For Sale By Owner, often called FSBO is when a seller chooses not to enter a listing contract with a real estate agent to sell their home. The listing contract gives the real estate agent the excusive right to sell the home and collect a commission, usually 3%. In return for signing a listing contract, the agent will provide marketing services to the seller. These services include entering the home in the database of homes for sale called the MLS or Multiple Listing Service. All MLS homes can be seen online at www.realtor.com. Other marketing services that may be provided are signs, flyers, ads in local real estate magaznes, and conducting an open house.

With FSBO the seller does all of the marketing services themselves and saves themselves the 3% that they would have to pay a listing real estate agent. Additionally, if the buyer has a real estate agent, that agent also collects 3% in commission.

As an example, let's use Joe & Donna Jackson who purchased their home 4 years ago for $100,000. The Jacksons have signed a contract with Agent Ann of ABC Realty to list their home. After researcing the house she lists the house at $115,000. Lisa & Mark Bean were driving through and fell in love with the Jackson's house. They told their realtor, Agent James about it and he contacted Agent Ann to setup a viewing. The Bean's purchased the house for $115,000.

Can you guess how much commission was paid to the real estate agents?
6% of $115,000 is $7,900!
This equates to each real estate agent collecting $3,450 each! Money that the Jacksons would have pocketed had they not used a real estate agent.

Another benefit is that homes sold without a real estate agent usually sell for 15% less that those sold with an agent. This is because the seller does not have to raise the price of the home to cover the real estate agents commissions.