 FSBO
and the InternetUsing the Internet to Buy or Sell a Home Yourself
First Published: April 2004
Last Update: April 2004
Author: Dr. Amanda Calhoun
Finding Homes For Sale By Owner can be much easier now that the internet has made information distribution faster and cheaper. Selling a home FSBO does require more of your time and energy, so the question is whether the money you save worth that effort. Over one MILLION homes are sold by owner in the USA every year without using a real estate broker - as high as 20 percent of home sales annually are "For Sale By Owner" (also called FSBO). Sell FSBO and you will save an average of $12,000 per transaction in Realtor commission. You can sell your home FSBO or buy a home directly from the owner and the buyer can save money while at the same time the seller can also keep more of their equity since no realtor is involved.
What does A Real Estate Broker Do?
Brokers normally want to keep a commission between 5% to 7% of the selling price. That means a $200,000 home would bear between $10,000 and $14,000 in realtor commission. If you sell a home For Sale By Owner, you keep that money.
That commission is paid out of the equity you have in your home, so if the commission is $10,000 and you only have $40,000 in equity, the commission is really 25% of your equity. If you sell by owner, you can protect your equity. Also, an owner is more motivated to sell that specific house than an agent, who has hundreds of properties to sell at the same time.
All Sales are "For Sale By Owner" Sales
In reality, all real estate is For Sale By Owner. Some owners just hire a realtor as their choice for their Marketing plan. In a nutshell, the biggest difference in purchasing property directly from an owner as compared to dealing through a realtor is that the buyer and seller do not have the weight of the "6% Commission Yoke" hanging around their neck to impede making a deal they are each comfortable with.
Transactions only occur when both the buyer and seller are comfortable with the deal. Many home sellers have a price that they either Need or Want to get out of their property. If property values are such that they can't get this price after they have paid a realtor 6%, these sellers Must either list their property with a realtor at an "above market" price (meaning a deal will not get done because the seller does not have the flexibility to negotiate) or market the property themselves in order to meet their price target.
Other property sellers understand that they can offer home buyers an attractive "slightly under market" price and still take more cash to the bank since they are not paying a realtor 6%. The buyer, on the other hand, simply wants to buy a home of a particular type in a particular area for the best price the buyer can get. Considering that sellers always think property is worth more than buyers want to pay, it is logically certain that deals should be easier to consummate when a 6% middleman is taken out of between two parties that already have a difference of perspective about what is a fair price.
Out of the starting gate, the buyer and seller are 6% closer to a deal. Every Buyer should appreciate the reality that the buyer is really paying the realtors 6% commission. Sure the title company takes the money out of the sellers account at closing, but just a few moments earlier it was the buyers money that the title company is then handing to the realtor instead of the seller. Therefore, buyers must decide if they consider the services of realtors to be a value to them at 6% of the property price since it really is the buyer who is paying for those services.
Has the Internet Made the Real Estate Agent Obsolete?
Millions of people buy computers "direct" from Dell and stocks "direct" through Etrade. Middlemen of all types are being cut out of many transactions primarily because the increase in the flow of information down the Information Super Highway has empowered the consumer to not need the middlemen as much, if at all. One day, maybe all real estate will be sold "this way" as well. As information resources continue to increase, buyers should increasingly find that they can pay a reasonable professional service fee to an Attorney, an Appraiser, and an Inspector and with this competent professional help buy property cheaper than paying a 6% commission to a realtor.
When a bank makes a loan on real estate to the buyer, they hire an Attorney, an Apraiser, and a licensed Inspector before they loan the buyer that money. The banks do not rely on the advice of a realtor to loan money, so why should a buyer value that advice so highly when they are the ones who are going to be paying the bank back? The bank hires all these professionals, of course, at the buyers expense anyway so these are not really "incremental cost".
There was a time when buyers, without the assistance of a realtor, could not get enough quality information about what properties were available in an area at what asking prices and the related information about the details of each of those properties to make a comparative evaluation as to whether the asking price of a particular property is reasonable or not and to have an ample selection of properties to choose from such that they could end up with a good deal on property that suited them just right.
Internet Information Makes "For Sale By Owner" Possible
Today information is much more easily exchanged. Sellers can advertise their homes nationwide for months for under a hundred dollars and in many areas the prior sale prices of homes are available from the property tax appraisal districts at their public web sites. There are so many information resources available today that the realtors informational value has at the very least been substantially diminished. The professional services of Attorneys, Appraisers, and Inspectors are being paid for at closing by most buyers anyway so savvy buyers will increasingly use all these information resources, drive themselves to go see the property, discover that they can indeed find the property they want without the realtors assistance, and are able to make a better deal, Direct.
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