For Sale By Owner (FSBO) as the term suggests is when a home buyer takes full control of selling his property and doesn’t depend on any broker or brokerage firm for sale. In this guide, we discuss details related to the journey of FSBO- how he prices the property, navigates through marketing, legal issues and other challenges. Read on.
What is FSBO?
For Sale By Owner (FSBO) is when a home owner takes it upon himself to sell his property, thus siding from the traditional broker led property transaction. While there are many risks associated with the FSBO, if a home owner is well-prepared, then by following this practice, he can successfully save himself from paying agent commission fees and reap the whole benefits of the property sale himself.
How can FSBO sellers market their property?
When you are operating as FSBO, you should first establish your credibility. For this be transparent, provide the right information about your property so that buyers don’t have any query regarding its authenticity. Mentioned below are tips that FSBO sellers can follow to market their property and attract buyer attention without the presence of an agent.
- High resolution property pictures: A picture speaks a thousand words and high quality pictures of your property will definitely generate people interest. However, take care that these reflect the property as it is and is not the case of pictures showing something and property is something different.
- Online listings: List your property online on the various portals and describe it in a way that the interested buyer is able to associate with it and is interested in investing in it.
- Social media: Use social media presence to advertise the sale of your property. Today, Gen Z as a segment is growing when it comes to property buying and they are active in social media. So, it’s recommended to use this channel to the optimum.
- Virtual tours: What became a necessity during the pandemic is today a preferred choice for people who are doing their first survey of the property. Interested home buyers who may not be able to visit in person ask for virtual tours as this helps them weed out from the many choices that they have. A FSOB seller should ensure that a virtual walkthrough for the property is created to address such home buyers.
- Pamphlets: Although old school, you can design and print pamphlets and circulate it in your city by partnering with newspaper vendors, magazine shops etc. This will help increase your reach.
How can FSBO sellers fix price for their property?
If you are going independent on selling your property, you would need to know the following tips that will help you fix the price of your property.
- Analyse market behaviour: Check if it’s a seller’s market or a buyer’s market. In the first one, as the demand is more than the supply, you can inch for that high valuation which may not be possible if it’s the buyer’s market, where the demand may be less and the supply may be more. It is recommended to monitor the market continuously to see if there is any surge when you can sell your property.
- Know your competitors: It is also important to know your competitors who will be selling in the same market. Analyse what is their strategy and how you can close the deal before them ethically.
- Compare costs with similar properties: If there has been a sale in the neighbourhood where your property is also located, do a comparison on the rates. This can be done based on the area of the property, the configuration, whether it’s a new or an old property etc. and according arrive at an approximate amount.
- Fix costs slightly higher than what you expect: Fixing property costs higher than what you expect gives you space to negotiate with the buyer. You as the FSBO seller will get what you want and the buyer will also be happy that you agreed at a deal asked by him. Also, while negotiating with the buyer, highlight that because of absence of an agent, there is a cost saving done by the buyer.
- What is your property’s USP? Identify the USP of your property on which you think it is right to charge that premium. For example, your property may have an attached terrace or a running balcony or a spacious kitchen or would come with two parkings etc. This extra helps FSBO sellers have an edge over a normal property sale.
- Add costs attached to home improvements to the property price: If you have done significant renovations in your house that gives the buyer the opportunity to use the property as it is, then it’s fair that this price is added to your price of the property.
- Check with a professional: You can check with a professional company who would come and evaluate the house and fix a price depending on many factors of the property.
Documentation work that FSBO sellers should be aware of
A property transaction involve documentation work that is necessary from a legal point of view. In the absence of an agent, the FSBO seller has to do this on his own. To ensure the paper work is done accurately, the following steps should be followed.
- Consult a lawyer: A lawyer will provide guidance with respect to any local rules and regulations that one should know with respect to property sale. Also, do a due diligence of the home buyer as to if he is a genuine buyer who is capable of completing the sale and buying the property and not a fraud who may cheat you of the property.
- Prepare needed documents: Get in place all property documents that are in sync with the requirements of the state government. This may include purchase agreement, property disclosure forms etc.
- Token money: Prepare an agreement after taking the token money that has clauses that detail what happens to the token money if the buyer backs out of the deal/ seller backs out of the deal. It’s a good idea to keep this money in an escrow account. While many people take word for token money, it is recommended to document and register the agreement to be clear in case of any dispute.
- Agreement of sale: Sign an agreement of sale that will detail the transaction. Once this is signed the homebuyer can approach a bank for home loan and a FSBO can proceed with making documents for registering the property. The sale deed will have signatures of the owner, the buyer and two witnesses from each side. Note that for registration of the property, the stamp duty and registration charges have to be paid by the buyer as he is registering the property as his property in the government records.
For sale by owner (FSBO): Benefits
- Control over the sale process: With FSBO, the property owner has control over each and every aspect of the sale- from fixing the property price, staging the property, meeting the buyer party at a time when suitable for both, understanding buyer requirement and negotiating with the So, basically, he won’t have any agent dictate terms to him, but make decisions by understanding market sentiment.
- Easy negotiations: Many times deals are lost because of the inflexible nature of the agent who wouldn’t budge to the buyer requirements. With owner taking direct control of the sale, negotiations would be better handled that will benefit both the seller and the buyer.
- Saving on agent commission: An agent charges as commission around 2% or more of the property value for an affordable house and this can go up in the range of around 3-6% for premium, luxury houses. This is huge money and can be saved if the property owner chooses to sell it on his own.
- Market across channels: With the owner taking control, he can market sale of his property across channels including online listings, offline marketing etc. and doesn’t have to stick to one particular segment.
For sale by owner (FSBO): Disadvantages
- Time taking exercise: The process of selling the house on your own is time taking as it requires you to set the price, fix things that are not proper in the house, stage the property to many prospective buyers across timelines, negotiate with many buyers, sign the agreement of sale with one buyer after taking the token money and then finally register the sale deed after the buyer pays the entire money (and doesn’t back out after giving the token money). A FSBO should be ready to invest the required amount of time so that he benefits out of the deal.
- Lesser reach to audience: With the limited network that owners have, selling a property on his own may be time taking for the owner. An agent on the other hand, with access to various networks and know how about listings, may be able to wrap the deal faster. So, if an owner takes ten months to seal the deal for his property, there are great chances that the same property with an agent may be sold within two months.
- Ineffective negotiation: Home owners who turn into property sellers may or may not be able to negotiate properly. This may be because they would have spent a lot of time searching for potential buyer that they may get desperate to seal the deal or they may be emotionally attached with the property that they may not be able to well negotiate the rate etc.
- Documentation: Selling a house involves lot of documentation work. An agent is well versed with these documents and has contacts in the registration department who guide them on what has to be done. For a new person, it will be a time taking exercise, even though they will also be guided by the state government department.
Housing.com POV
A home selling process is tedious and requires lot of time to be spent and an equal amount of documentation work to be done. While it may seem easy, it will require spending time in marketing, analyse the real estate market, compete with other buyers in the segment, talk to many buyers at the same time, constant follow ups etc. before garnering the interest of one buyer. While the returns are huge for a FSBO, the work that is expected is also directly proportional. So before stepping into being a FSBO and selling your property on your own, assess and see if you can manage it or will it be a better idea to go with an agent for the sale of the property.
FAQs
Why do people prefer FSBO?
People prefer FSBO to have control over the property sale, to not pay hefty agent fees and retain maximum profits by proceeding with sale on their own.
What legal points should FSBO sellers know?
The FSBO sellers should have in-depth knowledge of the local regulations, the documents required, disclosure requirements etc. that is mandatory for a real estate transaction to happen.
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