You Can Sell Your Own Home and Save Big on Real Estate Commissions
Let me first start with the full disclosure that I am a licensed real estate agent in Virginia. But, I am first and foremost a real estate investor who, like many others, has asked the question; is a real estate agent really worth 6% of my home’s value. Some people have decided the answer to this question is a resounding, no.
If you’ve decided to sell your own home then make sure you’re prepared.
Before you do anything else make sure you know what you’re getting into. Be confident that it is possible to sell your own home. But, also be aware that it is a lot of work and it can be very frustrating. If you want to get top dollar for your home then you really have to put in the work. The listing agent on a home makes a very big difference. There have been many homes that I’ve looked at and wondered, why isn’t this home selling. It’s priced right. It shows well. Yet the home languishes on the market while surrounding homes go under contract. Then I call the listing agent and the reason becomes clear. A lazy agent can kill a deal. If the agent is not readily available, responsive, accommodating, knowledgeable and pleasant then it can really drag a property down. Very few people have a unique home. If buyers can’t get information and access when they want it then they just go on to the next home. You’re now your home’s agent; be a good one.
Real estate agents know that for sale by owner listings are a good place to go fishing for new clients. Many people try to sell their own home and end up quitting in frustration and end up hiring a realtor.
Take a good look in the mirror. Every real estate deal requires flexibility. Many people are so intent on controlling the deal that they become inflexible. Or, they think their home is so special that it’s the buyer’s privilege to come tour the home. If you want to sell your home at 20% under value then yes you can demand the deal goes according to your schedule. If you want to get top dollar you need to get every possible buyer in your door. If you tell a potential buyer to come back tomorrow they may never come back.
Selling a home is all about the vibes. The buyer’s look at a home and everything associated with it. Homes are bought more on feelings than on any financial or structural factor. There are a lot of homes out there of similar price and amenities. You need to get someone to fall in love. If you’re generally gruff and demanding that plays into the overall feelings a person develops for the deal.
If you pass this self-evaluation then the next step is education. Many people think that selling their own home is as simple as advertising it and waiting for the offers. It’s not like selling your car or anything else. There is a lot involved with conducting a real estate transaction.
The good news is there are many tools now available to help you. Many For Sale By Owner websites and services have emerged over the past 10 years. That is generally good for the seller. The problem is that there are so many for sale by owner websites it’s hard to choose which one to use and it can get expensive listing your home on multiple sites. Try finding a site that has a lot of local listings. Most of these sites cost a couple hundred dollars to build a listing but they also have a lot of good information and they’re a great place to start your education.
I recommend that you make contact with a real estate attorney before you even list your home. A real estate attorney can help you make and navigate a deal and be a great source of information and contacts.
One of the biggest mistakes for sale by owners make is incorrectly pricing their home. People use some crazy methods to price their home. Many just look at what their neighbor’s home sold for. People are also inclined to price in their personal needs or attachments. It’s hard to look at your home as just a structure when you’ve made so many memories there. But the proper way to price your home is based on recent comparable sales. There is too much involved in market analysis to describe here so make sure you specifically research this topic.
Before you advertise you need to get your home ready for market. You have to be careful here. Most major renovations only return 50-60% of what they cost. It’s best to go through your home and take care of all the maintenance issues. New carpet and paint might be a good idea. Realtors spend a lot of time walking through homes with buyers and they have a sense of what sells. You’ll need to do a little homework. Decluttering your home and simple staging is usually a good plan. I also like to use air fresheners to help generate those good feelings in a home and engage more of the buyer’s senses. Your home needs to be as pleasant and inviting as possible but over improving will hurt your bottom line.
Now you’re ready to start advertising your home. Hopefully during your education phase you have looked at a lot of for sale by owner websites. Now is the time to select one or two and put them to work. Purchase a package and advertise your home in as many places as possible. You should be able to keep your advertising budget below a $1000 very easily. Make sure your ads are consistent. This takes a little managing.
Once your home is ready and listed you have to make a plan for how you’re going to accommodate potential buyers. If you can only show your home on weekends and between the hours of six and nine pm then you’re going to miss a lot of potential buyers and there’s good chance the price will come down.
You have to screen your buyers. At least make sure they are preapproved for a loan from a reputable bank or mortgage broker before you proceed to serious negotiations. Be prepared for tire kickers and time wasters. It’s amazing how many people will set up an appointment and then never show.
Have a plan for negotiating and handling offers. Some for sale by owners don’t really think this far. If you have a buyer that is willing and able you need to get that deal locked down right away. As I said, I recommend having a lawyer already identified. This is no time to be hitting the yellow pages to find someone to write or review an offer for you. Don’t count on your buyer to write and present an offer as is typically done. Many unrepresented buyers won’t know where to start. You also need to make sure your contract is complete, led based paint, seller disclosures, and HOA documents are some of the forms that are required but often overlooked. Failing to provide certain forms can cost you the deal and more.
Alright, now you have a contract. But, you don’t just get to sit back and wait for your check. You now have to manage that contract. Many people seem to believe that a contract is some sort of powerful mystical shackle that cannot be broken.
In reality a contract is binding on both parties and both parties have obligations to perform certain tasks and the seller usually has more to lose. The seller is often obligated to perform a list of tasks in a given time period. Failing to know these tasks and perform them on time could kill the deal.
I know what you’re saying, if the buyer breaks the contract then I’ll just sue them. Well good luck to you. I’ll tell you right now, our legal system does not work for middle class Americans. We have full time jobs, busy life’s and we lack the tens of thousands of dollars required to pay a lawyer to litigate. Your chances of winning are normally 50/50 at best and even if you get a judgement collecting that money can be another full time job.
So, get an earnest money deposit of no less than 1% of the contract price and deposit that money in your real estate attorney’s or title company’s escrow account. If your buyer breaks the deal without cause then you can at least keep the escrow as compensation for the time you lost on market. Earnest money deposits also ensure that your buyer is serious and committed to the deal.
The home inspector is going to find problems. How are you going to handle it? This is a particularly vulnerable time in the transaction. You just got done beating each other up on price and now the buyer wants you to fix a bunch of little nitpicky items and a couple big ones. Many people take this personally, don’t do that.
Pay close attention to the language in your contract about the home inspection. The seller will have a limited time to respond to the inspection report or the buyer may walk away penalty free. It might also state a certain dollar amount in repairs that the seller is obligated to make.
Just keep in mind a head of time that the home inspector is probably going to hand your buyer a list of at least 20 items that need repair or attention. Home inspectors have been under fire and many of them report every flake of paint. Be prepared in advance to make some sort of concession or at least prepare yourself to not take it personally. Try to place yourself in the buyer’s shoes and be solution oriented. It will cost you time and money to start over and the next buyer will probably hand you a similar list.
If you successfully handle all of these issues you might finally find yourself at the closing table. But you’re not done until the money is in your account. The list of things that can and often do come up at the closing table are too many to list so again, have a good real estate attorney involved.
Be aware that most people who are looking at homes for sale by owner expect some sort of discount. They know there is no agent commission involved which creates more work and risk for them. Many will state this outright. This is a hurdle not easily overcome. Homes sold without an agent typically sell for less than homes that are sold with agents. I will say statistics on this are drastically skewed but still it’s hard for anyone to deny that there is not some discount. Being educated, prepared and diligent will help you close that gap.
I will tell you that I have sold several of my own homes without an agent. This area is particularly difficult since many buyers come from out of town and have little time they often just contact an agent. I now list all of my homes with agents.