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FSBO MISTAKES AND HOW TO AVOID THEM
One of the biggest reasons people choose to forgo a realtor and sell their home themselves is to save money on real estate commissions. 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, that doesn’t mean you can’t do this yourself and still have success. It just takes some knowledge to help get you there. When selling your home yourself, it is important to understand that you are now your own real estate agent. It's like going pro se before a judge in a court. Like an attorney, there are many important things that an agent does and knows, things that you may not be aware of. These things can end up costing you money, and lead to frustration. This information is to help you avoid some of the common pitfalls and mistakes people selling their home by owner make.
NOT PRICING THE HOME CORRECTLY
Get this wrong and you literally could cost yourself thousands of dollars. However, pricing a home too high can also cost you. Over-pricing when you sell a home reduces buyer interest, makes competing homes look like better values, and can lead to mortgage rejections once the appraisal is in. Over-pricing when selling a home is the single biggest reason why many "for sale by owner" home sellers don't sell their homes successfully. Remember: the home selling market dictates the price (not what you think it should be worth).
It is important to note that home buyer websites such as Zillow are not the best resources for determining what the fair market value of your house is. The information is usually not up to date, nor is it as accurate as it could be. Looking at what homes in your neighborhood are listed at is also not a reliable resource—many homes are priced too high, and some could be distress sales. The best resource is looking at recent comps from the MLS, providing the most accurate assessment how to value your property.
BENEFITS OF HIRING AN APPRAISER: Hire an appraiser to perform an appraisal. It is a small expense, but it is well worth it. You will know what your home is worth so that you do not lose out on money, nor will you suffer through a long time on the market because you are overpriced. Plus, you can use the appraisal in your marketing to justify your asking price.
MARKET INSIDER: Pricing your home slightly below market can draw lots of interest and lead to a bidding war, which will actually drive up the price.
LACK OF MARKETING AND TIMING
Most FSBO homeowner sellers don't realize they can put their home on the (Multiple Listing Service) MLS without formally hiring a realtor. Having a home on the MLS is a huge marketing advantage as this is the most common method for getting a home sold. There is also the added bonus that MLS listings are the resource for home search websites such as realtor websites and Realtor.com.
All marketing should be geared toward making your phone ring and increasing traffic to your home. Consider your timing. Seasonal sales require unique approaches. Selling in spring is very different than selling in winter. April is considered to be the best month to put your house on the market in many parts of the country. Consider targeting buyer's agents with your marketing, and offering additional compensation to lure a buyer's agent to show your home. Remember, most buyers have an agent.
FOR SALE BY OWNER (FSBO) MADE EASY
Monday - Friday:
8:30 a.m. to 5:00 p.m.
FOLLOW THE SALE UNTIL CLOSED
Pricing your home right, listing it on the right venues and putting aside your emotions are all necessary to sell your home without a real estate agent. Additionally, you need the time and commitment to follow through with your efforts to actually close on the sale. That means quickly scheduling times to show the home, answering all emails, texts and phone inquiries in a timely manner and relisting the home when the current ads expire.
It also requires you to declutter the house, keep it clean both inside and out, and be willing to accommodate potential buyers whenever they want access. All of that takes time and work and is why real estate agents get a commission of as much as 6%. They are supposed to do all the heavy lifting. But if you have the time and desire and want to maintain control, you can successfully sell your home.
FSBO is much easier, of course, if your property is located in a red-hot real estate market. Cash-offers and bidding wars are common themes when you are selling in a market that is in demand. It can be a lot tougher if houses in your neighborhood aren’t moving, particularly if those houses are similar to yours. In that scenario, making sure your home is put on the MLS will give you a significant marketing the edge.
BE READY TO NEGOTIATE
Your sales price shouldn't necessarily carved in granite. Expect negotiations if the home inspection turns up problems. In fact, Dave Ramsey recommends that sellers pay for an inspection, too, even before they list their properties for sale. Forewarned is forearmed, and you'll especially want to know about big ticket repairs in advance so you can address them before they become an issue.
One of the benefits of using a real estate agent is you don’t have to deal with would-be buyers and any demands they may have. Nobody goes into the home buying process planning to pay full price for a property (at least in most cases). Negotiation is part of the game, which means you have to be prepared to field offers and be willing to negotiate.
It also means you have to brush up on your negotiating skills in order to maximize the sale. Keep in mind you don’t have to entertain low-ball offers or ones that you feel may have a hard time closing. For instance, if a potential buyer won’t have enough for a 20% down payment, its okay to reject the offer. The last thing you want to do is to enter into a contract and find out three months later the deal won’t close.
Resist the urge to accept a low ball offer if traffic to your home is low. Patience is necessary when selling a home. Set a realistic price you would be happy selling your home for and stick with it.
EMOTIONAL SELLING CAN KILL THE DEAL
One of the reasons people fail to sell their homes on their own is that they get too emotional. Homeowners stay in their houses for an average of 13 years, according to the National Association of Home Builders. That’s a lot of time to create a lot of memories and emotional attachments to a home. For people who raised their children in their home, letting go of that shagged carpet, regardless of how smelly, stained or outdated it is, may be hard. After all, their children crawled across and then took their first steps on it.
But emotions lead people to price their house too high and then balk at selling it for a fair offer. They think it's worth more because they love the decor or the renovation and don’t care what would-be buyers think. Their properties tend to languish on the market until they get a reality check that often results in them lowering the asking price—or giving up and hiring an agent.
In order to have a successful FSBO, you have to leave all your emotions at the front door. You have to view the home sale as a business transaction and nothing more. That can be difficult to do. If you think you won’t be able to treat the sale as a business transaction, then you may want to consider a real estate agent. An agent has no emotional skin in the game. Their incentive is to get the home sold quickly and at a good price. They won’t get insulted if potential buyers criticize the paint color or the nursery room addition. It’s easier to go it alone if you can set aside your emotional attachment to the house.
SELL YOUR HOUSE FAST LIKE A PRO!
Okay, so you don't want to work with a real estate agent to sell your home. How about working with professionals that have an understanding of the home selling process. As a Marketing Consultant and Facilitator we are quite familiar with the intricacies of selling a home. Complete the questionnaire above and receive a FREE no obligation Comparative Market Analysis (CMA) on your home! This is one of the most valuable assessments short of an appraisal that will assist you in determining the value of your home based on current market conditions.
As your Marketing Consultant and Facilitator we assist you in avoiding many legal landmines and mistakes that can be made and lead to a financial and legal mess. A simple thing such as checking the wrong box, failing to provide all disclosures or not properly wording a contingency can cost you thousands. The paperwork is often voluminous, complex and can be a slippery slope for the novice. We are more than familiar with all the necessary forms to facilitate a real estate transaction and numerous other factors involved in the home selling process.
A BUYER'S AGENT WILL MOST LIKELY BE INVOLVED
Deciding to sell on your own doesn’t mean the buyer's agent will not be involved. After all, chances are an agent has your future buyer working with them. Agents can actually be a great resource of traffic, but one thing can keep that flow of traffic away…not offering a commission to the buyer's agent.
You should offer a commission to agents if they bring a buyer. Why, because Agents avoid dealing with For Sale By Owners who do not do not offer a commission. Nobody works for free, and if there is no commission coming to the buyer's agent, they will avoid your house like the plague. However, by offering a commission, you greatly increase your chances of a sale.
FOR SALE BY OWNER (FSBO) FUNCTIONS
While the details of each real estate transaction vary, here are some of the tasks the seller is responsible for in an FSBO transaction: Determine the asking price by researching neighborhood property values for homes with similar features (aka "comps"), such as the number of bedrooms and the home's square footage. Stage the home for sale and make any necessary repairs. Manage the marketing, including advertising, online listings, brochures, flyers, and listing the home on the multiple listing service (MLS). Schedule and host all of the showings and appointments. Negotiate the price and terms of the sale once an offer has been made and accepted. Prepare the legal documents, such as the sales contract, residential property disclosure form, mineral and oil rights form, occupancy agreement, and lead-based paint disclosure (if the home was built before 1978). Sellers may also need to track down other documents, including the property survey, permits, certificates of occupancy (COs), loan documents, utility bills, property tax bills, homeowner association covenants and agreements, and the property title. Prepare the deed (e.g., quitclaim, warranty, or some other type of deed), and ensure it's signed, witnessed, and notarized. Close the sale. Depending on the state, the closing will take place at a title company or a real estate attorney's office.
HAVE YOUR PAPERWORK IN ORDER
Real estate transactions aren’t as easy as opening a new bank account or applying for a credit card. There is a lot of paperwork that is required to close on a home sale. Regardless of what state you reside in, there are going to be federal and state laws you have to adhere to. There are also federal and state real estate documents and rules the buyer and seller have to follow in order to complete the sale. Often home sellers and buyers are forced to sign countless documents at the closing. Some of the documents necessary to sell a house include the original sales contract with purchase price, documents related to the title and ownership of the property and mortgage and financing documents. Tax records may be required as well as appraisal and receipts for any home improvements you may have done to the home.
Daunting, indeed, but the Internet has a lot of free resources to help you out. DIY home sellers can download real estate and home sale forms for free from places like Nolo.com and FindLaw.com. For a small fee, FindLaw.com lets you download a real estate buying guide for your specific state that includes all the rules and regulations. There are also services that will help you in the sale for a fee. For Sale By Owner has a service that costs $399 and provides the tools, forms, and support necessary to sell a home without a real estate agent— still cheaper than paying the listing agent's commission.
BENEFITS OF LISTING FSBO
Going through a real estate agent or broker can save a homeowner a lot of time and headaches. However, commissions can reduce the seller's profits. The average real estate commission in 2019 (the most recent data available) was 4.96%, down from 5.03% in 2018, according to research firm Real Trends. A 5% commission on a $250,000 sale would come out to $12,500. If the seller handles the sale themselves, they would get to keep the entire $250,000—sort of. Keep in mind that the commission is usually wrapped into the sales price, which means the buyer ultimately pays the fee. Of course, with no commissions to worry about, the seller can ask a lower price—and the buyer can get a better deal.
SUMMARY AND CONSIDERATIONS
Savings thousands of dollars in commissions can be tempting. Still, it's important to remember that when a seller doesn't employ a real estate agent or other professional, the seller assumes all the responsibilities of completing the transaction. If the seller is unfamiliar with the home buying and selling process, any mistake can be quite costly. If the seller sets the listing price too high, for example, fewer buyers will consider the home. Likewise, too low an asking price means the seller could leave money on the table—potentially more than was saved by selling FSBO. Also, there can be legal risks with selling a home via FSBO if the legal documents are not drawn up properly or if the home has issues that aren't adequately disclosed.
Depending on the experience of the seller, avoiding the commission could be a wise financial decision. However, sellers with little knowledge of real estate transactions can find the situation stressful and may be better off working with a qualified professional, such as a Marketing and Facilitator Consultant. Ultimately, whether FSBO makes sense for you boils down to how much time you have to spend on the effort and whether you can handle the sale as a business transaction. If you have the time and desire to do all the tasks you would hire a real estate agent for, then go for it. If your efforts fail and your home languishes on the market, you can always call in the experts.
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