In Dallas, the median home price in Q1 of 2023 was $372,400; the Austin market saw median house prices reach $467,900 at the same time. If you’re a typical home seller offering a 3% commission to your listing agent, that’s a median cost of $11,172 or $14,037, respectively. There are valuable services that real estate agents provide, such as advertising the property, listing it on the MLS, handling the title process, and negotiating deals.
But many homeowners don’t feel that the agent is providing over $11,000 of value—let alone that the other agent is providing an extra $3,000 of value. Many homeowners are starting to consider selling their homes as For Sale by Owner (FSBO), and the market is changing along with this trend.
Technology companies and marketing services firms are providing the tools sellers need to confidently manage real estate transactions without agents. Buyers are also starting to search out FSBOs more readily because they want to pursue potential savings. Take a closer look at how FSBOs are changing in Texas and what you can do to benefit from the uptick in these property sales, both on the buy side and the sale side of the transaction.
Both Buyers and Sellers See FSBOs as a Way to Save Money
Ultimately, both buyers and sellers recognize FSBO transactions as a way to save money. While homeowners handle a lot of line-item fees while selling their homes—such as property taxes, concessions, and fees—the lion’s share of those costs goes toward commission fees. The norm in Texas is that sellers pay 6% of the home purchase price to the agents: 3% to their listing agent and 3% to the selling agent representing the buyer.
But with an FSBO, sellers can reduce that 6% aggregate commission down to 3% for the other side’s agent and go without. This one change can reduce seller fees by around $10,000. They can either list their property at the same price as they would have with an agent and keep that money for themselves (minus any listing fees and advertising costs) or safely list the property for up to $10,000 less to prompt a quick sale, knowing they haven’t lost any money.
Buyers also profit from this arrangement. Because sellers have that new 3% margin of savings, buyers can make a slightly lower offer, especially in a turbulent market, and expect sellers to be more receptive to it. For example, buyers can offer to buy the property for 1.5% less than the list price, and if their offer is accepted, both sides equally save money from omitting the listing agent.
3 Challenges Buyers Face While Navigating an FSBO
A For Sale by Owner arrangement typically impacts the seller’s process and experience far more than it does prospective buyers. As a buyer, you may need to navigate these challenges:
- Some FSBOs will not be listed on the MLS—the Multiple Listing Service that realtors and major real estate sites use to get information about new houses on the market. You may need to explore non-standard real estate sites or stay vigilant for ‘For Sale’ signs in your ideal neighborhood.
- Some buyers’ agents may not prefer FSBOs. These properties may present far more work on the agent’s end as they take on some of the paperwork and logistics aspects that a listing agent would otherwise oversee. FSBO sellers may offer less than the standard 3% for their commission. While real estate agents should act in their buyers’ best interests, these factors can affect the house search and negotiation process.
- Not all FSBO sellers have experience. Some are selling their homes for the first time or don’t have pricing and selling tools to help them manage the process. As a result, the property may have an inflated price, or negotiations may be hard to manage.
How Buyers Can Successfully Purchase an FSBO
With today’s market and resources, it’s possible to navigate all of those potential challenges. It’s important to note that 10% of home sales in 2022 were FSBOs. Because they’re becoming increasingly mainstream, many realtors are more willing to help buyers find one.
As a buyer, you also have more digital resources than in previous years. You can easily search FSBO listings across traditional and non-traditional sites like Facebook and Craigslist or by simple word of mouth. If you want to purchase an FSBO, or at least remain open to the possibility, let your agent know and do a little searching on your own so you can scoop up a great find.
5 Challenges Sellers Need to Consider Before Selling Their Home as an FSBO
As a seller, managing an FSBO deal can be simultaneously very rewarding and a little stressful. The advertising, pricing, showing, and negotiating elements of the process all fall on your shoulders, as does making sure everything proceeds to closing day correctly. Some of the biggest challenges you’ll encounter include the following:
- Knowing how to price your property: There’s an old adage that your house is worth whatever someone is willing to pay for it—and in Texas’s red-hot housing market, people are willing to pay a lot for the right location or a property with the right amenities. However, it’s important to start with the right price. If you list it for too low, you’re leaving money on the table. But if your price is too high, your property might languish on the market, falling lower and lower in the search results until you have to lower the price to get attention.
- Putting your listing up on the MLS: Generally, only licensed real estate agents have access to the MLS. This database houses histories and listing details for every property on the market. Agents use it to find properties for their buyers, and the database pushes out the property details to Realtor.com, Trulia, and other major real estate sites. Without an active MLS listing, your property won’t be very visible to prospective buyers.
- Managing showings and open houses: In a traditional transaction, your listing agent would put a Supra on your door, manage scheduled showings, and even run an open house or two for your property. Without an agent, you get to pick if you have open houses or just allow showings—but you also have to manage everything on your own.
- Staying in control of the contract process: In Texas, real estate agents must use standardized TREC contracts. But in an FSBO arrangement, you can create your own contract or use a TREC contact if you prefer. While this freedom can be empowering, you need experience or expertise in managing contracts. This is vital for ensuring the buyer doesn’t get perks you didn’t necessarily mean to agree to. You may even need a lawyer to review all the paperwork, and that can be costly.
- Managing title requirements: During the period between accepting an offer and the deal closing, a title agency will need to review the title and deed history of the property. This ensures the property is yours and you have the right to sell it and that the buyer will become the owner, free and clear. Depending on the particular deal terms both parties agree to, you may or may not need to choose the title agency used or pay some of the fees.
How to Make the FSBO Process Better: 3 Best Practices for Sellers
Those problems are by no means insurmountable. Because FSBOs are becoming so popular, there are plenty of online resources where you can learn more about the process and gain helpful tips if you get stuck at any stage. There are also services and digital tools that can help you do most of the things licensed real estate agents can while still saving money.
Here are some modern strategies FSBO sellers are using:
- Use AI and pricing algorithms to list your property at the right price based on real-time data. You may not have direct access to comps and pricing forecasts like realtors, but you can use online pricing tools to zero in on the right price based on market data and buying trends.
- Get your property on the MLS with a flat-fee listing service: This is one of the biggest tactics for any seller. While real estate agents conventionally had exclusive access to the MLS, that’s not the case in today’s market. You can create your listing by describing the property, putting your list price, and uploading photographs of the property. A service with access will ensure everything is properly uploaded onto the MLS. Providers charge different fees for additional services, so you can further fine-tune and control your approach.
- Pick a title company you trust: Title work has to be hands-off, even in an FSBO, because it can only be done by licensed and certified professionals. But you can retain some degree of control over the process by choosing a title company you trust. Look for companies that offer relatively low fees, have a simple and reliable process, and maintain a proven record of handling everything on time.
Incorporating today’s digital tools and resources into your FSBO strategy can make it much simpler—and more profitable—to manage the deal without an agent.
For Sale by Owner Is Changing—Make Sure You Have the Resources to Do It Right
When selling property in Texas, chances are you stand to make a hefty profit. But when paying a listing agent 3% of your home’s purchase price doesn’t sound right, selling the house by yourself is always an option. At ListingSpark, we’re here to help make the process simple while still keeping the reins in your hands. With our flat-fee listing service, you can upload your property details onto the MLS and catch the attention of more buyers and agents. We also provide a la carte photography, marketing, and management services. Reach out today to start exploring modern tools for modern Texas FSBOs.
Learn more about the current state of the Texas real estate market and get predictions on what you can expect in 2023. Stay up-to-date on trends and make informed decisions with this comprehensive report from ListingSpark!
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