So you’ve decided to sell your home? Of course every seller wants to make as much as possible and sell as quick as possible. Right? Well, a big decision is whether to use a Realtor or sell it on your own. If the seller decides to sell the home on their own, it is called a For Sale By Owner (FSBO). Some will discount the value of a Realtor and choose to try FSBO listings. But keep in mind that selling a home is a lot more than putting a sign in the yard and making some flyers. If you’re serious about listing your home as a For Sale By Owner, then there are questions to ask yourself. Additionally, spend some money in a few areas as a FSBO seller. Hopefully you find this article as a good start in selling your home.
How Much is Your Home Worth?
Determining the value of your home can be tough because there are so many factors. Ask any appraiser! Real estate statistics will show that your best chance of selling quickly is to price the home well up-front. Overprice the home, then the best opportunity to sell is missed. Once the home sits on the market a while, buyers wonder what’s wrong with it. But be wary of online home value estimators like Zillow’s Zestimate. Zestimate could be way off since it goes by the tax office square footage and doesn’t take into account other variables like condition.
Although, some neighborhoods with cookie cutter homes and many recent sales should not be hard to determine a value. If a couple of homes next door sold quickly for $350,000 just like yours, then your home is probably worth $350,000. Another potential issue in determining value is underpricing the home. What if you left a lot of money on the table because of under pricing?
Use a Realtor for Determining Home Value
Other than the easy scenario above, a local and knowledgeable Realtor is best for determining a home value. Realtors familiar with all homes in the neighborhood and surrounding area has its advantages. A couple areas of importance are as follows:
- How do recent sales compare in quality, size, amenities
- Knowing how much buyers are looking to pay in the area
Although you consider selling on your own, Realtors may still help with a market valuation of the home for determining a price. A Realtor will provide a thorough market analysis of the home including supporting recent sales. So if a Realtor offers assistance in this area, take it. Yet don’t be surprised if an agent will not do these things for free as this is one of their offered services in their listing agent service.
Should You Hire a Photographer and Video Expert
Pictures grab buyers’ attention first. So think about someone scrolling through endless listings and what stops them are interesting pictures. Taking pictures with a cell phone usually doesn’t cut it. Also DO NOT alter pictures as it will only bring trouble to the seller. Successful real estate agents typically have a high end camera plus the expertise in taking high quality pictures. If not, then real estate agents have a trusted photographer on call. Also video takes the visual element to another level and even drones are even taking it further. Drones create excitement from a unique angle and works especially good for homes on the water or golf course. For maximizing your chances of bringing buyers quickly, spend the money on high quality photos and video!
Market FSBO Homes to Real Estate Agents
Even if not using a real estate agent to list your house, offer to pay a buyers agent fee. Unless you strongly feel you can quickly attract buyers yourself, paying at least a buyers agent fee is smart. Additionally, market the home to buyers agents working your area. Just think, Realtors have a huge network of buyers so you need to showcase it to your marketing team (Realtors). Also consider an open house for real estate agents. Give area agents an opportunity to see your house in person, mention the buyers agent fee, and they may find a buyer.
Prepare for Buyer, Appraiser, and Attorney Requests
Whether using a Realtor or selling as a FSBO, having these items are a necessity. Providing these will help for a smoother contract and closing process. Not only for the seller, but also the buyer because the buyer is your customer. So make the customer’s process as easy as possible.
- Survey or plat map
- HOA covenants and restrictions
- Prior title insurance policy – may help the buyer save money on title insurance
- Choose an attorney to represent you as a seller
- Mortgage information – provide to attorney for obtaining payoff
- Warranties for appliances, siding, roof, windows, etc
- Utilities contact list and monthly costs
- Existing termite contract or recent treatment
- Flood elevation certificate and flood insurance policy (if applicable)
- Make sure the whole house is available for the appraisal & home inspections
Keep everything together for easy access. Plus start your own list for moving and start your own mortgage prequalification / strategy session with our mortgage team. At the end of this article we share the details for this very important step.
Make a Plan for Screening Buyer Traffic
This part may be overlooked until scheduling that first buyer comes and you get nervous. Just think you are bringing someone into your house that you do not know. Consider having a system of screening the buyers as well as having someone capable of protection at the showing. If a buyer is not using an agent, check to make sure the buyer isn’t a threat of stealing or worse. But if an agent is bringing a buyer, check out the agent’s credentials and license status. This is just to make sure that the agent is really a licensed agent.
Be Careful of Representations You Make
This is a litigious society so if you market and sell your home as a FSBO listing, think about this. Realtors carry errors and omission insurance in case of a mistake in a home representation. We are not aware of a policy being available for sellers, but you could check into this. Although a seller could make a slight mistake in calling floors “oak”, what if the buyer discovers it is cherry or laminate? This could be a big issue. As a FSBO seller, make sure to use the correct contract forms. Of course, normally a Realtor handles completing the purchase contract and addenda. If not using a Realtor, strongly consider a real estate attorney drawing up the contract. It is a legal contract, so having a licensed real estate agent or attorney is a very good idea.
Understand the Seller and Buyer Closing Costs
When it comes to figuring an acceptable purchase price, a seller should know the numbers. For starters, know how much you need to net as a seller. There are costs that the seller is customarily responsible for. These costs vary by state and property. Common costs include mortgage payoffs, outstanding liens or judgments, prorated property taxes, deed stamps, transfer tax, deed prep, and potentially other costs. It is best to request an estimated seller cost breakdown from the seller’s attorney. The earlier these figures are known, the better. In addition to normal seller closing costs, there may be a need for the seller to pay all or a portion of the buyer’s costs.
As a seller, it is important to understand the concept of seller paid closing costs (SPCC) or sales concessions. First of all, just because a buyer asks for seller paid costs, does not mean you have a weak buyer. Often the seller paid costs are a just a buyer strategy. Why not roll the costs into a low rate mortgage loan? Additionally, there are plenty of well qualified buyers for a low to no down payment loan, yet they lack the funds to cover closing costs. That is where SPCC comes in. So as long as the seller is comfortable with the net after paying costs and the property appraises enough to cover the total price, it could be a good idea for selling the property. Check out the maximum seller paid costs for the buyer here.
Anytime you sell a property, always consult your accountant about tax ramifications. Depending on your individual scenario, there could be a tax liability, a tax free gain, or nothing at all.
Questions to Ask a Realtor Before Deciding to go For Sale By Owner
Prior to completing the steps mentioned above and spending the money, make sure to interview an experienced, local Realtor first. Here are some good questions to ask a Realtor. A real estate agent who will represent you well will gladly answer these questions for you.
- How to your advertise my home?
- What is your social media marketing strategy for my house?
- Can you show me examples of photography and video techniques you would use?
- Which homes have you listed in my area and what were the results? Look at original list price versus sold price
- What tasks would you take off my plate if you were my realtor?
- Are there any other ways your services exceed other agents?
- How much is your fee for selling my home and how much would you suggest to a buyers agent?
- How can you sell my home for more money and faster than I can?
- What is your process of qualifying a buyer to show them my home? Do you show to just anyone or only qualified buyers?
- Do you recommend an open house? If not, why?
- What are your feelings on staging?
- What is your strategy about price reduction and why?
After meeting with Realtors, then you can make an informed decision to try a FSBO listing or to hire a Realtor. Keep in mind that all of these steps take time, learning, and money. This is not meant to talk you out of using a Realtor, but it is meant for a seller to strongly consider the advantages and disadvantages of a For Sale By Owner sale.
How to Transition from a Seller to a Buyer
Don’t underestimate the importance of this step after deciding to sell. Start the financing process for the next home purchase before the current home is sold! Whether selling as FSBO or with a Realtor, here are 4 top reasons to start early.
- Understand loan options in advance
- Strategize best use of sales proceeds
- Reduce time between sale and purchase closings
- Take the stress out of entire process
Understand Options and Strategies
Reviewing loan options including product type, cash to close, and payment goals is best accomplished early. Many buyers don’t realize that many low down payment programs aren’t just for first time buyers. For instance VA, USDA, FHA, and down payment assistance are not just for first timers. So if not netting a lot of money from the sale, there are great options. But even if netting a larger amount, there could be better options for the sales proceeds. For instance, paying off debts or paying for college may be a better strategy for these funds. Do you have to pay the IRS as a result of the sale? Talking to your mortgage professional and financial adviser is key so that the funds are used in a way that meets your financial goals and strategies. Maybe you don’t have a strategy. Well, this could be a time to create one!
Reduce Time Between Closings and Stress
On top of loan option discovery, planning, and use of proceeds, the advantage of starting early could help reduce the lag time between the closings. If the right house is found, the closings could actually even happen on the same day! Same day closings work well for the buyer as long as everything is planned out well and everyone’s homes close as planned. Finally, the overall goal is to take as much stress out of the process as possible. There is nothing worse than selling a house, spending the proceeds on paying off a bill, and then finding out that was the wrong thing. Now you don’t qualify or the terms could have been better.
This is why we offer our S2B program, which means Seller to Buyer. Ask about how it works for sellers whether using a Realtor or selling as a FSBO home.
Author: Russell Smith
Team Move OVM Financial loan officer success is Russell’s primary focus. He provides the tools and techniques he used as a top producing loan officer. Additionally he offers the Team Move OVM Financial Agent Training Program. Sharing is so important to Russell so he works diligently to be a resource to loan originators and Realtors.