“The FSBO (For Sale By Owner) Experience”
Walt Hennessee, Owner/Broker Zeriss Realty LLC / Real Estate Instructor /
Certified Distance Education Instructor (CDEI)
So you want to sell your house on your own. There are some that tell you not to even bother – no one really sells their home on their own. Don’t buy it: it CAN be done, and IS done every day. But it is a complex process, and can be emotional and frustrating, with problems popping up every time you turn around. If you’re considering selling it yourself, you need to answer these questions:
- Do I have the time to do this?
- Do I have the knowledge?
- Can I be objective?
- Will I know a good buyer when I see one?
- What is my time frame, and what is the plan if it doesn’t sell?
If you’re satisfied with your answers to these questions, you’re ready to proceed! Are some FSBO’s successful? Of course. Do most of them run into surprises and roadblocks? Count on it. It’s no secret that many FSBOs do end up working with real estate agents eventually. The right real estate agent actually creates natural competition for your home by exposing it to hundreds more qualified buyers than are typically available to the FSBO. Many FSBOs may choose to list their home after trying to sell it on their own, or they may agree to pay a commission to an agent who brings them a buyer. The goal is to SELL your house in the SHORTEST amount of TIME for the BEST PRICE. And there are a lot of ways to do it.
Before I became a Realtor, I sold my own homes. Some went relatively smooth. Others I wouldn’t go back and attempt again. Here’s what I always found to be the biggest challenges and what I recommend you watch out for:
1. Pricing the home. Always remember, your home is worth what someone is willing to pay you for it. There is no “exact” number. So where in the world do you come up with a price? More often than not, homeowners will look through online listings, ads in the paper, ask their neighbors or consult with a Relator who won’t actually sell the home. Most often, these methods will provide a BALL PARK figure, not actual SALE prices, which determine the market value of your property. Your estimate can be off by thousands of dollars, too high or too low. Too high and the property won’t sell. Too low and you’re out the money.
The Most Common Mistake: Pricing too high. The amount of interest your home generates will be directly related to the asking price. Once your home is priced and on the market, it generates an initial surge of activity. This is a delicate matter, because first impressions are everything, and once potential buyers see your initial price and think it’s too high, it’s tough to go back and correct the damage. This initial surge can be wasted if the price was not market sensitive to begin with.
2. Managing the transaction. As the FSBO, you are responsible for verifying and following your buyer’s financing, negotiating the deal, preparing the proper documents (contracts – which are binding on you and the buyer), etc. These details of the transaction can be overwhelming to say the very least. Especially when financing difficulty, inspection problems or negotiation roadblocks pop up.
The Most Common Mistake: Assuming the coordination will “just happen”. In other words – leaving matters to the buyer, the title company, or other involved parties. In a FSBO transaction, YOU are the one who has the most at stake, so it is YOU who has the most to lose. Don’t assume that others are going to manage it for you. The buyers are overwhelmed with their home buying “to do” list anyway. And the title company is not being paid to coordinate the entire deal. YOU are the one who will need to make sure everything happens when and how it should.
3. Providing the buyer with what they need. There are things that the buyer will need from you to close the transaction. And there are things you must legally provide to the buyer of your home (various disclosure forms, lead-based paint forms, etc.). Some other instruments you may owe the buyer, such as title policies, home warranties, purchase agreements and addenda, can be daunting if you don’t have the experience to understand how they affect your transaction.
The Most Common Mistake: Lack of information. Don’t wait until the closing date to realize you forgot to give the buyer something. Buyers tend to be wary of FSBOs anyway, because there is no neutral coordinator involved in the transaction. Make sure you spell out up front exactly what you’ll be providing the buyer, and when. I also recommend purchasing a home warranty and advertising it as a selling point for the house. It shows that you believe in your property and it creates the perception of reduced risk in the minds of the buyers.
And remember: Internet marketing and exposure is CRITICAL these days! After all, more than 85% of home buyers begin their search online. Many FSBO web sites are well worth the small investment you will make to give your home its “net presence”.
Marketing and selling your own home certainly can be done under the right circumstances but you owe it to yourself to do the homework, manage the deal objectively, and call in help when you need it.
If you have questions, need an expert opinion, or would just like to talk about your marketing options, I hope you’ll give me a call and it will not cost you anything. I would also be happy to provide a custom “FSBO Plan to Sell Your Home” designed specifically for your home and location. This will insure when you put your FSBO on the market, you will be way ahead of the game and all your bases will be covered.
Tips for Selling Your Home
Some would like you to believe that selling your home is an enterprise fraught with peril. Something like, “don’t try this at home”. If you have enough time and a real estate agent to provide advice, you can sell your home by yourself. It’s not particularly easy but with a little preparation, money and time, it can be accomplished at a substantial savings to you.
Setting the appropriate price…..
Setting the appropriate price is paramount in your quest to sell your home. If you set your price too high, you won’t get any traffic to your home. If you set your price too low, you’ll immediately sell it, but you will miss out on money you deserve.
Stick to the facts….
Concentrate on only those things that the buyer would be interested in. Try to eliminate extraneous considerations like how much you paid for it. Also, the lovingly built Koi pond in the back yard may not hold as much value for a buyer as it does for you.
What are other houses going for?....
Real estate professionals use what are called “comps” (or recent comparable sales) to properly price a home. This is a list of prices for houses in a neighborhood (comparable to yours) which have sold recently or have offers on them currently.
When using comps, be careful to add or subtract the differences in the comp to or from the value of your house when calculating a comparable value. Also, be careful you don’t compare houses which are for sale currently. The expectations of those sellers might be inflated.
What do you need?......
If you are not in a hurry to sell, then you might want to have a slightly higher asking price. If you are in a hurry to sell, as in the case of a job transfer, or already having bought your next home, you might want to price the house 5%-10% lower than comparables for a quick sale.
If you can offer incentives such as a home warranty, owner financing (not recommended), or an assumable mortgage, you might be able to command a higher price for your property.
Know your market….
What is the real estate situation in your area? Are homes selling fast, or are they languishing for months, sometimes years before being sold. The market can determine what price you need to set to sell your home. If houses are selling in less than 60 days on average, it would indicate a seller’s market. If they take 120 days or more to sell, it’s probably a buyer’s market.
Get professional help….
Many real estate agents may offer a “free” market analysis to allow them to be able to pitch their services to you. Sometimes they will price the house low in order to try and get a quick sale, or maybe price high to try and gain your business.
Either way, never invite a real estate professional to your home if you have no intention of listing with them. You can tell them up front that you intend to try to sell it yourself, and if you’re really planning on doing it, tell them that you will consider them if you are unsuccessful.
You might also want to hire a real estate appraiser to determine the value of your home. These professionals can cost you anywhere from $300-$400, but many times the fee is worthwhile as you might have been planning to undervalue your home by thousands of dollars.
You are competing with real estate professionals for buyers.
As a FSBO, you are competing with real estate professionals for limited pool of qualified buyers. The real estate professionals have the upper hand because they have the extensive networks of contacts, they know the area, and they have access to the MLS (Multiple Listing Service).
Buyers use agents because they cost them nothing. They will drive a prospect around for weeks showing them house after house. Buyer’s agents earn a commission when their client purchases a property that is offering a commission to a buyer’s agent.
FSBO’s must learn the difference between a “prospect” and a “suspect”. A prospect supplies a name and phone number. A suspect provides either a name or phone number never both. Statistically a broker screens 10 prospects to make one sale.
A way to tap into the real estate community is to welcome buyer’s agents, and offer a commission 0f 2% to 3% to those who bring you a buyer who successfully closes the sale. This commission money may be the best money you ever spend.
Be wary of real estate professionals who tell you that they have a buyer who is really interested but will bring them around only if you sign a long term (30+ days) contract with him or her. A simple contract stating that you will pay a percentage commission if the agent brings you a client you sell to. The contract can be stated to expire in 7 days. Let me know and I will get one of these contracts to you.
Real estate professionals will not bring prospects to your house if they have no possibility of making any money doing it. They make their living by earning sales commissions, which are split with their real estate company.
Make sure you do little cosmetic things around the house that make it look bright and “spruced up”. Look at the house from the street. Is it:
*Clean – freshly painted if need be
* Neat - Grass cut, trimming done and hedges trimmed
A coat of paint can do wonders on both the outside and inside of the house. If possible, paint well ahead of sale time to avoid the “paint smell” that might imply there were flaws which were quickly covered up. Put light scented air fresheners in the house. Make sure that it is clean and picked up. If you are selling your house yourself, you need to be prepared for people tromping through your house on very short notice.
I found that replacing the old electrical switch and plug plates, at about $1.00 each, makes the house look as if it had all new wiring.
Have a neighbor or relative (Anyone who is not as emotionally involved in the house as you are) take a walk through with a critical eye and point out the things they like and especially those they don’t like. Take that advice! The small crack in the wall you’ve been living with for the last 10 years will draw a prospective buyer’s eye like a magnet.
Market your property….
Get a professionally made sign for the front yard. Homemade signs look…well…homemade. Make sure that your phone number is prominently displayed on the sign and visible from the street.
Have flyers made up with color pictures of the house, and take out a small ad in the local newspaper. The FSBO (fizzbo) conjures up thoughts of a real bargain.
Keep your cool…..
When you get a prospective buyer in your house, one of the big stumbling blocks is negotiations. Some sellers are so excited they become pushy and scare buyers off and into the arms of a buyer’s agent. This can result in added commission costs.
Keep safety in mind at all times….
When you advertise your home as a FSBO, you are inviting complete strangers into your home. Hopefully they are there to see if your house is the one they want to purchase, but that may not be the case. Keep the safety of you and your family utmost in your mind. Always ask for identification and write the information down.
Know you limits….
Unless you are a real estate professional or an attorney, hire a professional to handle the paperwork for you. I prefer an attorney, because they are bound legally to look out for your interests. Expect to pay $400-$600 for a real estate closing, but it will be some of the best money you spend. You will have the peace of mind knowing someone else is getting all the appropriate paperwork together and all you’ll have to do at the end is sign a bunch of paperwork and accept your check.
Have your exit strategy ready ….
Set a firm deadline as to how long you will try to sell your own home and stick to it. If the deadline passes, spend no more time waiting around, and look at other alternatives, like hiring a real estate agent. The longer your house remains on the market, the “staler” and less appealing it becomes to prospective buyers who wonder “what is wrong with it?”