show the home when it suits buyers. They also should know how to recognize and deal with unethical or unlawful practices by buyers.