For Sale By Owner

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For Sale By Owner is a real estate term that describes the situation that the seller directly offers the property without the representation of a real estate broker.

What it means to seller

A seller will need to take care of the things that a real estate broker usually do, for example, yard sign, fliers and advertising. Since the property is not listed by a broker, it won't show up in the Multiple Listing Service (MLS). MLS is a database that real estate brokers use to share the property information such as available properties in an area, price comparison and other types of informations. So not being listed in MLS is a loss of the marketing opportunity.

However, selling without an agent means a lot of savings on the agent's cut, which is usually 6% of the property sale price. In reality, the cost might be less because seller will probably hire a real estate attorney to prepare and review the contract and oversee the transactions, etc.

What it means to a potential buyer

1. The seller does not want to pay the commission to a broker. The real estate commission is typically 6% of the selling price of the property in general. For example, if a seller sold a property for $200,000, $12,000 will be paid to the real estate broker, and the seller will take the remaining. As you can see, it can potentially be a big saving done correctly.

2. Since the seller is not listing with an agent, the property is probably priced by the seller himself(herself).

Here are some examples of for sale by owner ads.

Buyers need to be aware a few things. First, if you have an agent, the FSBO seller might not want to deal with you. Using an agent increases cost, which is what the seller tries to avoid in the first place. Second, you'll have to do a lot of homework to research the price of the property. It is actually quite common that the seller overprice her property so you'll have to make sure the property is priced properly. Third, if possible, use a flat fee agent to ensure everything is covered, from title research to contract.

Other alternatives

One of the fast growing trend is "flat fee listing". A FSBO owner can contact a real estate agent to negotiate a price to have his(her) property listed in MLS. In this way, the property can get exposure to other agents through the MLS, and it is still possible to save on the commission cost. Some real estate agents offer the flat fee listing as part of their service.