There are really 3 basic myths regarding FSBOs.

1. A FSBO is cheaper than a listed home with an agent.
2. You will save money selling your home yourself.
3. You can't use a buyer's agent to represent you to a FSBO.

Answers:

1. Not always, in many cases not at all.
2. It is possible, but not necessarily and with significant tradeoffs.
3. Not true in most cases, most FSBOs will allow a buyers agent in the transaction. Some Realtors will search FSBOs for their clients.

For more information read on:

Buyers:
Buyers often look for a for sale by owner on the notion that a FSBO will allow them to get a lower price on the home.  The thought is that if you eliminate part of the cost of selling a home, the agent fees, you can save that money in the cost of the home, thus paying less overall.  This theory is logical, however, in practice there are other things that come into play.

If you are a buyer consider why the seller is listing the home without an agent.  It is certainly not because the home will sell faster without the advertising, brand name, MLS listings, research and effort of an agent.  It is not because the seller wants to make sure that the buyer saves money.  The seller wants to capture the perceived savings on the cost of selling the home, not pass it on to the buyer.  In fact they are so concerned about capturing the transaction cost they are willing to risk taking more time to sell the home in order to keep the money.  Again, they aren’t risking a longer time on the market to save money for the buyer, quite the contrary.  In fact many FSBO homes are priced incorrectly because the sellers do not have access to as detailed or accurate information as a professional realtor and are using automated programs or other listings (without the research into those listings).  Many think that a quick search on MLS is enough to determine the price.  What most buyers and sellers don’t realize is that the information a Realtor® gains from multiple listing services is a lot more than that available to a non-member MLS view.

The other issue for a buyer of a FSBO is the fact that the buyer loses the representation and research that a professional Realtor® brings and is at the mercy of the seller.  The saying caveat emptor, or let the buyer beware, applies.  A professional Realtor® can represent a buyer to a FSBO seller in most cases.  In some cases the buyer will not consider a buyer’s agent.  If there are no issues with the transaction the transaction process is possible with two parties who have some knowledge of the process.  If there are any other issues, warranties, title issues, contingencies, inspections, liens, loan issues, etc. it can be very difficult unless you have someone familiar with the process representing your interests.  There is a potential to come out of the process unprotected against common pitfalls.  The seller is not likely to be looking out for your protection.

There can be good deals with a FSBO, but not as frequently as most believe.  When there is a buyer’s market, as is the case now, these deals become even less significant since there are many deals to be found. 

If you are looking for a home it is helpful to enlist the services of a Realtor®.  If you find a FSBO in which you are interested a good Realtor® will investigate that for you and help you determine a reasonable value or offer for that home and in most cases can represent your interests in the transaction to ensure you get the best deal and avoid undue difficulties or pitfalls.

Sellers:
If you are interested in selling your home FSBO is an option.  Many pay money to list their homes on typical FSBO websites.  If you are considering selling by owner consider why you are doing it.  If you are simply trying to capture the real estate transaction costs for yourself many buyers are aware of this and realize that the home may not be a better deal than one which is brokered by agents.  Additionally the buyer (and seller) is losing the benefit of representation and protection.  In order to combat these downfalls to the buyer it is important to price your home lower than a typical agent listing to be reasonably competitive.  The only advantage to a buyer (your customer) is a home that is priced below agent listed homes.  If your home is priced alongside the broker listed home you will have a hard time selling the home.  Market value assumes real estate transaction costs.  If you are going to reduce your home by the commissions to save the buyer money FSBO may be for you, with some other considerations.

Studies show 90% of home buyers use an agent, meaning your home gets 10% market exposure when sold by owner.  Agents search for homes for their buyers that are fit the buyer’s needs.  If inventory is high (as it is in the current market) they will find plenty of homes that offer a commission to the agent.   Some agents, not all, will contact a FSBO seller to see if they will offer a seller’s agent commission.  Most owners will offer this if they are interested in selling their home.  Remember, the transaction cost you are trying to recoup is half the buyer’s; if the buyer is bringing their agent you should allow them the representation they desire, even if you chose not to have representation. 

Even though some agents will seek out FSBO’s for their buyers, some will not.  Ultimately your home will be presented less than a listed home and your home will likely take longer to sell unless you lower the price by at least the agent fees and it will still get less exposure.  Additionally you should advertise the home in as many places as possible to compete with real estate professional publications that are reserved for licensed agents.  Lastly you may find agents that you can pay to list on the MLS for you.  Consider putting in a note in the description about a commission to buyer’s agents to increase showings of your home.  All this will reduce your net sale price since an agent will advertise for you, list for you, post professional signs, hold open houses, use referrals, show to other agents, and keep track of all comparable sales.

This is not enough in a buyer’s market.   It is only enough in very heated seller’s markets. If your desire is truly to pass on savings to a buyer at the expense of taking longer to sell the home with less professional representation then a FSBO may be the right answer if you price it under the market value, and offering a buyer’s agent commission.