DIYing is all the rage and that’s true when it comes to selling a house.
Fed up with paying a real estate commission, some homeowners are opting to go it alone. They’re betting they can save money, move the property faster and are more equipped to highlight selling points than a real estate agent. With the Internet and social media, they think the days of using an agent are coming to an end.
The results so far have been mixed. Zillow, the online real estate company, recently surveyed homeowners and found that while 36% of sellers that (at first) attempted to sell their homes on their own, only 11 percent of sellers—in other words, less than a third of those who started down the DIY path—actually sold without an agent. Millennials, city dwellers and minorities, were more likely to try For Sale By Owner, or FSBO, Zillow found. Just 19% of Baby Boomers tried to sell on their own initially, compared to 57% of Millennials.
The National Real Estate Association, the main trade group for real estate agents, has long argued homes sell for less when an agent isn’t involved. Researchers have undercut that claim, finding homeowners who go it alone aren’t selling their homes for less. Instead, they are just unloading cheaper properties, on average, than those who use a real estate agent.
Either way, there are benefits to cutting out the real estate agent. The average 5% to 6% commission is the most obvious one. You can save thousands of dollars that can be used for home improvements or put aside for emergency expenses. Keep in mind you do have to pay the commission to the buyer’s agent if he or she uses a professional real estate agent. It’s typically 2.5% to 3% of the final sale price.
Let’s say you’re selling a $200,000 home. A 6% commission means you have to shell out $12,000 to the real estate agents. Forgoing the real estate agent also means you have complete control over the sale process and can devote more time than a real estate agent, who is juggling multiple clients, might.
At the same time, there are a lot of challenges to FSBO, with time and comfort level among the big ones. Whether it makes sense for you, depends on how quickly you need to sell, your availability and your expertise in the real estate market.
How to Price Your Home
Selling a home requires more than listing it on real estate websites or spreading the word on social media. In order to ensure your property sells fast, you have to price and market it correctly. Both of these tasks take time, knowledge and determination.
Indeed, the effort FSBO takes is one of the main reasons people turn to a real estate agent to begin with. A good agent knows what comparable homes are selling for and what buyers in a particular neighborhood want. They understand the local market and can get it listed on the right venues.
If you decide to forgo a real estate agent, the best way to determine what you should price your home for is to get it appraised. It will cost you an average of $300 to $400 and in return, you’ll get an unbiased assessment of your home based on its current condition. Appraisers can spot attributes that may get you more money or problems with the property you can fix before listing it.
Armed with the appraised value of your home, compare that to what recent houses in your neighborhood went for to set your asking price. There are online tools that can help, but it will take time and commitment to make sure you price it correctly.
If that sounds too complicated then FSBO may not be for you. How much you list your home for is critical. The last thing you want is for your property to languish on the market because you set the asking price too high. Nor do you want to take a low ball offer because you didn’t do your homework. If the idea of making a mistake gives you too much anxiety, then a real estate agent may be the better choice.
Marketing Your Home
Marketing your home is equally as important as pricing it right. If buyers don’t know it’s for sale, it doesn’t matter how competitive you are with your asking price. Just because you are adept at clever tweets and your memes go viral doesn’t mean you know how to most effectively advertise your property.
There’s a lot that goes into marketing a home including taking digital photos and videos, putting your house in the best possible light in marketing material and making sure you are listing it on venues where the buyers you want will see it.
Most real estate agents use the multiple listing database (MLS) to find homes for clients. In order to get your FSBO property listed on MLS you need to be a real estate agent or have an agent list it for you. That service can cost about $400, but it’s still cheaper than paying a seller’s agent commission. Keep in mind that if you list on the MLS, you may be on the hook for a 2% to 3% commission for the buyer’s real estate agent. But MLS isn’t the only venue you should list on. There are several FSBO websites including ForSaleByOwner.com, HomeLister and Homefinder.com that are visited by buyers looking to purchase a home. Real estate sites such as Zillow and Realtor.com are also important venues to list on. The idea is to get as much exposure as possible. The more traffic the better the chances you have of selling your home quickly.
If you have the time and, more importantly, the skills, you can create a Website for your home. The site should include digital pictures, videos and information about the property and neighborhood. Wix is a free Website creation tool you can use. Even a YouTube video or Facebook post can go a long way to getting the word out about your listing.
Thanks to advances in technology, taking professional pictures or videos don’t require a fancy camera or a professional. Your iPhone or Android device is ideal to capture the essence of your home and doesn’t require an additional investment.
Emotional Sellers Not Wanted
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.
Gear Up to Negotiate
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% downpayment, its ok 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.
Get your real estate paperwork ducks 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.
Follow Through Wins the Race
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, using a real estate agent may give you the edge.
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.