How does For Sale By Owner work?
A seller who offers a property for sale without using a professional real estate agent or broker can often follow the same steps an agent would take to get a home listed and sold. The legal process of transferring ownership in exchange for money, or closing, is the same regardless of whether you have an agent. The primary difference in how the process works involves the owner putting in all the same work a real estate agent would.
For example, this may involve:
- Repairing blemishes and minor damage.
- Professionally cleaning the property.
- Staging the property.
- Preparing disclosure documents.
- Getting the property listed on various listing sources.
- Showing the property.
- Holding open houses.
- Reviewing and responding to offers.
- Clearing contingencies.
- Preparing the sales documents.
- Coordinating the closing.
Is For Sale By Owner legal?
Yes, it is legal to sell your own home without a real estate professional. No law requires a private seller to use a listing agent or broker. Sellers, however, are generally subject to all laws and regulations that govern the sale of homes or real property in their city, county, and state. Here are just a few:
- Prohibitions on discrimination on the basis of race, disability, and other factors.
- A duty to disclose problems or defects with the property, such as storm damage or the presence of lead-based paint.
- State and local laws on transferring title and ownership.
While it is legal to sell your own home, state laws generally prohibit anyone who is not licensed as a real estate agent or broker to sell another person's home and collect a commission or payment for doing so.
How do you list a house as For Sale By Owner?
Only placing a For Sale By Owner sign in your front yard may not get many prospective buyers to view your property. Fortunately, over the last several years, the internet has provided numerous options for sellers to market their own properties.
Multiple Listing Service
A Multiple Listing Service lists all of the properties for sale in a particular area, along with contact information about the listing agent or seller. An MLS listing makes information about the property available to every real estate agent in that market, as well as some popular real estate websites and apps.
Real estate agents may be able to list properties on a MLS for no direct fee. It is also possible for owners in some markets to list their properties on their local MLS for a flat fee. In some places, however, the MLS may be limited to real estate agents only.
Online listing services
Numerous real estate websites offer listing services to sellers for a flat fee. The many popular options available may allow sellers to list in more than one place to increase the number of prospective buyers. You may want to research which service is the most popular in your area before deciding which to choose.
Websites, social media, and classified ads
Sellers may list their properties on other websites and in classified ads. Many sites allow free listings, while local newspapers offer classified ads both in print and online for a fee. Sellers may also use social media to advertise their property to the general public and those in their own network. These can be useful places to supplement, highlight, or direct people online to your main listing.
In the end, sellers may want to utilize more than one method to market their listing.
Can I save money with a For Sale By Owner?
A seller can potentially save money by not paying a commission to a listing agent at closing, but they may have to scrutinize offers to purchase from represented buyers. Offers may state that a commission of 5-6% of the sale price will be paid at closing and split between the agents. A few things could happen based on these types of terms:
- The seller's agent and the buyer's agent split the commission 50/50.
- The buyer has no agent, and the seller's agent receives the full 5-6%.
- The seller has no agent, and the buyer's agent receives the full 5-6%.
In any event, a seller does not have to agree to pay the buyer's agent's commission. If a seller refuses to pay the commission, then the buyer may end up having to pay their agent's commission out of pocket.
For buyers, a property offered up directly by the seller may be an opportunity for a good deal, even if they must pay their own agent's commission.
Are there less closing costs when selling without an agent?
There can be significant savings in closing costs when there are no agent or broker commissions being paid. Apart from that, most closing costs remain the same whether a seller has an agent or not, however, the responsibility for some or all of the closing costs may be negotiable.
Closing costs often include:
- The commission for the buyer's agent.
- Prorated property taxes for the current year.
- Appraisal and inspection fees.
- Title insurance premiums.
- Escrow fees.
- Attorney's fees.
What are the pros and cons of For Sale By Owner?
The pros of an owner sale may include:
- Control: You have more control over the process of when and how your property gets listed and sold.
- Cost savings: You do not have to pay a commission to agents or brokers.
The cons of an owner sale may include:
- Lack of expertise and network: You will not have access to a real estate agent's professional education and skills, nor access to their network of other professionals with clients looking to buy.
- Lack of objectivity: Your property may not be worth what you think it is worth.
- Lack of access to resources: You may not have access to use time-saving tools available to real estate professionals.
- Lower sales price: A selling agent is incentivized to get top dollar to maximize their commission.
- Commitment of time and energy: Selling a home is hard work and time consuming.
How can I protect myself when selling a home without an agent?
The best way to protect yourself in a For Sale By Owner transaction is to vet your buyer, know your rights and obligations, and to document as much of the deal as you can. A Home Sale Worksheet can help you identify all of your responsibilities and keep track of each step in the process. It can also be helpful to ask a lawyer about the process for selling your home in your area, or for help with reviewing your documents.
Can I sell my house without a lawyer or an agent?
You are not required to have an agent, or a lawyer, when selling a house on your own. Real estate professionals typically justify their high commissions by reaching more and better qualified buyers, often leading to higher sales prices. A lawyer, however, can often help sellers prepare paperwork and avoid a variety of pitfalls at a much more economical rate than the commissions real estate agents charge.
To learn more about your rights and obligations in a For Sale By Owner deal, reach out to a Rocket Lawyer network attorney for affordable legal advice.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.