For Sale By Owner: Myths, Realities and Benefits for Home Sellers

Selling a home is one of the most significant financial decisions a person can make. For many, the question arises: should I sell it myself (FSBO - For Sale By Owner) or hire a real estate agent? The allure of FSBO is undeniable—saving tens of thousands of dollars in commission fees. However, myths surrounding FSBO often discourage homeowners from taking this route.

One of the most pervasive myths is that FSBO homes sell for less. Let’s dive into the data, debunk the myths, and explore the realities and benefits of FSBO.

Common Objections to FSBO

Critics of FSBO often argue two main points:

1. FSBO increases liability risk.
2. FSBO homes sell for less than agent-assisted homes.

While liability concerns can be mitigated with proper paperwork and disclosures, the second objection—that FSBO homes sell for less—requires a deeper look. Many real estate agents perpetuate this myth, often citing vague or misleading statistics from sources like the National Association of Realtors (NAR) to suggest FSBO sellers lose money by going it alone.

The NAR Claim: FSBO Homes Sell for Less

According to NAR’s 2023 Profile of Home Buyers and Sellers, FSBO homes sold at a median price of $380,000, compared to $435,000 for agent-assisted homes ¹. While this may appear to confirm the claim, it doesn't tell the full story.

Drawing the Wrong Conclusions

The NAR’s data doesn’t account for critical differences between FSBO and agent-assisted homes:

• Home type: FSBO homes are often smaller or manufactured homes, which are inherently less expensive.
• Location: FSBO homes are more likely to be in rural areas, where prices tend to be lower.

These factors heavily influence median prices, making it misleading to claim agents are the primary reason for higher sale prices. As John Wake explained in Forbes, FSBO homes often differ significantly from agent-listed homes, which skews the data ².

Comparing Homes of Equal Value

A study by the National Bureau of Economic Research (NBER) provides a more accurate comparison. It analyzed 15,606 home sales in Madison, Wisconsin, and found no significant price difference between FSBO and agent-assisted sales when comparing similar homes in similar neighborhoods ³.

This study demonstrates that the perceived price gap isn’t due to the use of an agent but rather the types of homes being sold.

FSBO Classifications Vary

It’s also important to note that FSBO statistics don’t always include sellers who use flat-fee MLS services. These sellers manage the sale themselves but pay a small fee to list their homes on the MLS, gaining exposure to a broader pool of buyers. The exclusion of such sales from FSBO statistics further skews the data.

What Agents Aren’t Telling You

Contrary to popular belief, FSBO homes often sell faster and closer to their asking price:

• Time on market: FSBO homes typically sell in less than two weeks, compared to three weeks for agent-assisted homes ¹.
• Sale price vs. asking price: FSBO homes tend to sell for 100% of their asking price, while agent-assisted sales average 98% ¹.

The Bottom Line: FSBO Makes Sense

Selling FSBO can be a practical, cost-effective option for homeowners, especially when proper tools and resources are used. Whether it’s leveraging flat-fee MLS services, researching market comps, or utilizing FSBO platforms, homeowners can successfully navigate the sale process without sacrificing equity.

Elon Musk’s decision to sell his multi-million-dollar homes FSBO is a testament to its viability—even for high-value properties. As FSBO continues to gain popularity, particularly among Millennials, it’s clear that selling a home independently is not just possible but increasingly common.

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References

Footnotes

1. National Association of REALTORS®, “2023 Profile of Home Buyers and Sellers”. ↩ ↩² ↩³

2. John Wake, Forbes, "The Truth About FSBO". ↩

3. National Bureau of Economic Research, "The Relative Performance of Real Estate Marketing Platforms". ↩