How Does for Sale By Owner Work?

A For Sale By Owner (FSBO) works when a homeowner like you decides to list your house for sale without a real estate agent.

The process of a For Sale By Owner follows these steps:

1. Get your house ready to show
2. Set your sales price
3. Market your home
4. Show your home to potential buyers
5. Complete negotiating and paperwork
6. Find a closing agent
7. Negotiate after contract issues
8. Closing your sale

Now that you know the steps in the process for a for sale by owner transaction, let’s dive deeper and learn more about each one.

Get Your FSBO House Ready to Show

The first step in doing a For Sale By Owner is to fix up your curb appeal and interior to create a clean and friendly walk through.  A clean appearance makes your house more welcoming to potential buyers and helps increase the amount you’re offered.

Here are some easy and inexpensive ways you can do this:

• Increase your curb appeal to improve your real estate photography and first impression as a potential buyer approaches.
  • Trim your lawn and bushes, landscape plants and color in dry spots green.
  • Repair any crumbling concrete, missing gutters or peeling paint.
  • Rent a power washer for sidewalks, walkways and driveways so everything looks clean.
• Organize your closets and kitchen counters to show available space vs. making it look like your home does not have storage.
• Add fresh paint (in neutral tones) to rooms so you can remove smudges and dirt. This also helps display the space so the buyer can envision how they will make it their own.

Once you have your house ready to show, it’s time to figure out what to list it for.

Set Your Sales Price by Creating a Comp

To set the sales price on your for sale by owner, you’ll want to create a comp.  A comp is short for comparable – which is a similar home or homes near you that has sold recently. You use comps to calculate what you should list your home for.

Bonus tip: Just because you list for a certain price doesn’t mean you have to sell at that price. You could end up with a bidding war and get higher than asking on your for sale by owner property or you could get offers below your asking price.

You can find what similar houses in your area are selling for by researching sites like Redfin, Realtor and Zillow. Make sure to only include homes that have sold in the last 6 months to get a more accurate view of the current market.

Now that you have what houses are selling for, look for homes that are similar to yours including:

• Proximity to your home (within one mile if possible)
• Year built
• Condition
• Square footage
• Number of bedrooms and bathrooms
• Lot size
• Amenities (like a pool, outdoor kitchen, finished basement or a workshop)

In addition to looking online, drive by and attend open house events to see what the asking price is for similar homes that professional real estate agents came up with using their comps.

Pro tip: Have your house appraised.  It only costs a couple hundred dollars and you’ll have an unbiased third party evaluate the value of your home justifying your asking price.

Now we have a great looking home and know what to sell it for, our next step in the for sale by owner process is to market it!

Market Your For Sale By Owner Home

Marketing your For Sale By Owner house starts with good real estate photography. Good photography makes your house be more appealing as potential buyers scan websites, look through magazines, or check out the flyers you hang in your neighborhood.  In addition to great photos be sure to use engaging text to match your photos.

Bonus tip: Use different times of the day to display the best features of your home. If you get a glowing ray of light in the kitchen each morning, include a photo of what it will be like for the buyer to wake up each day with the sun and a delicious cup of coffee.

The description should help the buyer visualize themselves within your home.

Use phrases that stir emotions:

• Enjoy romantic sunsets on your cedar deck.
• You’ll be proud of your holiday dinners in your huge luxurious dining room.
• Every time you walk into your master bathroom you’ll feel like you are staying in a five star hotel.

Now that you have great pictures and content, you are ready to start finding buyers.

Marketing your for sale by owner home is easy.  You just have to test and keep at it.

Popular ways to sell a for sale by owner home include:

• Advertising your For Sale By Owner home on websites like Zillow and Redfin.
• Post pictures and listing information on your Facebook page and ask friends and family to share with anyone that may be interested.
• Try running ads using platforms like Facebook (Meta) ads and Google Ads.
  • Make sure to use demographic targeting so you can reach an audience that matches the type of person who would buy your home.
  • i.e. if a selling point is the school district, market to families with children.
• Put a sign in your yard.
• Host open houses on weekends.
• Contact professionals like HR departments at large and local companies, or divorce attorneys as they all have clients and employees looking to relocate or move into a new home regularly.

Pro-tip: Collect the email addresses of potential buyers as they tour your home and keep notes about what the buyer liked and didn’t like.  Now follow up with them by writing individual emails. Buyers will tour multiple homes and by keeping yours in front of them while reminding them what they liked can turn an interested browser into an offer.

Now that your advertising is getting people to call you, the next step is showing your home to potential buyers.

Showing Your Home to Potential Buyers

Pro tip: Safety is a must! Have a friend with you during the open house. Once the open house is over, have your friend walk through your home with you making sure everyone has left. And if you have medications or firearms, lock them up before you allow strangers into your open house.

Showing your home to potential buyers is how you sell your home. Instead of doing all the talking, ask the potential buyer questions like, “Is that the kind of kitchen you are looking for?” Your goal is to get buyers to say “Yes” several times. When buyers say “yes” it helps them associate your home with everything they’re looking for mentally.  And once they’re saying yes and falling in love with your home, it’s time to get the offer!

Offers don’t just happen, part of showing your home is seeding the buyer from a browser to an interested shopper.  You can do this with passive sales questions.  Try asking “Can you see yourselves living here?” and build up to, “Shall I get the paperwork started?”.

When the potential buyer says “OK”, you are ready to start the paperwork and the negotiations.  This is the most important and exciting part of the for sale by owner home selling process.

Start The Paperwork and Negotiate Offers

Start by getting the forms and disclosures you’ll need from a licensed real estate attorney.  Each state and county may be different, so make sure to find out about the following documents and which apply to you:

• Offer to purchase – with all terms and dates due.
• Any disclosures required by your state about things like radon, mold, lead based paint, etc.
• If buyer should or if you are allowed to ask them to submit a mortgage pre-approval or a proof of funds letter with their offer.
• How a buyer can submit earnest money (a deposit) with their offer and what you are legally required to do if you keep them waiting or decide to go with a different buyer.

It is important you have the paperwork ready to be signed when the buyer is ready to buy. If you don’t, the for sale by owner deal can fall through if a different house they liked is ready to roll.

Pro-tip: Don’t accept a verbal offer. Real estate deals that are verbal tend to fall apart and verbal offers are not always enforceable, depending on the state you live in.  Here’s a good example from Inman.com.

Bonus tip: Try to get your paperwork signed while the buyer is still in your home. This happens more than you’d think.

If the buyer sees what they want and other people are touring your home, the buyer won’t want to lose the property to another shopper that is equally as interested. If you get them to sign you’re one step closer to completing the process of a for sale by owner transaction.  And this brings us to the last step, choosing the right professionals to close and bind the deal quickly.

Choosing a Closing Agent or Attorney

You will need to choose a closing agent or attorney to help you through the rest of the transaction. And good news, this is the final step in how for sale by owner real estate sales work.

There is a specific legal process to go through to transfer ownership of a house. But don’t worry, this is easy and you have help!  Closing agents are licensed by the state and trained to do this work for you so choose a good closing agent that speaks in a way you can understand.  This will help make everything run smooth. You can also find a closing agent that is also a title company or licensed real estate attorney.  By using an all-in-one shop you may be able to close faster or have less hassles as you won’t be reliant on multiple people from multiple companies trying to communicate.

Money-saving tip: You are legally able to shop for a closing agent and title company allowing you to compare prices and services so you can save money.  You do not have to go with the buyer’s choice if you do not feel comfortable.

Now it is time to get the contract signed and sent to the closing agent for processing.  But you’re not in the clear yet.  The buyer may still try to negotiate with you.  This is normal and doesn’t have to kill a for sale by owner deal.

Negotiate Post-Contract Items

Post-contract negotiations generally include mortgage issues, appraisal issues and inspection issues.  These are normally not discovered until after your contract is signed, so don’t panic.  They do not mean your deal is dead.

Mortgage Issues That Delay Home Sales

Mortgage issues that can delay the sale of your house occur when the buyer is waiting for final approval for the mortgage.

Mortgage problems can include when:

• The buyer was not accurate with the income they reported to the lender.
• The buyer has un-filed tax returns or unpaid tax debt.
• The home has serious safety or structural issues discovered in the inspection and the lender does not feel it is a smart use of funds.

Pro-tip: You are allowed to talk to the lender and be notified of issues. This helps you determine how close you are to closing, or if you’ll need to reach out to other potential buyers to come back.

Appraisal Issues

The buyer’s lender will appoint an appraiser who will ask for an appointment to appraise your home. You don’t have to do anything but let the appraiser in for the appointment.  If you don’t feel comfortable with a stranger walking through, invite a friend to be there with you, or simply wait outside.

Pro tip: If the appraisal does not come close to what you are asking for, and the buyer is not ok paying a lot more than the actual value, the deal can fall through.  This is why getting your comp right is important. And it isn’t just the home buyer, it is the lender too.

But don’t let a low appraisal kill your for sale by owner deal, you can:

• Lower the selling price to the amount the home did appraise for.
• Complete and pay for items that are causing a lower appraisal such as a roof or foundation repair.
• Negotiate with the buyers to increase their downpayment so they need to borrow less.

Inspection Issues

Inspection issues can delay your for sale by owner deal if the inspection report reveals problems that the buyer wants you to pay for. If there are issues with inspection, you can agree to pay for the repairs, you can refuse the offer, or you can split the cost with the buyer. Inspection problems do not have to stop a for sale by owner deal.

When this is done, you are ready to close!

Closing the Sale

This is the easiest part of the for sale by owner process.

1. You sign the paperwork prepared by your closing agent or attorney.
2. The buyer signs the paperwork they need to purchase the home and receive the mortgage.
3. Your closing agent will take the necessary signed papers to the county records department and give you the proceeds from the sale.

And that’s it!  Now you know how a for sale by owner sale works, the steps involved during the for sale by owner process and how you can save time and money to help your deal close faster.