For sale by owner

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A common For Sale By Owner yard sign.

For Sale By Owner (abbreviated as FSBO and pronounced /ˈfɪzboʊ/) is a real estate term which describes the situation in which a property is offered for sale directly by its owner and without that owner having solicited the help of a real estate broker, implying that no real estate commission is associated with the sale. In recent years, the term has been used more broadly to describe the process of marketing, buying, and selling of real property without the representation of a real estate broker.

Many sellers who choose to sell via FSBO do so to avoid paying a commission to a broker, typically 6% of the selling price of the property in many parts of the US.^[1] Commissions can range between 5% and 7% in different markets across the U.S. as well as in Canada.

1 The mechanism of bargaining
2 Industry review
3 Internet services
- 3.1 Multiple Listing Service (MLS)
4 See also
5 References
6 Further reading
7 External links

[edit] The mechanism of bargaining

When homeowners decide to sell their home without a real estate agent, they enter the world of the FSBO sellers. If a seller markets a home as a FSBO, and a buyer who is not working with an agent wants to buy this home, the seller pays no commission because no real-estate agents are involved. If a buyer who is represented by an agent is interested in a FSBO home, that buyer's agent may request the owner to pay him or her a commission or finder's fee for bringing the buyer.

In many states, brokers have appropriate pre-printed forms in place for agents to pre-negotiate a "one time showing" with a negotiated commission rate. This ensures that agents can represent their clients' best interests and consider all available homes in the decision-making process.

In order to protect themselves, sellers typically arrange to have the necessary forms at hand or have them drawn up for them. Lawyers will normally draw up an agreement for a fixed fee often as part of legal representation for the purchaser. In parts of Canada (e.g. Ontario), office supply stores carry legal kits that can also be used. While these kits are relatively inexpensive, a poorly constructed purchase document could result in a transaction falling through or even in litigation.

[edit] Industry review

More and more owners selling their own property are using online marketing companies to advertise their properties. FSBO web sites are now a real part of the real estate market, as the Internet becomes vital in the home-selling process.^[2]

According to a NY Times article from December 2007, "Nationally...real estate companies are spending 26 percent more on online advertising this year, even as total real estate ad spending declined 3 percent, according to Borrell Associates, a research company." ^[3]

The owner of an English site called ByTheOwner estimates his revenues at $2 million in 2007. According to the last report, 16,700 properties have been sold to date through the website with an average success rate of 64 per cent. ^[4] According to MoveWise at least 1 in 10 properties are now sold privately in the UK. This number is expected to increase.^{[citation needed]}

Since 1984, long before the internet boom, Buy Owner has been helping buyers and sellers of real estate save thousands of dollars in real estate commissions. Establishing itself as the original for sale by owner company, Buy Owner grew and expanded its expertise to the Internet, becoming the first “by owner” company to provide magazine quality text and pictures to a real estate web site. As the Internet market expanded so did Buy Owner by offering virtual tours with almost every listing online.^{[citation needed]}

Miami, Florida-based Fizber.com also claims substantial economic growth in the FSBO business field, saying its website has 2 million homes for sale (listings) across the U.S. ^[5] and 207,371 unique visitors a month ^[6].

According to a press release by the National Association of Realtors (NAR) regarding their most current annual survey of real estate consumers, 2005 Profile of Home Buyers and Sellers ^[7]:

12% of 2006 US real estate transactions were FSBO.
13% of 2005 US real estate transactions took place via FSBO (down from 14% in 2004).
The record percentage of 20% of US real estate transactions (since tracking started in 1981) took place in 1987.

According to the Canadian Real Estate Association, which claims that 75% to 80% of homes in Canada were sold through brokers, it would appear that "Sale by Owner" accounts for some 20% or 25% of the remainder.^[8]ByTheOwner.com is the leading For Sale By Owner website in Canada with 680,000 unique visitors per month. ^[9]

In Australia, FSBO accounts for less than 2% of all properties sold. (source: Zeroagents 2006) Commission rates within Australia are typically 2.5% of the selling price. The FSBO market within Australia has been restricted with major property portals only allowing property advertisements through real estate agents.^{[citation needed]}

[edit] Internet services

[edit] Multiple Listing Service (MLS)

Main articles: Multiple Listing Service, Flat fee MLS

One service often provided by commercial FSBO websites is a connection to the publicly accessible portion of the Multiple Listing Service (MLS), which is the main source of information for Realtors. ^[10]

If a broker lists a home in the local MLS, the broker offers a portion of the commission to any other broker who can bring them a buyer. The flat-fee MLS option allows the seller to cut out the listing broker's commission completely, thus reducing the seller's payment either completely or in half.^{[citation needed]}

According to the statistics of ByTheOwner.com, consumers saved close to $237 million in commissions with this service. ^[4]

Some services such as Craigslist.com allow sellers to list without a fee.