“For Sale by Owner” (FSBO) means that a person is selling their own house or property without the aid of a real estate agent or broker. There is nothing illegal about such sales and they can often save a property owner time and money that would have been spent with a real estate agent.
On the other hand, an owner who wishes to sell their property on their own may have to devote additional resources to learning the local laws regarding the purchase and sale of residences. Thus, it is important that a homeowner carefully consider the benefits and disadvantages of selling their home without an agent or broker.
What Are the Pros and Cons of For Sale by Owner?
There are many advantages to selling one’s own home, such as:
- Control of the entire process: A person will control all decisions regarding important matters such as setting the price, doing advertising/marketing, selecting buyers, and setting the sales terms and conditions of the sale:
- Savings in costs: It is often cheaper in the long run as a person will not have to devote profits to commissions for real estate brokers or agents, who generally charge a commission, calculated as a percentage of the sales price, for their service.
- Savings in time: A person would not have to spend their time meeting with real estate companies;
- More freedom: A person can make choices, such as taking their home off the market without violating the terms of a listing agreement.
On the other hand, the FSBO process also has its disadvantages, such as:
- No advice: An owner would not have an experienced real estate agent to provide them with help or advice regarding matters such as pricing, advertising, and home inspections;
- Less exposure to the market: Most real estate companies work with listing services that expose the property to other agents and buyers. An owner’s property may get less exposure because the owner will not be able to work through a listing service. Of course, now there are websites that service owners who are selling on their own without agents and brokers;
- More work for the owner: An owner will have do everything themselves, including locating contractors for repairs or decorating, home inspections and the like, showing the home to prospective buyers, handling financial transactions, hiring appraisers and arranging for the closing of the sale;
- Legal assistance: An owner may find it necessary to work with a lawyer to help identify the various kinds of legal documents that are required by state and federal law for home sales and to draft sales contracts between the owner and the buyer; the lawyer may cost more than what would be paid to an agent or broker in the final analysis.
Depending on a person’s individual situation, these factors may be advantageous or disadvantageous. An owner would have to carefully assess their budget and time constraints when considering FSBO. Also, an owner would have to do quite a bit of background research on the real estate laws in their state.
Disclosures that must be made by a seller to a prospective buyer is one reason for which FSBO may be disadvantageous. For example, in most states, such as California and Maryland, state law requires an owner to make certain disclosures about known defects that could affect the property’s value or desirability. In Maryland an owner can either provide disclosures or can offer a property on an “as is” basis, but the owner cannot do both. This is not the case in other states, which require disclosures and do not allow an owner to avoid the obligation to disclose defects by offering a property “as is.”
However, even in Maryland if the owner sells the property “as is”, the owner is still required to disclose “latent” defects, that is problems in the property that could not be discovered by a reasonably thorough inspection before the sale. An example would be issues that only reveal themselves when it rains. In almost all states, latent defects must be disclosed.
In Massachusetts, if asked whether a property has a history of suicides, murders or paranormal activity, an owner must disclose the information. However, the information does not have to be disclosed if it is not requested. And murders, suicides, and paranormal activity are just some of the stigmas that may have to be disclosed.
There are federal laws that require various types of disclosures. For example, the federal Department of Housing and Urban Development enforces the lead paint disclosure law. This requires sellers of residential real estate to disclose to a buyer any information they know of regarding lead-based paint or lead-based paint hazards on the property. A seller must also disclose information about any lead paint hazard such as the location of any lead based paint and more.
Cities and counties may have disclosure laws that apply to sales of residential real estate as well. Some counties require disclosure of the location of airports in the county, because airports can create unpleasant and unwanted noise pollution.
These are just a few examples of the kinds of disclosure requirements that can apply to a residential real estate transaction. Real estate agents and brokers stay abreast of local state, state and federal law regarding disclosures. In fact they have a legal duty to be fully informed about required disclosures. An owner thinking of selling without an agent or broker needs to inform themselves of applicable disclosure requirements.
Another disadvantage to FSBO is knowledge of sales strategies that might be useful in different kinds of markets. A buyer’s market is when housing prices are trending down as they did in 2010 during the Great Recession. A buyer’s market may dictate use of certain sales strategies to maximize the price a seller can command.
A seller’s market, on the other hand, is a market in which prices are trending up. An owner might anticipate receiving multiple offers for a house after it has been on the market for only a few days or even a few hours. This might dictate the use of different strategies in order to get the maximum price for a house. An experienced real estate agent will have experience with different kinds of markets and should know which strategies are recommended for various market phases.
An owner thinking about FSBO might have to invest a lot of time and effort in acquiring the knowledge that a real estate agent already possesses and can bring to a sale situation. It is worth weighing whether an owner has the time and resources to get the education they would need to get the best deal from selling their house.
For most people, their house is their most valuable asset and getting the best possible price for it is important. An owner needs to honestly assess whether they think they can do as well as a professional real estate agent or broker in selling their house.
Do I Need a Lawyer for “For Sale by Owner” Issues?
When selling your home, the For Sale by Owner process can offer some advantages, though there are some disadvantages associated with it as well. Having an attorney can become essential with FSBO sales, as you may need legal advice regarding your property and the sales transaction.
Also, if a dispute arises with a buyer at any point in the transaction, an experienced real estate lawyer can help represent your interests and possibly help negotiate a resolution. It is a good idea to have a lawyer at your side as your head into a sale of your home on an FSBO basis.