For Sale By Owner Tips
All homes are for sale by owner. It is the owner who holds the title. Homes for sale are offered by (1) unrepresented sellers or by (2) agents who represent and advise the seller while marketing their home.
While many homeowners sell their house with the assistance of a Realtor, some homeowners prefer to handle it themselves. Selling your home without an agent can be a lengthy, complex process.
The basic parts of the job involve:
- Pricing your house accurately
- Qualifying a buyer
Advertising
- Familiarizing yourself with basic real estate regulations and contracts
- Coordinate the details of a closing.
The greatest downside is the demand on your time and the legal and financial risks. Mistakes may cost you the money you're trying to save. Don’t become a statistic. Facts reveal the median selling price of a home sold directly by an owner was almost 15% less than those who use a Realtor. Unrepresented sellers typically put less money in their pockets and are at more liability and risk to themselves.
However, if you're thinking of trying to sell your home without an agent, here are a few tips:
Pricing Your Home
It is crucial to price your house correctly from the start. Overpricing is the most common mistake and some people actually ask too little for their house! A good marketing campaign can only do so much. Price will determine how quickly your property sells and if it sells.
If you need to sell your home in a hurry, you will likely need to price it at or below the market value. If time is not so critical, then you can try to get above market value. If your house isn't priced competitively, it may not sell at all. Intimidated buyers might walk away without bidding.
Are you sufficiently familiar with sales in your neighborhood to set the asking price? Find out the house's accurate value. Accurate value is the highest price a ready, willing and able buyer will pay. You need to consider comparable properties in your area, current market conditions, as well as the cost of financing and its availability.
Location is your biggest determinant of price. Invest in an independent appraisal by a qualified appraiser who has access to current market data and can be objective about what buyers would like pay for your house. Showing buyers a professional appraisal will help you justify your asking price.
Many homeowners price their home based on what another homeowner is asking down the street. The asking price is NOT the selling price. Base your price on what the market will stand, not on an inflated price that some neighbor might be asking. People tend to exaggerate when talking about the fantastic “deal” they pulled off. Be wary a neighbor who tells you they bought or sold for a huge sum. Work on facts, not fiction.
Don’t value your property based on your tax assessment, plus some magical percentage added on for good measure. Tax assessments can be quite different from the true market value.
Forget about what you paid for your home – it has no significance to the current market. What you want or need in financial terms is irrelevant. A buyer is not interested in your personal situation. Your home is only worth what someone is prepared to pay for it, which in most cases will be the true market value.
Selling a home requires an intimate understanding of the real estate market. Agents will sell your home for the highest possible price in a reasonable amount of time.
Your Safety comes first
Security is a major issue when selling your home by owner. A “For-Sale-By-Owner” sign is an invitation to strangers to wander through your home. People will arrive at your home, eager for their own reasons, not all of which are honorable. Opening your door to a criminal is the last thing you need.
The majority of lookers are safe, honest people and quite possibly home buyers. However, security measures are necessary for the possibility that one of the visitors could see your home as an opportunity for crime. It's an unfortunate fact that there are creeps out there who target FSBO homes as easy marks for theft or worse. Just ask a police officer how often unrepresented sellers are robbed, assaulted, or otherwise endangered by criminals disguised as home buyers.
- Make all your showings by appointment only. Get some information and check out the prospective buyer before you let them in your house. Always get a name and number and call back to verify them. Simply say, "let me check with my husband (wife) for the best time and I will call you back." Even if you are not married.
- Don’t be home alone when a stranger visits. This ‘truth’ hurts. Yet, being robbed, raped, or even worse – hurts a whole lot more.
- Have visitors sign a guest book and ask to see identification. You are inviting strangers into your home and you have a right to know something about them. If possible, jot down a license plate number. Put the information in a safe place so if something happens, the police have a lead on a suspect.
- Place all valuables out of sight. Guns, jewelry, keys, credit cards, silverware, and collections. Anything of value needs to be hidden. Hide ALL prescription drugs.
- Eliminate displays of personal information, such as which schools children attend.
- Never leave a messages informing callers that you are not home. Don’t let strangers know your schedule, such as when you or your spouse are not home, when you pick up kids, when you work, when you will be on vacation.
- Request that visitors enter and exit through one door only, except when you escort them to the backyard, garage, etc. Have quick and easy access to all of your exits.
- Never leave a stranger alone and watch everything they do while in your house. Keep a reasonable distance between you and your visitor. Never enter a bedroom, den or other room with a visitor. Stay in the doorway.
- Do not put information on flyers which would compromise security.
Seemingly innocent questions by a “potential buyer” may be designed to “case” your home. Beware of casual questions like “Do you have a security system?” If you feel uncomforable, tell the person you have another appointment and show them to the door.
Scams
One scam in Dallas: A friendly, clean-cut couple makes an appointment to view your house. When they get inside one of them asks to use the bathroom. While in the bathroom they search for prescription drugs. There is a big market for these.
Another scam: A nicely-dressed, well-spoken woman comes to see your home. She loves your decor, pays you compliments and asks to take some digital photos so her husband, who is away on business, can see the pictures. You have no objections. In fact, the prospective buyer has just taken pictures of your most valuable possessions and documented the location of the rooms. If you have a home security system, she may have taken a picture of the motion detectors and the security key pad.
Weed Out The ‘Window Shoppers’
Attracting potential buyers is the No. 1 problem encountered by unrepresented sellers. Attracting qualified buyers is even more difficult.
When the FSBO sign goes up, the parade of the unqualified curiosity-seekers begins. Window shoppers and “lookie-loos” are not serious about looking for a home but actually use it as a form of entertainment or as a hobby looking for decorating ideas. To make it more frustrating, they will call and stop by at all hours of the day and night.
You need to determine lookers from qualified prospects. A good real estate agent verifies a buyers pre-approval status before showing the property. You can lose a lot of momentum by getting into a contract, making plans to move, and then weeks later find that the buyer wasn't able to swing it financially. Then you have to start all over.
You should pre-qualify potential buyers to ensure they can afford to buy your home, before you spend any amount of time with them. A few careful questions can help you weed out those who aren't serious, or who don't stand a chance of getting a home financed.
It can be difficult for a seller to screen and qualify buyers comfortably. Will the prospects confide in you about their financial status? People who know they cannot get a loan think that unrepresented sellers offer a better opportunity, because they're hoping to find a seller who will finance the deal.
One of the challenges of an unrepresented seller is dealing with low-ballers. Sellers are often worn out by the time they realize how much time, effort and expertise it requires to spot these people quickly. Settling for a lowball bid is worse than paying an agent commission.
Be Prepared
Make your home appealing by making repairs, cleaning and painting. Cosmetic repairs are your best investment when it's time to sell your home.
When a buyer wants to look at a home, it must be available for them. Most buyers are not flexible enough to look at the home when it is convenient for the seller. As an unrepresented seller, you must be available 7 days a week. You may miss opportunities to sell if you are unavailable.
Be "on-call," and be willing to do the things most folks don’t like: working weekends, answering the phone at all hours, and always being polite.
Market Effectively
There's a lot more to marketing a house than putting a sign in the yard, an ad in the paper and waiting. You need to develop a clear marketing plan that will attract the largest number of buyers.
Realtors use a variety of promotional efforts to attract buyers. They include signage, ads in newspapers and magazines, mailings, open houses, flyers, Multiple Listing Service, the Internet, referral organizations, agent contacts, company contacts, as well as past customers and clients.
You should arrange professional-looking marketing materials. Prepare flyers and distribute them to all your neighbors. You'll probably want to plan some open houses. The cost of signs, flyers and advertising can add up, but don’t skimp here. Use every advertising option you can think of.
Nearly 80% of today's homebuyers use the Internet to search for homes. Without a great internet presence, online advertising and internet exposure you stand to lose many potential buyers.
Get great pictures of your home. Good photos to show prospective buyers are a great investment. If your house looks good in pictures, people will want to see more.
Keep in mind that you’ll be missing out on relocating buyers. Most big companies use relocation companies to assist their transferring employees and these companies usually work only through approved real estate agents. There is not much you can do about that.
Be prepared to follow-up with prospective buyers. They seldom buy on the first visit and it is up to you to keep their interest up. Don’t be too aggressive or they may get the idea that you are desperate and that could hurt your negotiating position.
Selling your home is nothing like selling a car. Every home is different and market values vary based on many different factors. Unless you sell real estate full- time, it is very difficult to keep abreast of market trends, houses in your neighborhood, and the people most likely to buy there. An active realtor knows how to reach the largest number of people who may be interested in your house.
Be ready to answer questions like "Why aren't you using a Realtor? Is there something wrong with the property? Since you aren't using an agent, we can take their fee right off the top, right?"
Negotiate
Arriving at the negotiation stage is a big achievement. Many unrepresented sellers feel the stress of the whole process on reaching this point. They often then agree to terms of the buyer and give in to the buyer's demands. You want to make sure you get the best deal and not just the fastest deal.
It's important to emotionally detach yourself from your house. Try not to be affected by unkind remarks from prospective buyers trying to get you to lower your price by insulting various features of your home.
Make sure you are comfortable with negotiating directly with a buyer, but keep in mind many buyers may not be. But, some are, especially if they are good and can negotiate your price to below the market value. Many buyers who aren't good negotiators, are afraid that you might be.
The vast majority of the qualified and "ready to buy" buyers are working with real estate agents. Be prepared for them to ask you to pay their ”buyer’s agent” commission (usually 3%). This is traditionally the way I help a buyer purchase a FSBO home.
FSBO homes typically attract bargain hunters who often expect you to lower your price since they, too, are looking to save money on commissions. While you're trying to avoid paying commission, if the buyer doesn’t have an agent, they are doing the same. These buyers will often deduct the commission from your asking price and then start negotiating with you. But why would you want to do that? If you’re going to take a % off the price upfront for saved commission, you could have saved yourself all the hard work and just listed with an agent.
Most buyers will require some kind of financing. If attractive terms are available, the buyer can, and often will, pay an even higher price. The more knowledgeable you are about available financing, the better your chances of making a sale at the best price. Lenders can acquaint you with their underwriting guidelines so you can attempt to qualify the buyer financially before contracting with them.
Every unrepresented seller should have an attorney or another qualified individual to preside over all agreements, draw up the contract, manage the sale proceedings and closing. Become familiar with top inspectors and escrow companies. Don't randomly select inspectors, attorneys, and title representatives. Like any profession there are people who can slow, delay and possible even cost you the transaction. Have a plan for where to close, where to buy a title policy, where to keep a good faith deposit, etc.
Before you decide to take the FSBO route, ask yourself: Can you get buyers to sign a purchase agreementt? How do you pick a Title Company, and who is suppose to pay their fees? What if the Buyer backs out of the contract? What coverage do I have if the Buyer sues me a year after closing?
Stay Legal
Preparing the proper paperwork, legal forms, disclosures etc. are your responsibility and you need to know everything that must be done to close the sale properly and legally.
If you are not skilled in the area of writing binding business contracts you may end up having your transaction fail, or ending up with a legal or financial liability because you made a mistake. Many home sales have been lost due to incomplete paperwork, lack of inspections or not meeting disclosure laws.
You must become educated about buyer's contingencies, seller disclosure laws, lead based paint issues, financing options, title and deed requirements. Texas is one of the most demanding states when it comes to selling real estate. Lack of proper disclosures are often the cause of post-sale legal disputes.
Individual sellers aren't subject to as many fair housing guidelines as real estate agents, but it's smart to follow all fair housing laws, just to make sure you don't encounter legal problems.
If you do not fully understand the legal ramifications and necessary steps required in selling a home, hire a real estate attorney. Don't cut corners here. An attorney not familiar with real estate processes and closing procedures could cost you hundreds of dollars and delay the closing. Neglecting to get guidance from an attorney or Realtor will cost you money, not save it. Factor in the extra attorney cost when looking at your bottom line.
Here is where my sellers find that a Realtor representing them is worth the money. There are so many details and fine print, creating countless pitfalls involving your life's savings. Making even a small mistake can mean serious trouble.
Contact a real estate attorney now and prepare a contract that you can have on hand. If you find a buyer, you want to be able to execute a contract without delay.
Verbal agreements cannot be enforced. Put every aspect of your contract in writing and make sure that everyone involved signs the agreement. Once you've reached an agreement and arrive at the contract stage, you must be aware of any contingencies the buyer has added to their offer.
The contract should spell out what happens to the buyer's earnest money, if the deal falls through. The earnest money is not yours until the house sells or the buyer breaks the contract in such a way that it becomes yours by prior agreement. It must be credited to the buyer's funds on closing day and should be held in a trust account until then.
If everything we just covered works, the final job involves coordinating all the legal and technical details to complete the transaction. It's one thing to find a buyer and get a contract. It's another thing to make that sale go through. You need to follow-up constantly on necessary paperwork, including inspections, surveys, title insurance, notice of escrow and loan approval to ensure a successful closing.
When You're Ready...
Many people just want to try selling on their own for a while and then, if the house doesn't sell, they hire a Realtor.
For many unrepresented sellers, the financial savings are disappointing. By the time they figured the amount of fees paid to outside attorneys, consultants, inspectors, appraisers, escrow and loan officers, marketing, advertising... they would have been better off to have paid the agent fee which would have included many of these charges up front. Many unrepresented sellers say the time, paperwork and everyday responsibilities involved were not worth what money they saved.
The Latimore Team’s Real Estate Directory
The Latimore Team
Donald & LaToya
Latimore
Residential Listing
& Home Buyer Specialists
800-836-3202 ext. 6001
Email:
HomeSales@LatimoreTeam.com
Keller Williams, Realty,
Columbia NE
140 Wildewood Park Dr.
Columbia, SC 29223
