|
|
1. General Tips (SELLER TIPS) |
How to Plan and Have a Successful Open House
Selling your home is stressful enough without people calling and “dropping by” at all hours to look at your property. You need to be organized with the showing of your home, so that you don't feel that the selling of your home is wiping away all of your time. You need to have a specific time and day for potential buyers to look at your home.
The best way to keep control over your time is to schedule an open house. Plan on a fixed date and time at least one week in advance, so you have plenty of time to prepare. Weekends are usually best, generally because of work related issues to you and to potential buyers. Plan on at least 3 or 4 hours each day. When someone calls about your home, give them your open house schedule.
This will help you by:
1. Giving you time to clean up and organize your home so that you're prepared for buyers when they come by.
2. Saving you time. You know when you will be showing your home, so you can plan your schedule accordingly. This cuts down on “drop-ins” and makes your life easier.
You may have people ask if they can come back for another look. Most likely they want to bring a friend or family member to look also. You do want them to come back if they are genuinely interested, so pick a day and time that will be convenient to both of you. This will give them another opportunity to ask questions and find out more about your property
.
Be sure to have plenty of help. Enlist a neighbor or family member to help answer questions and to make sure that each potential buyer gets quality “one on one” time to receive all the information they need to make a decision. You will also want to make sure that anything valuable is locked away safely if you can't have someone walk thru your home with each buyer.
Plan for Success
Use these tips to make your open house successful for you and your buyer
1. Presentation is everything. Clean your home and make any necessary minor repairs. Clean up all the clutter around your home. Put some items in storage if need be. You want your home to look spacious, not space-less. Potential buyers are probably looking for more space, if you show them how clean and spacious your home is, they will be more interested.
2. Make Sure The Price is Right: The price that you want for your home may not be the price that it will sell for. The best way to determine a reasonable asking price for your home is to call 1 or 2 real estate agents and ask each for a comparative market analysis. This will provide information such as what other homes similar to yours have sold for recently, the original asking price, the selling price, and how long it took those homes to sell. This is an invaluable tool for the by-owner seller. And most real estate agents will do a comparative market analysis for free.
3. Post Signs: Signs sell more houses than anything else. Buyers see signs and follow them into neighborhoods they may otherwise not have known about. You need 3 types of signs. For Sale by Owner, Open House, and “arrow” signs. Put the large For sale By Owner sign in the front yard. Put up Open House signs when you plan to hold Open Houses, and the “arrow” signs should point the way from the main roads to your property.
4. Make a Flyer: Include your asking price, the address of your property, directions, the number of bedrooms and bathrooms, and anything that you think makes your house a “home”. You may also want to include the distance to local hospitals, schools, supermarkets, etc. Add your name, phone number, and the date and times of your open house.
5. Advertise: Post classified ads in your local paper. The internet also has classified ad sites where you can list in your area. Be sure to include details about your home and anything makes your home special, as well as basic information, such as name, phone number, etc.
6. Help your buyer obtain financing: Contact a mortgage firm and make arrangements to refer potential buyers to them. This will benefit the buyer and they will appreciate the effort on your part to help them. It will also benefit you because not only have you impressed the buyer but if they choose to use the mortgage firm, you can keep informed of the process. You will also know right away if the buyer can receive financing for the sale.
7. Don't miss a call: Every phone call that comes in could be a prospective buyer. Don’t take the chance of missing any calls. Be sure you have an answering machine set up, or a voice mail service. You want buyers to know that you're serious about selling, so be serious about returning their calls.
8. Be organized with your Time: Stick to your open house schedule. When someone calls and wants to know when you will be available to show your home, refer them to your open house date and time.
9. Learn to negotiate: Know what your bottom line is, and if you have to lower your price, do it in small increments. You want the buyer to know when they have reached your lowest possible price. You may also want to consider including appliances, such as dishwasher, stove, refrigerator, etc. as part of your negotiation.
10. Patience is a Virtue: Rome wasn't built in a day and your home won't be sold in a day either. Hundreds of potential buyers will not show up on your doorstep the very moment that you advertise your home for sale. A waiting period of a few weeks to even a month is not a long time when selling a home.
Dealing with Low Offers
Ok, so you've listed your home, you've had a great open house, and you finally got an offer. The offer, however, was thousands below your asking price. What do you do?
Don't take lower offers on your home to heart. First of all, the buyer doesn't really expect you to sell your home for a ridiculously low price. They do expect you to counter them with a slightly lower price than your original asking price. Most buyers will use this tactic to get a better deal.
Another reason why you may get a really low offer is because you are selling your own home without a real estate agent. A potential buyer may think you don't really know what you're doing and feel that he/she may trick you into offering your home for a lower price.
If you get a terribly low offer on your property, stay calm. Make an offer back to them that is slightly higher than your original asking price. This will show them that you really do know how to negotiate. Then bring them back to their original offer and make a serious counter offer. That will put a stop to the games and tell the buyer that you know what you are doing.
Make Buyers Remember Your Home
Keep in mind that yours is not the only property that some buyers will be looking at. Use these tips to make your home memorable to buyers.
- Make sure your home is presentable. Clean it. Do any minor repairs that need to be done. De-clutter every room and the garage if need be. Make sure your grass is cut and the outside is as clean as the inside.
- Play soft music. This will give the potential buyers a sense of comfort.
- Bake something that smells really good but not too strong. If you don't bake, you can get something from the bakery that will give the buyer a sense of “home”.
- Use potpourri in all bathrooms. Something with a nice, clean smell is best.
- Put fresh flowers in rooms that would otherwise seem empty or bland.
- Provide detailed information on your home in written form so that you can hand it out to buyers. Be sure to include photos.
- Be sure to tell them about all the little things that make your home special.
Understanding Closing Cost
It is important to research the laws in your area to understand who is ultimately responsible for paying closing costs. Buyers and sellers alike are generally responsible for their own closing costs.
Buyers generally pay mortgage fees, appraisal or home inspection fees, homeowner's insurance, title and escrow fees, and attorney's fees. Buyers are also responsible for commission if they use a real estate agent to help them find a home.
Sellers generally pay outstanding mortgage, commission if they use a real estate agent to sell their home, any repairs that are stipulated in the contract that must be completed prior to the sale, and their own attorney's fees if applicable.
So you can see that both parties have their own closing costs in any real estate transaction. If you do your research and plan on these costs prior to selling your home, you won't be met with any surprise fees that will take away from the profit of your sale.
Tips for Selling Your Home Fast
You want to sell your home, and you want to sell it NOW! You are no different than any other homeowner who has made the decision to sell.
Use these 5 tips to ensure a quicker sale.
1. Think minor league. Minor repairs are key. Major repairs are time, not to mention money, consuming, and shouldn't be worried about. Stick to minor repairs. Do some touch-up painting and lawn care. These minor repairs will be more noticeable and won't drain your time or wallet.
2. I can't stress enough - Cleanliness is next to Godliness. Clean and organize everything. Every room, every closet, everything!!
3. Pets must be kept outside. Even inside pets must be put outside and the carpets and furniture cleaned to remove any leftover hair.
4. Have something setting out that smells homemade or put flowers or potpourri around in various rooms. The smell will trigger something in the minds of your buyers and make them feel “at home”.
5. The number 1 key to selling a house is PRICE! Try to set your asking price just below the market price for the area that you are in. If your home looks and smells wonderful, AND the buyer can get it for less than market value, you've got a sure sale!
Effectively Using Signs
If you are selling your property on your own, For Sale By Owner signs should be used. Using these signs is a necessity. These signs receive much more attention that just For Sale signs.
You will also need Open House signs. Open House signs are important to getting interested buyers to look at your home and eventually to make you an offer. If they can't find you, they can't buy from you.
You can purchase FSBO signs using this link. Putting them up shouldn't take more than an hour or so, and the results will be well worth the time and effort. Make sure that you point them in the right direction, and place them so that they aren't hidden by trees, shrubbery, street signs, etc. You want them to be seen completely and without hindrance from other obstacles. You also want them to be as directional as possible, so that any potential buyers
cruising through your neighborhood can find you easily. Keep in mind that you need several of these to put at every major entrance that leads to your property. Place them at all intersections and major roads leading to your home. You want to create a trail to your property to make it easier for potential buyers to find you.
As you can see, signs play a very important role in the selling process. You need to get the word out to potential buyers about your property. Potential buyers need to know about your property and how to get there. Signs are the easiest, least expensive, and most successful way to accomplish both these tasks.
Agents Aren't Necessarily Enemies
If you are intent on selling your home yourself, you need to understand that real estate agents may actually prove to be useful to you.
Consider this: many buyers will use a real estate agent to locate a property for them. If an agent expresses interest in your property, it may be that they have a potential buyer in mind and want to show them your home. Keep in mind that if a buyer is using a real estate agent, then the commission that the agent receives will be from the buyer and not from you. It is in your best interest to let agents bring their buyers to your property.
Many agents may contact you because they think that you will tire of trying to sell your home on your own and eventually let them take over. This can be very helpful to you. They may, just to be “helpful” provide you with documentation that you will need for the sale, including a purchase agreement, escrow instructions, disclosures, and other things that you may need. Keep in mind, they will probably only be “helping” you because they expect you to eventually need their services; they no doubt feel that you will never be able to sell your home yourself. We know this is a wrong assumption, but they don't. So let them help you, use every resource that they offer. It will only benefit you in the long run.
A Picture is Worth a Thousand Words
To properly market your property, you will need to have pictures. These need to be clear, well taken pictures that draw attention to your property and really “show it off”.
There is no possible way for you to describe your property to a potential buyer by using only words. Pictures are essential for a clear, concise description. As the old saying goes, “talk is cheap, but a picture is worth a thousand words.” For instance, if a home is referred to as “cozy”, one might get the impression that it is an intimate, safe, home-y place. When in fact, “cozy” may very well just mean small!! This is why it is important to properly photograph your property so as to not mislead buyers.
You have to assume that most buyers will not trust you. Especially if they don't know you. You can't really blame them; you probably wouldn't trust them either. So taking clear, detailed pictures is of the utmost importance for the description and detailing of your property. Your picture could very well be the first impression that a potential buyer has of your property. And remember you always want to make a good first impression.
You may want to consider hiring a professional photographer to take your pictures. They will understand the lighting and angles, and how to take a really flattering picture. You can very well take the pictures yourself, but remember to take more than you think you'll need. You want to be able to pick the best out of what you have. A good rule is to triple the amount that you need. If you think you need 10 pictures, then take 30. That way you'll have a lot of different angles and you can choose the 10 best ones.
Real Estate “Professionals”
Think of your doctor. You trust him or her because you know that they spent years studying and interning, and have years of experience in doing what they do. Some people trust that their Real Estate Agent has the same knowledge and experience in their profession. This is just not true.
Real Estate agents study for approximately 90 hours to be qualified for the state licensing exams. These exams are multiple choice and only take about 4 hours. They also only require a score of 70% passing. The real “training” that real estate agents receive has little to do with properties and transactions, and everything to do with selling.
They are trained to get clients, either to buy or sell, their homes. They are trained to use many techniques to get a signature on their contracts, and thus getting large commission checks. Their goal is not to help you; it is to help themselves to large amounts of commission.
Please bear in mind that there are agents whose goal is to help their clients. Most, however, are only interested in their money. By using FSBO, you will avoid the process of trying to find the “good” agents and get on with the task of selling your home.
The Problem with Improving
We've all heard the Real Estate “Gurus” telling us to buy a house, fix it up, and then re-sell it for a major profit. This is a good idea, unless you over-do it. You can run into problems when home improvements drive the cost of your home into more than the market will allow.
There are two basic rules when dealing in real estate:
1. Location, Location, Location. Your home must be in a location that is desirable to buyers. It must be accessible, and most buyers nowadays want convenience to hospitals, stores, etc.
2. You should never buy the best home in the neighborhood. You should look for a home that needs some minor improvements. This way, if you do the work, you can re-sell it for a tidy profit.
Both of these facts ring true. However, the one drawback is that buyers sometimes improve on a home so much that they price themselves right out of the market.
For example, let's say you buy a home in a neighborhood where the market value of homes is $300,000. This means that other homes similar to yours are selling for $300,000. You find a “fixer upper” for a miserly $250,000. Great! That's a $50,000 profit when you re-sell it. Now let's assume that the kitchen needs to be remodeled. It needs to be larger, and the appliances look like the ones your grandmother had in 1950. So you proceed to spend $25,000 to remodel the kitchen and bring it into the 21st century. Now let's say that you decide to add some landscaping. You think a pool would be a good selling item, so you have a pool installed, and add some privacy shrubbery, not to mention the patio deck around the pool. All these improvements set you back about $15,000. Now you decide that the carpet needs to be replaced, and you have your heart set on hardwood flooring. This alone sets you back a cool $10,000. Then you decide to add a two-car garage. After all, everyone wants a house with a garage. You spend another $20,000 on the garage. Now your home is perfect!
The only problem is that when you decide to re-sell it, you have exceeded its market value by $20,000. You paid $250,000. Your improvements totaled $70,000, and the market value of the homes in your neighborhood is only $300,000. You're out $20,000 when you decide to sell.
When buying a fixer upper, it is important to put a plan together and stick to it. More importantly, it is vital that you create a budget and stick to it. This may all sound obvious, but this scenario plays out over and over in the residential real estate market.
Can You Be a FSBO?
Selling your home is not the only major decision that you must make. You also need to decide if you are going to use a real estate agent, or if you will be a FSBO.
FSBO simply meant For Sale by Owner. This means that you are selling your home without the help of a real estate agent. Many homeowners decide that they would rather sell their homes themselves instead of paying a hefty commission to a real estate agent. Homeowners who have experience in real estate generally prefer to sell as a FSBO seller.
If you do decide to be a FSBO seller, here are 3 things to keep in mind:
1. Selling your home will take time. You will have to be able to host open houses, or show your home when potential buyers want to see it.
2. There will be paperwork. If you're not comfortable with paperwork, you can elect to hire a real estate attorney to handle it for you. However, the paperwork is mostly done on pre-printed forms that you can purchase online or at most office supply stores.
3. There will be frustration. You need to decide if you want to deal with the frustrations that may arise out of the transaction. There may or may not be issues to deal with. If there are, you need to be able to remain calm and deal with these issues.
If you do find out that you can't handle being a FSBO seller, don't panic. You can always hire a real estate agent to help you if and when you need one.
Offers Below Your Asking Price
There will be at least one buyer who will offer you a price so low that you take it as a personal insult on your property. Don't. Don't take low offers to heart. Generally there are a few reasons that someone makes you a terribly low of the process.
There are two basic reasons that someone may make a terribly low offer on your property:
1. The potential buyer is trying to figure out how desperate you are to sell. He doesn't really think that you will sell for this low offer, but he does think that you will counter with a price that is slightly lower than your original asking price. If you do, he still gets a deal. The truth is, he's just trying to figure out how low you will go.
2. The buyer thinks that because you are a FSBO seller, that you don't really know what you're doing, and he can “trick” you into selling your property for a ridiculously low price. Just show him that you do, indeed, know what you are doing. If he offers you a really low price, offer him a counter that is slightly HIGHER than your original asking price. This way, he knows that you can negotiate and he'll stop playing games and make a real offer.
FSBO Homes are More Popular
By John Good
The real estate market has cooled over the last few years. There is no longer a stampede of buyers ready and willing to make offers on homes. One area of the real estate market that hasn't cooled is the FSBO.
As a FSBO seller, you need to understand that people may assume you don't know what you're doing, and will let them “steal” your property for a ridiculously low price. Take heart, these assumptions will help you sell your house, and they'll help you do it quickly.
Real estate investors look for FSBO properties. They do this because they know that you will negotiate on the price and that there is not an agent involved. They assume that they can buy your property for a low price, and then flip it for profit. They assume that you don't know how valuable your property is, and that they can make a nice piece of change off of your naivety.
Other buyers may just assume that you will negotiate on the price, and offer them a better deal if they are serious about buying. They assume that you will sell, and assume that you will do it a just about any price.
Don't automatically try to show potential buyers that you know what you are doing. Know what your bottom line price is and stick to it. However, don't let the buyers know what your bottom price is. Keep your asking price above your bottom line. Let them think that they're getting a great deal. That way everybody wins.
Being a FSBO seller is a definite way to attract potential buyers on your property.
What Makes Your Home Special
When you decide to sell your property, you need to keep in mind what makes it special for you. You need to let potential buyers know any little thing that makes your house a home.
For instance, can you see the sunset from your back deck? Do you have hummingbirds in the spring?
Home buying is based mostly on emotions. People want to buy a house that will feel like home. Let your buyers know anything special about your home. Tell them stories about the tire swing in your backyard, or about the butterflies that inhabit your flower garden every summer.
Make a note for yourself to let buyers know about all the little things that make your home special and be sure to tell them all about them. You want your potential buyer to be able to visualize them having family moments, or quiet nights, or getting to know your friendly neighbors. At the moment that your buyer starts to feel at home, you will get an offer from them.
You will always be inclined to point out the great architectural points of your home, or the spacious square footage, but remember homes are sold mostly on emotion, so be sure to point out the emotional aspects of why the buyer would love your home as much as you do.
Staying Calm When the Market Drops
Many homeowners are getting nervous about the drop in the real estate market. Remember, what goes up must come down, but eventually will go up again.
You can look at the real estate market in two different ways, by monthly or annual trends, or by long-term trends. It is always best to look at the long- term, 5 years or more, trends.
You may have noticed a significant appreciation on your home over the last few years. Properties in Las Vegas, for example, were appreciating at a 25% rate per year. Lots of people became millionaires because of the equity gains in their property. However, these growths are not inevitable.
It is important that you don't over-react to a downward trend. Any gains that may have occurred on your property over the last few years were paper gains. Simply put, these gains did not put any money in your pocket, unless you sold. As the trends fall, remember that these are also paper losses. You aren't actually paying anything out of your pocket.
If you look at the long-term trends you will see a continual increase. There may be variations over a 2 to 3 year period, but overall the trends are increasing. The current downward trends on property will end, and the trends will start appreciating again.
If your property is on a downward trend, it may be best to wait until the trends increase, unless you have a compelling reason why you must sell now. If you stay calm, and wait, real estate prices will rise again in the near future.
What Does FSBO Really Mean?
FSBO simply means For Sale By Owner. This term does not only apply to real estate. It also applies to the sale of used cars, furniture, garage sales, etc. However, for our purposes here, we will stick to real estate.
The idea behind being a FSBO seller is to save money. Generally, real estate agents will charge a 6% commission, however, these rates vary, and some may go as high as 10%. Using a 6% commission as an example, if your home sells for $200,000, then the commission that you would have to pay a real estate agent would be $12,000. That's a lot of money out of your pocket. From the financial aspect, being a FSBO seller makes a lot of sense. You will save thousands of dollars that could better be spent elsewhere.
While this is true, some homeowners are nervous about the aspect of FSBO. Mostly because they feel that they don't know enough about real estate to sell their own home. But remember, most of the forms that you will need are pre-printed, you simply fill in the blanks. In fact, there are FSBO kits for sellers. Also, the process of selling your home is not unlike selling a car, you simply clean it up, advertise it, and show it off. You wouldn't hire someone to sell your car for you, and you don't really need to hire someone to sell your home for you.
Keep in mind that selling your own home will require you to learn a few details. It will be worth it in the long run. Just keep in mind all the extra money you will have after it sells, money that you won't have to pay to a real estate agent.
Multiple Listing Services
There is a common misconception among people who decide to sell their home without a real estate agent. The misconception deals with getting their FSBO home in MLS listings.
Many people believe that without a real estate agent, they can not list their home in an MLS. This is simply not true. In many areas, MLS has been opened to individuals. You can also ask a discount broker to list it for you. These brokers charge a fee for the listing, however the fee is much less than the commission that a real estate agent will charge.
Although it is a good idea to list your property in an MLS, it is not completely necessary. The main reason that MLS listings are so popular is that they are listed on the internet. A recent study found that nearly 70% of buyers are now researching homes on the internet. This simply means that an internet advertisement for your property will do you better than an MLS advertisement.
If you do decide to sell your home as a FSBO seller, you can list your property in the MLS.
FSBO Hesitation
Even if you are completely ready to sell your home, you will still feel a bit of hesitation. Whether or not you use a real estate agent has no impact on the hesitation of selling your home.30% of homeowners tend to feel hesitant when selling their homes, especially if you decide to do it FSBO.
You will second guess yourself, and wonder if you're doing something wrong. You'll wonder about the legalities involved in the transaction. You will have many questions and apprehensions. Don't let your apprehensions take over.
The fact is that hundreds, maybe thousands of people sell their home every day without using a real estate agent. In light of the internet revolution, you can find the answers to any questions online. You can run a property value report online to check what your property is worth, so you don't worry about selling too low, or too high for that matter.
And remember, nearly all the paperwork will be pre-printed.
The defining factor in determining if FSBO is for you is to calculate how much you will save by not using a real estate agent. The thousands of dollars in commission that you would have to pay to an agent could be thousands of extra dollars in your pocket. This alone should convince you that FSBO is the way to go.
If you are hesitant, use these calculations to help decide what route you should use. If saving thousands of dollars sounds like a good idea to you, then that savings should take precedence over any hesitation.
Make it a Seller's Market
In a seller’s real estate market, buyers make offers as quickly as possible to avoid getting beat out by another buyer. In a buyer’s real estate market, however, they are much more conservative.
In the recent real estate market, buyers were at a disadvantage. They had to decide quickly and put in an offer immediately for fear of losing the property to another buyer. On some instances, not only were offers made before the listing on the MLS, but actually closed before the ads came out. This was a seller's dream.
Right now, however, and for the next few years, buyers have the advantage in the market. Things will eventually turn around, however, and sellers will soon be back in power.
If you want to sell now, here are a few tips to consider:
1. Show your home. You will want to show your home once a week. You will also want to get as many potential buyers in your home at the same time as possible. This will lead to a sense of competition among them and they will place an offer much quicker if they feel that they will get “beat out” by another buyer.
2. Define the date you want to sell by, not so much the reason for selling. If you give a specific date, buyers will be more motivated to make an offer. However, if you only have one potential buyer, they may give you a lower offer because they assume that you must sell by this date. You can either risk selling too low to this one buyer, or avoid this strategy completely if you do have only one interested buyer.
Earnest Money Deposits
Earnest money is simply a deposit of good faith, meaning that the buyer is entirely serious about the transaction. If the sale goes smoothly, the deposit is credited to the buyer as part of the down payment. Earnest money deposits should be considered “back up” from the buyer. If a buyer refuses to make an earnest deposit, you should move on and secure another buyer. The amount of the deposit is entirely negotiable, but is generally around 10% of the property price. Just make sure that you research and learn the practice and laws in your area. You don't want to demand a 10% earnest deposit, if the customary deposit in your region is only 5%. This could potentially kill the sale of property. Once you both agree on a deposit, the buyer should deposit the earnest money with an escrow agent, an attorney, or even a bank in certain states.
If the transaction doesn't go smoothly, then the earnest money deposit can be forfeited to the seller in some cases. You would need to research your state laws regarding the claiming of earnest money deposits in the case of a bad transaction. Earnest money deposits are also governed by what both parties put in writing. For instance, if the seller agreed to have certain improvements, such as broken water pipes, repaired before the closing, and then didn't have the repairs made, and then the buyer would be entitled to the earnest money back. On the other hand, if the buyer makes an earnest deposit, and then neglects to go ahead with the transaction, then the seller would be entitled to the deposit, because the transaction was lost due to the buyer.
The Biggest Mistakes Made By FSBO Sellers
There are many people now using the FSBO selling techniques. Some are successful and some are not. Here are the three biggest mistakes to avoid when selling your home FSBO.
1. Failing To Get Help - Selling FSBO does not mean that you will be entirely on your own. You will do some of the work involved in finding a buyer and completing the transaction, however, this doesn't mean that you should be completely alone in the transaction.
There are numerous sources of information for the FSBO seller. Here are the 2 main sources where help is available.
- Marketing - You can't expect buyers to automatically know that you have put your home up for sale. You will need to market or advertise your property. There are many books that may help you with this "The Complete guide to Buying and Selling Your Own Home" is a free resource to help with your marketing plan.
- Documentation - You may need some professional help when preparing sales agreements and other paperwork. You can hire an attorney to help you, or in some cases, real estate agents will help you with this for a fee well below their normal commission.
2. Pricing Too High - Many homeowners decide to sell FSBO because they have been told by a real estate agent that they are asking too much for their property. They assume an “I'll show them” attitude and this is a mistake.
Whether you list with an agent or by yourself, you must keep your price within what the market will allow. A home's value to a buyer is simply what the market sets the price at in that particular area. FSBO sellers have an advantage in that they are not paying a hefty commission to a real estate agent, thus they can afford to drop the price slightly and offer a better deal to buyers.
3. Ignoring the Needed Improvements. - If there are minor repairs, for example, touch-up painting that needs to be finished, it is a big mistake to ignore them. A good real estate agent can walk through your home in ten minutes and quickly tell you everything that needs to be fixed or improved.
Therefore, take advantage of an agent's services. Most agents would be happy to come by and give you their perspective on what to do to fix up your property. They'll probably do it for free in the hopes that in the event you don't get a buyer on your own, you'll list with them.
Timing Is Everything
Home prices are rising in most parts of the country and homeowners are wondering if maybe it's time to sell. Even those who had never thought of selling their homes are thinking about the thousands of dollars in profit that they could receive if they sell. They are wondering if they will miss out on a good market if they wait.
For those considering FSBO the thought is even stronger. After all, if real estate agencies can sell properties within just a few weeks, shouldn't an owner be able to sell just as quickly?
TIMING IS CRITICAL
A friend of mine recently sold her home FSBO. It lasted on the market for only three day. She received three offers, one for her asking price of $870,000, which she naturally accepted.
The remarkable part of this story is that two years ago, she put the exact same house on the market for only $570,000. She listed it FSBO for three months, and after no offers came in, she dropped her asking price to $400,000 and still never received an offer.
All of this just goes to show that real estate is a booming market in many areas of the country. And if you're contemplating selling, you couldn't pick a better time than right now.
Ask Yourself
Before putting your home up for sale, here are some questions that you should ask yourself.
• Where Will You Move To? It could cost you more to move to another home in your area than to stay in your current one! (Some sellers are moving to lower cost areas, often out-of-state, and pocketing the difference in prices.)
• Will You Make More Money By Staying? Who knows, the market could go up even more!
• Is The Timing Right For You? What the market does is one thing - what you're ready to do can be another. You should consider your kid's schooling, your retirement plans, your employment options, even your current need for healthcare facilities.
No one knows the future. And determining whether or not now is the best time to sell your home is really a guessing game. You'll only know for certain six months or a year from now. Then, if the market has turned, you may look back and wish you had sold for that top dollar when you had a chance. On the other hand, if prices are still accelerating, you could be like my friend who waited and is now counting the extra money she made.
Advertise
80% of homebuyers begin their home search online. Many customers of ChangeMyStreet.com sold their homes to buyers who did this searching online. Read these testimonials from ChangeMyStreet.com’s satisfied FSBO sellers:
My buyer looked at it on the web site and decided she wanted to buy it before she even came to the house to look all the way through. - Billie Bartley, St Joseph, MO
Thanks to ChangeMyStreet.com, my house is UNDER CONTRACT !!!!!! People saw it on ChangeMyStreet.com and came to my open house. - Fred Redden, Floral Park, NY
Describe Your Home to a “T”
You want to make sure you have complete information about your home and community when buyers view your listing. They not only want to know the specifics about your home but the community you live in. Are the schools close? Is the neighborhood quiet? Are the neighbors friendly? Is there shopping nearby?
Remember you are entitled to unlimited copy with your listing.
A Picture is Worth A Thousand Words.
You could simply write “beautiful” to describe your home, but showing your beautiful home in pictures will get a buyer's attention much more quickly.
You could read all day long about the vaulted ceilings, or natural wood floors in a home, but seeing actually believes. With a photo you can imagine yourself walking across those floors or gazing at those ceilings. Buyer's need to be able to imagine they living in your home, and pictures are the perfect way to do that.
Photos are Extremely Important. It showed just how much sq. footage we actually had per room. Visuals are easier for a prospective buyer to understand. - Mary Jo & David Gauf, Davenport, IA
The most useful tool was the web site with pictures and room for an adequate description of the house. The pics are the key. - Doug Bigelow, Media, PA
Be sure to show both the interior and exterior of your home. Photograph anything that you think is special or unique. You are allowed more than 10 photos on ChangeMyStreet.com. And if you want to add more lately, go to your Account Page and click on Edit Photos.
Do You Have What It Takes?
Saving thousands of dollars in real estate agent's commission is a big incentive to sell your own home. But do you have what it takes?
To sell by FSBO, you will need to advertise your property, show it to prospective buyers, handle the paperwork, and the closing. Some find this very intimidating, while others look forward to the challenge. Where do you fit in?
There is not sure-fire test to see if you will be a successful FSBO seller. Here are 4 points you should consider before deciding to sell your home on your own.
1. Are You a People Person?
Do you like meeting and talking to new people? Or do you shy away from conversation? If you can act natural, have conversations with strangers, and you feel comfortable discussing your home with people, then you are probably a good fit for FSBO. If, however, you are shy, and don't like talking to people, maybe you should hire a real estate agent.
2. Do you like doing paperwork?
Most people don't like paperwork; however, we all do it when we have to. In a real estate transaction, most of the paperwork is technical. It would be a good idea to hire an attorney or real estate agent to handle some of it for you. Most of the paperwork that you will need to do is deciding what order things are to be done in and when to do them. And remember, help is always available.
3. Do you have time to sell on your own?
You will need time to show your home, time for paperwork, and time for the closing. Selling your home can't be done in just a few days. If you are a very busy person, who has no free time, you might be better of going with a real estate agent.
4. What are you afraid of?
You will have many people coming to see your home. If you are afraid of being alone with these people, then by all means get a friend, neighbor, or family member to be present when they come by. If you're afraid of the legalities involved, then get advice or help from an attorney, or someone you trust to give you legal advice. If you don't feel comfortable with these suggestions, then you can always pay commission to a real estate agent for help.
I believe that practically anyone can sell their home on their own. I also know that it's a fairly complex process. I do suggest that you don't try to do it on your own unless or until you've gone through at least one real estate transaction that was handled by real estate agents. Then you'll have some idea of what the transactions involve.
When Agents Bring a Low Offer to The Table
Ok, so you've advertised your home, put up FSBO signs, held open houses, and an offer finally comes in. All your hard work has paid off. Or has it?
The offer is from a real estate agent who is representing a buyer. They want you to sign a one-day listing that states you will only pay 2.5% commission if you accept. The normal commission in your area is 5%. Well, that's half what agents usually charge, so maybe you think it's worth it just to get the sale over with.
So, you sign. Then the agent shows you the offer and it's for thousands of dollars below your asking what do you do now?
1. GET THE AGENT ON YOUR SIDE
The agent assumes that you must sell at any cost. Rather than admit this is true, you should calmly explain to the agent why you couldn't possibly accept this low offer. Here are some things you could say:
- The recent comparisons (other similar home sales) justify your asking price, assuming they do. Remind the agent that he/she knows (or should know) this.
- The home is in great shape and in an exceptional area of low crime and good schools (if it is). Again remind the agent that he/ she should know this.
- Finally, point out that you do want to sell and are willing to compromise somewhat on the price (if you are). Point out that the agent also wants a sale, otherwise they get no commission. Thus, it's to the advantage of both of you to come up with a price that's fair to both you and the buyer - obviously a higher price than what's offered.
2. ENTER THE COUNTER-OFFER
At this point, the agent will decide that you are not going to accept this low of an offer. He/she will probably start working on a counter-offer for you to make to the buyers.
Remember that although you are paying the agent, he/she still works for the buyers. Also remember that the agent may know how high the buyer will actually go in price. They may very well tell you this. You just need to decide if it's high enough for you to accept. If it's not, your counter-offer will be slightly higher, and it's the agent's job to get the buyer to accept it.
Counter-offers can go on for some time. Just remember to stay calm and try to avoid selling your home for a lower price than you want or need.
Recreational Property FSBO
Many people now own second homes. Some of these homeowners are considering selling their second-home for reasons such as to move to a different area or just to cash in for the profit. Others simply want to opt out of owning a second home.
Selling recreational property by owner can be done, but it can be tricky. If you are selling your residential home by owner, you are probably living in it. This is what gives you an edge. You are there to answer phone calls, to keep the property fixed up, to show it, and to negotiate with potential buyers.
Now imagine doing all those things if the home that you're trying to sell is located 200 or 300 miles away, or more. Even if you go there for a week to fix it up, you couldn't possibly rush right out there every time a potential buyer calls. Also consider that buyers may not want to call you long distance to ask for a showing.
There are answers to these problems. Some homeowners who opt to sell their second homes ask a neighbor or friend who lives in that area to show the property for them. That way, there's someone there who open the house and let the buyers “have a look around”. However, you do run the risk of legalities. In some states, showing a home for someone else requires a real estate license. Also, you would need to really be able to trust the person that is showing the home.
So what else can you do if you're selling at a distance?
One answer is to look for a discount broker in the area. Offer to pay a partial selling commission. That way you'll get a professional (hopefully) job of showing the property, yet won't pay a full commission. You can still handle the negotiations once a serious buyer is found. (Or, depending on your arrangement, the agent can do that for you, too.) Further, you may also use the agent to list your home on the MLS in the area.
The bottom line is that it's very difficult to handle a pure "by owner" sale at a distance. But modify it by using a discount broker, and suddenly it becomes quite feasible.
Bare land is a different story. There's not usually the problem of showing the property. Normally it's a lot and potential buyers can pretty much “show” it to themselves.
You can hang a "For Sale" sign on a tree or post with your phone number, web listing address and price. The only drawback is that it often takes time to sell bare land. Waiting 6 months to two years or more for a buyer to be interested is not unusual. The good news is that buyers who do contact you about your lot are usually quite at ease buying directly from a seller.
Check The Market
The one thing that everyone can agree upon when talking about the residential real estate market is that it has been extraordinary. We've seen unprecedented price appreciation, although mostly on the coasts. We've seen historically low interest rates. And we've witnessed shortages in home supplies that have resulted in bidding wars by buyers. It's been a grand few years for sellers and a tough time for buyers.
But what about now? If you're thinking about selling your home yourself is it the right time to put your home on the market? If you're thinking of buying, whether directly from a seller or through an agent, is it the right time to jump in? Will the market hold? Or have we peaked and has the "bubble burst?"
These are all legitimate questions that both buyers and sellers should ask. However, the answers are not always easy.
One way to determine if the market is good is the mortgage interest when rates go up, it becomes more expensive for buyers to purchase and sales and prices tend to decline. When the rates go down, it makes it easier to get a loan and purchase, and sales and prices go up. So, how does this information help you?
Although short term interest rates have been rising for months, the interest rate for mortgages has actually declined. Last week Freddie Mac, one of the two super-secondary lenders (Fannie Mae being the other) released statistics indicating that for the fourth straight week in a row, rates on the 30-year fixed-rate mortgage declined, down to 5.78 percent from 5.8 percent the previous week. (Freddie Mac assumes .5 to .6 points on all loan average quotes.)
The decline was across the board:
30-year Mortgage: 5.78, previous week: 5.8
15-years Mortgage: 5.33, previous week: 5.36
1-year Adjustable: 4.21, previous week: 4.26
5-year Hybrid: 5.2, previous week: 5.22
Keep in mind that only a year ago, the 30-year mortgage rate was 6.01%, the 15-year mortgage rate was 5.35%, and the one-year ARM was 3.75%. Please understand that these rates change weekly and new rates might be in effect by the time that you read this.
What this all means is that the good times for sellers are likely to continue, at least for awhile. Lower mortgage interest rates make it easier for buyers to qualify for bigger loans. And, as noted, that translates into more sales... and often higher prices.
Buyers should also be happy, because it will cost them less to purchase. Unfortunately, as noted above, the savings are often quickly absorbed by higher home prices in a heated market. It's also important to note that it's mostly the low-end to middle of the residential market that's affected. The high-end homes, those going for more than a million dollars, are less affected by interest rate fluctuations (apparently because high-end home buyers have much more cash to put down).
Economists agree that mortgages interest rates will soon raise, but they disagree as to how high this rise will be. The general consensus seems to be that they'll reach between 6.5 and 7 percent by the end of the year. However, declining gas prices and a heated economy could boost them, while increased gas prices and a slower economy could knock them back.
Co-Broking for FSBO
Co-broking is when agents share a listing. For example, one agency may represent the seller in a real estate transaction, and another agency may represent the buyer. If the property sells, the agents will split the commission.
It is possible to co-break a FSBO property.
The fact is that when you're selling your property “by owner” you are performing the duties of the selling agent. This means that you are advertising your property, showing your property, anything that a listing agent would do for you.
In a typical real estate sale where there's a 6 percent commission, the listing office gets half the commission (3%). The other half (the other 3%) goes to the selling office, the agency that produces the buyers. Your half is the same as the listing office's half, when you deal with an agent while selling "by owner". Here's how it works:
If an agent calls a FSBO seller and says that he or she has a potential buyer for the property, they will ask if the seller is willing to co-break.
What the agent wants to know is whether or not the seller will give them half the commission. Keep in mind that if you're doing the work of the listing agent, or selling the home FSBO then you are entitled to half the commission. The buyer’s agent is also entitled to half the commission if they produce a buyer that ultimately purchases your property.
If you're agreeable, they'll usually want you to sign a short term listing (typically a day or two), to protect themselves, and then they'll produce the buyer. If you sell, you'll owe them that 3 percent commission.
Many FSBO sellers are determined not to pay any commission. They hope to find a buyer on their own. They may find their own buyer, and they may not. Keep in mind the odds are stacked against finding a buyer on your own.
A broker who has a buyer for your property could mean a quick sale. And you'll still only be paying half the usual commission. Just beware of a broker who might run a "pretend" buyer through your home hoping to trick you into signing a long-term listing. This practice of “pretend” is unethical and may be illegal in some areas.
Co-Broking will only work with the buyer's agent. Don't expect the selling office to do your work for you for half a commission. They won't want to handle disclosures, escrow, and title clearing for half the commission; they will charge you the full commission percentage.
Quick Sales
I was interviewed recently for a story in the New York Times and asked a very interesting question. The interviewer pointed out that the main and obvious reason for FSBO sellers was to save money on the commission. He asked if I could give him one other reason why a person may become a FSBO seller.
Without hesitation I replied, "To get a quicker sale."
The interviewer then asked how that would work. After all, a sale by owner is often more difficult for both the buyer and the seller than using an agent. An agent, after all, has the expertise, documentation, and experience on his or her side. When you're selling on your own, you have to do it all yourself, or find sources to replace what the agent offers.
Therefore, it only stands to reason that because a FSBO sale tends to be more difficult, it would be harder to find a buyer, and take longer to sell. Keep in mind that things aren't always what they seem
When selling by owner you possess something you can give to the buyer that no agent can match - a big discount.
Assume that if you used a real estate agent, you would be required to pay them a 6% commission. If you want a quicker sale, why not offer a discount to the buyer for say 3% of your asking price. 3% off a $300,000 home would save the buyer $9,000. Keep in mind that you are saving $18,000 by not using a real estate agent.
The buyer is getting a $300,000 home for only $291,000. This is a big savings for them. You, on the other hand, are still saving $9,000 and with the discount that you are offering, you are much more likely to move your home quickly.
Of course, a discount may not be necessary. Prices are soaring in some areas, and you may have buyers who are more than happy to pay your asking price.
You should consider offering a discount if your home happens not to be in one of those fast-moving areas. Or if you have some detracting feature you need to overcome. Or if you just need to really make a quick sale.
It's certainly something to consider.
Remember, you can't pay the buyer a commission. Only licensed real estate agents can collect a commission. But, you can discount the price of your house which, in effect, offsets the amount you would otherwise pay an agent.
Healthy House?
There seems to be a new advertising “pitch” for the FSBO sellers. “Healthy” houses are being advertised. Apparently people are claiming that some houses have a healthier lifestyle than others. For example, a few years back a professor at San Diego State conducted an analysis of two neighborhoods - one in San Diego that had lots of sidewalks and walking trails with safe paths for walkers and many local stores and restaurants. People could easily walk to shopping and to eat out. This was contrasted with a neighborhood in Claremont, California that had been primarily designed for the driver - drive to the store for everything. People rarely walked there simply because it was inconvenient.
Naturally enough, people in the San Diego neighborhood tended to weight less and be healthier than those in the Claremont neighborhood. The San Diego homeowners walked an average of an hour more per week than the Claremont homeowners.
All of this is to point out that if your house is in a “healthy” neighborhood, one where walking would be convenient, then tell your buyers that. With so many health conscious people today, it just may trigger your potential buyer to make an offer.
There are several ways that a house can be “healthy”. Having a newer home that isn't contaminated with asbestos, lead or formaldehyde is a good start. And having an adequate heating and cooling system also contributes to healthy residents. (And that includes having double pane windows and two-stage heaters and air conditioners that avoid rapid changes in temperature and draft corners.)
Many people are concerned about allergies, and as those who have this problem know, some of the problem can come from carpeting where mites and allergens tend to hide out. If your home has many rooms with tile or hardwood floors, you can point this out. It might not make a difference to every buyer, but to someone who is very concerned about allergies, it could be the deciding factor.
Be careful when you describe your home as “healthy”. You don't want to be misleading or make statements that you can’t prove in a reasonable way. It's one thing to "puff" up your home - it's quite another to make claims that can later come back to haunt you. For example, you might point out that you've heard that the hardwood floors, such as those in your home, are better for allergy sufferers than houses with wall-to-wall carpeting. On the other hand, you probably would be crawling out on a limb that's ready to be sawed off if you said that your tile floors would definitely relieve the buyer's allergy symptoms.
How to Close the Deal
In a real estate transaction, closing the deal has two actual meanings. The first is actually getting the buyer's signature on the agreement. The second is closing the transaction, and getting title to change hands.
There are 5 steps that a FSBO seller must go through in order to close the deal. If you're not using a real estate agent, it will be up to you to do these things.
- Open Escrow
- Follow the buyer's financing progress
- Clear title
- Deal with disclosures and inspections
- Sign the deed and close escrow
It's not necessary to follow these in exact order, although the first obvious thing to do is to open the escrow. This starts the process of searching the title to be sure there isn't a hidden lien somewhere. (A lien is typically a loan or other debt that prevents the title from being cleared--these rarely turn up, but when they do, it's up to you to go back to the lender and get them cleared.) Escrow can be opened simply by bringing the sales agreement to an escrow officer.
You'll also want to keep track of the buyer's progress in getting financing. Some buyers will be able to present you with a pre-approval letter showing that they are qualified for a loan. Now they must simply get the loan. If the buyer has problems and can't get the loan, then the deal would be broken. You will want to know as soon as possible if your buyer can't finance the home, so that you can get it back on the market.
You will need to disclose (or tell) the buyer any defects in your property that are required by your state or by the purchase agreement. You must deal with the buyer's professional, termite, and pest inspection. There may also be other reports required. If problems arise, you may have to make repairs, or negotiate the terms or price of the deal again.
It may sound like a lot to do, and in some transactions it can be, but it usually goes fast. A typical closing today lasts only about three or four weeks. (The reason is that lenders can quickly make decisions and fund loans electronically.)
Soon the escrow company will call and say they are ready to close the deal. The down payment and closing costs from the buyer are in escrow and the lender is ready to fund. All that remains is for you to sign the deed. You go to escrow, see your closing statements and learn the actual amount of money you'll get out of the sale, and then sign the deed. A few days later escrow closes and you get your check.
Don't get so involved in closing the deal that you forget to make plans for your own move. If you're buying another home, its closing should be tied to that of the home that you're selling so that they close simultaneously. You'll need to arrange for utility turn- offs and -ones as well as movers. Moving is the other side of closing!
How Much Money Will You Save?
As I've stated before, the main reason for going FSBO is to save on real estate agent commissions. After all, if you've gone to all the trouble of marketing and selling your home, you want to know how much it's saving you , and whether it's going to be worth it.
It will depend entirely on whether or not you involve any agents. If you go FSBO completely you can look to save the entire commission. We'll look at an example based on a 6% commission:
|
If the Sales Price is:
SALES PRICE
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
|
You'll save:
SAVINGS ON COMMISSION
$6,000
$12,000
$18,000
$24,000
$30,000
$36,000
$42,000
$48,000
$54,000
$60,000
|
|
Keep in mind that these figures do not include normal expenses such as escrow and title insurance fees, if they apply. If you do enlist help, you may have a few other expenses as well.
For example, you may want to hire an attorney to help with writing up the sales agreement and other documentation. That could easily cost $1,000 or more. And you might want to hire a "fee for service" agent to do some of the heavy lifting (advertising, responding to calls, showing the property and so on) for you. That could also eat into the savings.
If you "co-broke" your property with an agent, you'd most likely be responsible for half a commission, the buyer's agent's half. That might be 3 percent of the full 6 percent, although you might be able to negotiate it down to between 2 and 2.5 percent.
And, if instead of handling the seller's part of the transaction entirely on your own, you opt for using a discount broker, you might be responsible for a seller's broker's commission of anywhere from 1 to 2 percent or more.
So you see, depending on how much of the work you do yourself, you could save anywhere between the entire 6% commission, to as little as 1%. Keep in mind, that the 1% is if you do practically none of the work yourself.
Is It Worthwhile?
Remember that selling your home on your own, or FSBO, can save you potentially thousands of dollars in commission. Depending on how you structure the sale, you could "give" some of that savings to the buyer in the form of a lower price, meaning that your home would be more competitive than others, resulting in a much faster sale.
Also, by handling the sale yourself, you have more control over the process, and may be able to avoid unnecessary costs and fees.
By becoming a FSBO seller, you'll be helping to protect your equity. Remember, the commission is based on the sales price, not on your home equity.
Being a FSBO seller isn't for everyone. But if you do your research, and are willing to work at it, you can be very successful.
How Much Is Your Home Really Worth?
One of the hardest parts of the real estate transaction, whether working with an agent, or FSBO, is correctly pricing the property. If you ask even 1 or 2 percent above the market, you may not get any offers. You may not even get any lookers.
It doesn't make any difference how much work you've put into your home. It doesn't even matter how much money you've put in. The bottom line is that your home is only worth what a buyer is willing to pay for it. In other words, it's only worth the market value. Consider this, why would a buyer pay you more for your home than they would pay for a similar home in your neighborhood that is priced considerably less than yours?
Some buyers may be hesitant to buy directly from the owner, so to be wise you should undercut the market price by at least 1% if you want a fairly quick sale.
What is a realistic market price for your home?
One way to find out is to ask a real estate agent for a CMA (Comparative Market Analysis). Almost any agent will be happy to create one for you in the hopes that you'll eventually list with him or her.
Another way is to do your own CMA. Find out what similar homes similar have sold for in the last six months and compare them to yours. You may also obtain an electronic appraisal of your home through ChangeMyStreet.com.
The idea is to make a short list of these properties and their features. Then do a strict comparison. Look especially for:
• Square footage
• Number of bathrooms and bedrooms
• Upgraded kitchens and/or baths
• Condition of home and landscaping
This information will also often contain location and price. If not, you may be able to drive by the home if it's close by. New owners will normally love to show off your new home, and you could ask the owner if you could see their home. Explain that you're planning on selling your house down the street and want to get a better idea of neighborhood prices.
Correctly pricing your home is critical, not only for finding a qualified buyer, but also to alleviate any fears for yourself that you may have set your asking price too low.
How to Correctly Price your Home
Pricing your home correctly is possibly the most important thing to consider selling it quickly and easily. Overpricing is one of the most frequent reasons FSBO sellers fail. Many times, when an FSBO seller decides to list with an agent, the house sells because the agent convinces the seller that it had been overpriced. Since you are doing the work yourself, you will need to research the price you are planning to ask.
Remember that one of the main reasons that buyers are interested in FSBO properties, is because they think that they will be getting a deal, sharing in the real estate commission, so to speak. If you are not offering to share any of the savings, it is possible that buyers will simply move on to traditionally listed properties. Pricing a house is one of the areas in FSBO selling where spending a little money up front to get the necessary info is very helpful.
There are many tools and methods to help you price your home:
• The basic means for determining the value of real estate used by appraisers, lenders, and agents is comparables. Comparables are similar homes that have sold in the area within the last six months. .You can obtain a list of sold properties by ordering a home comparable report from ChangeMyStreet.com or another vendor. Once you receive the comps, you will have to assess the relative quality of the location, condition and features of your house as compared to the comps. You should be able to get a good sense of this from the comp report. For instance if a 3 bedroom home right around the corner sold for $5,000 less than a nearby 4 bedroom, the approximate value of the extra bedroom is $5,000.
• After you have a comp report that shows what has sold in your neighborhood, spend a couple weekends visiting open houses in your area. Go to neighborhoods that are very much like yours, with houses of similar style and size and approximate price range. Although appraisals are based on SOLD comps, it is useful to see what is for sale now to get a sense of the current real estate market. For instance, if listing prices are lower than what you think your home is worth, that is an indication that house prices may be falling your area. If listing prices are higher than the sold comps indicate, that is an indication of prices moving upward.
• Have a “desk appraisal” done which will indicate a range of value. A desk appraisal means the appraiser will not visit your home, but rather will pull comparables from closed sales (they may well have more recent comps available than you can obtain from any source) and assign a range of value. Where you price your home within the range is up to you. The cost of this option is about $60, and you will have a formal document with which to justify your price to prospective buyers. Appraisers can be located through the Yellow Pages in your area, or you can search for them online.
• Have a formal appraisal completed by a licensed appraiser. The appraiser will come to your home, measure it, inspect it, take pictures and assign an actual market value. The cost of this option is about $300. A professional appraiser will provide you with a formal document that you can use to justify your price to buyers. Keep in mind that your prospective buyer’s lender will have to order another appraisal and will probably not be able to use yours. Appraisers can be located through the Yellow Pages in your area or you can search for them online.
• Another alternative is to ask a real estate agent in your area to do a Comparative Market Analysis (CMA) for you. You probably know of at least one real estate agent that you could get to do this for you. Obviously, you should tell the agent that you intend to sell the house FSBO, before they put in any time on your behalf. Most agents will help you because they think that eventually, you will give up trying to sell on your own and ask them to list the property for you. They will probably try to talk you into letting them list for you. Listen to all the information and then make up your own mind.
Once you have a range of value or an independent appraisal of the property, you will still have to decide on an asking price. You should assume that you will get an offer below your asking price. Houses generally sell within a 10% margin of a reasonable asking price. Set your price at the high end of the reasonable range if your house is in excellent condition compared to other houses for sale in your area and/or the market is fast. Set your price at the lower end of the reasonable range if your house needs work, doesn’t show as well as it could, or the market is slow.
Dealing with Low Offers
What you want most is an offer on your property. All that work you've done placing ads, holding open houses, posting signs, was all to get a legitimate offer from a buyer.
Yet, when an offer does come in, it can sometime be disappointing. The offer came in well below your asking price. What can you do? You don't want to agree to what you consider a ridiculously low price. Yet you don't want to lose this real buyer. How do you get a low-ball to better the offer?
FACE-TO-FACE
I've found that the best way of improving a low-ball offer is to meet the buyers face-on and have an open and, if possible, reasonable discussion with them. The idea here is to carefully explain why your price is realistic and justified and why the amount they are offering is simply too low. Buyers are unlikely to be swayed by emotional outbursts. But, they can be convinced by logic and facts.
WHAT YOU SHOULD NOT SAY TO BUYERS:
• Don't tell buyers that you need more money because of all the money you put into your home. You may have over-improved for your particular neighborhood, and remember, your house is only worth its market value.
• Don't tell them that you have a big mortgage to pay off and you need extra money to move into your next house. They'll view this as your problem, not theirs.
• Don't tell them that you want more because of the sentimental value of your home. Buyers may feel the same way about their cat, but it's not likely to get you more for your home.
WHAT YOU SHOULD SAY TO BUYERS
• Do show them the comparables or appraisals for recent sales of similar homes in your area. If your house is priced right in that range, it will be the most reasonable argument for your asking price.
• Do explain the amenities of your neighborhood such as good schools, low crime rates, friendly neighborhood and so on. These are the extras that buyers are looking for.
• Do mention the exceptional features of your home such as vaulted ceilings, new air conditioner, marble tile in kitchen and bath, hardwood flooring throughout, etc. These pluses may make a difference.
Talk It Out
Be reasonable, this is a business deal. When buyers see your logic, they may also see the value of your property and reconsider their offer. .
Do be prepared for buyers who simply want to “steal” your property. They may even admit this to you. It's up to you to decide whether to let them, or look for another buyer.
Others may simply not be able to afford to come up with more cash or a bigger mortgage. If they truly want your home, but can't quite squeeze into it, consider financing part of the purchase yourself with a second mortgage. (See earlier articles on seconds.)
Don't be overeager to sell, but don't be afraid to ask the buyers to come up with more money. If you come up against a no, don't be afraid to ask why. It may be that you can find a solution that will satisfy everyone.
What Is Earnest Money?
Money handling is one of the main factors in selling a home. If you decide to be a FSBO seller, you will be responsible for any earnest money deposits that a buyer will make to your. Earnest money is sort of a good faith payment to let you know that the buyer is indeed serious and fully intends to purchase your property. The normal amount for an earnest deposit is 10% of the selling price. You can choose your own amount for an earnest deposit, but 10% of asking price is a good figure. This will let you know that the buyer is indeed serious.
Now, what happens if a few days or weeks into the transaction, something goes wrong? Let's say that you entered into an agreement with a buyer. You set a price, he accepted, and you drew up all the paperwork. The buyer gave you a check for, let's say $10,000. You deposited the check and all is well. You feel confident that you are going to get this home selling experience over with.
But...you need to understand that in real estate, no deal is finished until all the contingencies are removed. These include such things as the buyer getting financed, approving disclosures, and getting a professional inspection report.
Let's say that two weeks into escrow, you get an inspection report that says there's a roof leak. No problem, you knew there was a minor leak, and you agree to get a roofer to fix it. The buyer, however, decides to hire his own roofer, who says that the entire roof must be replaced at a cost of $15,000. You refuse, stating that YOUR roofer will do the repairs for under $5,000. The buyer then refuses to approve the inspection report and demands his $10,000 earnest deposit back. You say that you agreed to fix the leak and should be entitled to keep the earnest money. Now, who's right?
The buyer! If the contract specifies that if there's no approval of the inspection report, then the deal's off, you owe the money back. But, you think to yourself, it's in my bank account; I've already spent some of it. Just let the buyer try to get it! And before you know, you're in a legal battle over the earnest deposit. Situations like this can and do happen. They also can be avoided.
One good way to handle any problems with earnest money deposits would be to have the deposit check made out to an escrow agency. The agency will hold the deposit until you and the buyer both agree that you're ready to close the deal.
The Buyers Are Coming!
Ok, so you've listed your home FSBO (For Sale By Owner) and people start coming in to have a “look see”. You neighbors may come by to see what improvements you have made. They may want to compare your home to theirs, to get an idea of what to do if they decide to sell.
You may also get some real estate agents coming by. They may have buyers to show your home to. They will offer to bring buyers, usually, in exchange for half their normal commission. So, if commission rates in your area are normally 6%, then they will ask for 3%. I recommend letting these agents bring buyers to you. You will still retain that extra 3% of the commission, and these agents may bring in a buyer who will purchase your property. It could make the transaction go more quickly.
You will also, hopefully, get potential buyers who have seen your advertisements. They want to come by and see your home. Here's a good tip to remember when showing your home:
Keep a Visitors Log
One of the best suggestions I could make to you is to keep a log of all the people who are interested in your property. Have a sign in sheet, notebook, or register by the front door, or whichever entry you are using. Make sure if you're having several open houses, or different dates that people come by, that you date each page accordingly. Ask each buyer to please sign in with their name, address, and telephone number. Ask them to sign when they first enter. If you wait until after you've shown them your house, they may forget, or simply leave.
The reason for keeping this log is you want to be able to call them back. Buyers rarely purchase on their first visit. And sometimes all that it takes to peak their interest and get them to come back (and hopefully make an offer), is a phone call. Call them up, ask them if they have any questions, and start a conversation. It could lead to a sale. But, you can't do it if you don't know who came by and if you don't have their phone number. Be sure to call neighbors, too. While they may not be interested themselves, they may have friends who are. And you can compose a list of agents from your register, in case you want to list later on.
Another reason for the log is that if you do decide later to enlist the help of a real estate agency, you can use the names from the log to identify your personal buyers. You can say you'll pay the agent a commission for buyers he or she brings by. But, if the buyers first saw the home while you were selling FSBO, then they're your buyers, you'll deal with them directly and no commission is due. This is why it's important to get as much information on the buyers as possible, including the date they saw your home.
Keep this log for at least six months, or until your transaction is complete, if you find a buyer. If you do find a buyer, keep the log at least until escrow closes. This way, if problems arise, or if you don't sell, you can call back potential buyers every 1 or 2 months to see if maybe they're still interested and would like to come see your home again.
Selling “As Is”
Selling a home "as-is" means that you can skip the repairs, improvements, touch-up painting, etc. This will save you time and money. However, keep in mind that selling “as is” is likely to drop the price that potential buyers will pay.
“As Is” may scare your buyers into thinking that there is something fundamentally wrong with your home that you don't want to fix yourself.
The "as-is" marketing strategy does not free you from liability if you don't disclose all your home's known defects, and you should know them all completely.
“As is” simply means that you don't provide any guarantees or warranties, and you won't allow for any credits or price reductions for problems or improvements that need to be made in your home.
In a buyer's market it can make for a harder sale, but it can save you money. In a seller's market, buyers are more numerous, and they are willing to risk buying into an “as is” property.
But the as-is deal doesn't have to be a risky proposition for you or the buyer, provided you really get to know your home and disclose all its conditions.
Have your home inspected thoroughly and completely. You will want to call in a professional home inspector, as well as a major appliance inspector, roof inspector, chimney inspector, pest and termite inspector, etc.
Not only will the inspections allow you make clear and specific disclosures, they will also indicate your willingness to identify any and all defects in your home, and thereby reduce your liability.
Professional inspections can also save you time. If you have the inspections done, then your buyer may not feel the need to have his own inspections done.
"You can make the transaction contingent upon the buyer approving the reports. Once he sees the inspection reports he can proceed, he can withdraw or you can negotiate.
Just keep in mind that if your inspections point out repairs that could jeopardize the health and safety of the potential buyer, he may opt out. You could offer to pay for the repairs or improvements to be done, or negotiate with the buyer to have him pay the bill, maybe with a discount in price, or simply withdraw the deal.
Disclosing a Lead Hazard
The federal government has determined that lead paint and lead-based paints are a health hazard. To help protect the public, it has mandated that some home sellers must provide specific lead disclosures to buyers. If you are selling your home FSBO, it is your responsibility to disclose any lead hazards to your potential buyer.
Insight into Lead Poisoning
Lead is a soft, grey metal probably most well-known for its use in batteries and its ability to shield radiation. Lead is also poisonous, but it may take a long time to have an observable effect. Small children five and under are most susceptible to it.
Lead poisoning can occur when the metal is either breathed in or ingested. Its symptoms include vomiting, irritability, and loss of appetite, sluggishness, and abdominal pain, to name a few. Long term effects include hypertension, anemia, gall bladder disease, and disorders of the digestive system.
Lead is seldom found in modern homes. However, in older homes, particularly those built prior to 1978, it was quite common. It occurred in the solder used to bond copper pipes and most commonly in paint. Lead based paints were outlawed in 1978.
As a result, if your home was built before 1978, the federal government has mandated that you must:
• Provide buyers with copies of any reports dealing with lead and lead testing.
• Inform potential buyers of any known lead based paint or lead based paint hazards. A specially worded disclosure must be used which can be found at www.epa.gov/lead or www.hud.gov/offices/lead
• Provide buyers with a federally approved lead based paint hazard booklet, "Protect Your Family from Lead in Your Home." (These booklets can be obtained at the above websites or by calling 1-800-424-LEAD.)
• Provide buyers with a 10-day period in which they may do a risk assessment and test the home for lead based paint hazards. This must be done before drawing signing a contract and the buyers are permitted to cancel the deal during this time. The buyers and sellers may agree to lengthen or shorten this period or to wave it completely. Both must agree to this. Some buyers may also insist that a clause be inserted into a sales agreement allowing them to back out of the deal if lead is found.
• Be sure that you get a signed receipt for the booklet and of the prescribed disclosure form as well as a signed approval that the buyers have received the agreed upon time to inspect the property and have approved it.
Please understand that the seller is under no obligation to test for lead or to remove lead if it is found. You must only provide information to your buyers regarding the lead hazards in homes.
If you would like to have your home tested for lead, you can contact HUD (Housing and Urban Development) for a professional inspector in your area. This testing can prove to be moderately expensive. While chemical analysis and paint scrapings can be used for testing, X-ray fluorescence is usually considered the most accurate test.
If you do find that your home contains lead, it is NOT a good idea to attempt to remove it yourself. Sanding or burning off lead-based paint may cause it to be released it into the air. A better way of removing lead is to simply replace old doors, windows, and melding and trim that contain lead paint with new materials.
The Low-Ball Strategy
With the real estate market booming in most areas of the country, sellers are now using a strategy for getting the highest possible price for their properties. Different people have different names for this strategy, but I call it "low-ball pricing." Let me explain to you how “low-ball pricing” works.
If you're comparative market analysis (CMA) determines that your property has a market value of $500,000, a real estate agent may suggest that you list it for less than the market price. The “low-ball” price they suggest may be 10% less than market value, or $450,000.
Buyers today are very aware of pricing and “bargains”. The real estate agent may spread the word to other agents that he has an under-priced house. Buyers will immediately start making offers. While initial offers may come in for less than the asking price, other buyers may bid slightly higher. Since agents will let the buyers know that the actual market price of the home is $500,000, buyers won't hesitate to raise their bids, thus creating a bidding war.
Keep in mind, however, that a bidding war can lead to irrationability, with buyers simply competing to win. Some buyers may bid over the market value, eventually offering $525,000 or more. So, you see, by “low-balling” the price, you hope to start a bidding war, and sell your property for more than the market value.
Whether or not this strategy will work will depend on three key factors:
1. How hot the market is
2. How well the “low-ball” price is publicized
3. How well the seller can hold on to several offers, and wait for better ones to come in.
Keep in mind, that depending on what sort of contract you have with the real estate agency, you may be obligated to pay a commission to the agent even if you don't accept an offer. Some contracts state that if the agent produces a ready, willing, and able buyer, even if you don't sell to that particular buyer, you are still obligated for the full commission price. This is called an exclusive listing. If you do use an agent, just be certain of what kind of listing you have agreed to.
For the "by owner" seller, not having a listed property avoids the potential complication noted above - there's no commission to pay regardless of price. On the other hand, a "by owner" seller risks not getting a bidding war started because of an inability to well publicize the low-ball price.
Remember, most agents have easy access to the Multiple Listing service as well as direct communication with other agents. They can almost instantly spread the word that there's a "steal" out there. And other agents will quickly bring their buyers by.
If you decide to be a FSBO seller, you don't necessarily have access to a Multiple Listing Service. You can advertise on your own, post signs, list on the internet, etc., but this process could be slow. Listing it on an Internet site such as ChangeMyStreet.com should bring in quicker results, as buyers often search such sites looking for good deals. But, in both cases unless the buyers themselves know your house and area, they won't immediately realize it's under-priced. You may have to convince them that they are getting a bargain.
You also have to be careful not to over publicize your under priced home. You must expect bidding wars to happen quickly, in a matter of days sometimes, and they will happen all at once. Buyers won’t normally let you consider their offer for a month while you wait for a better offer to come in.
Online Advertising
Nearly 80% of first-time homeowners use the internet as a significant part of the home buying process. While the traditional methods of advertising, for example posting signs, classified ads, word of mouth, etc., are important. It is vital that you do not overlook the importance of online advertising. The internet can be an excellent source for finding buyers.
When you advertise on the internet, you are really offering your buyers:
• The ability to quickly learn all the important facts about your property from its size, to the number of bedrooms and bathrooms, to the architectural structures that make it special. They also have the opportunity to visualize your home, either through simply looking at pictures that you've put on your listing site, or through virtual tours.
• The chance to compare prices with similar homes to see that you are offering a reasonable asking price.
• The chance to look at local schools, crime rate statistics, transportation, any shopping or local attractions that may be in your area.
The best part is that potential buyers can do all of this from the comfort of their own home. They don't have to roam from house to house to see what they are potentially buying. They simply use their computer to determine their interest level in a home. They then call the owner for a showing in person, to confirm their interest and possibly place an offer.
If you're thinking about putting your home up for sale "by owner," it is very important that you don't forget internet advertising.
How to Handle Multiple Offers
With the real estate market on the rise, it is not uncommon for a seller to experience multiple offers from interested buyers. If you have been lucky enough to encounter multiple buyers competing for the purchase of your property, here are a few ways to handle the multiple offers.
1. Don't do anything to jeopardize all of the offers. If you turn all the buyers away, you will end up with nothing. However, you should try to get the highest price, from the best buyer.
2. Allow buyers to present their offers as soon as possible. Don't put off one buyer to consider another, take all offers as they are made.
3. Remember, you are in control. If you can get a few buyers to compete for your home, you may start a bidding war, in which case, you would probably end up with more than your original asking price.
Compare Offers Carefully
If you are presented with multiple offers, you must be careful not to automatically accept the higher offer. The quality of the buyer and the terms of the offer must also be considered.
Most buyers will be able to present you with a pre-approval letter to let you know that they are already qualified for financing.
Here are some tips to remember when looking at a pre-approval letter:
• Make sure it's from a lender, or at least a mortgage broker representing a specific lender.
• Make sure it says that they buyer has been pre-approved based on credit score and a credit report.
• Make sure that there are verifications of deposits and employment.
• Make sure that the lender is ready to commit to the financing on an income to expense ratios basis.
A good pre-approval letter may not commit to funding, but it will commit the lender to the buyer saying that this person has qualified for the needed mortgage, short of a change in his existing credit status at the time of closing.
A buyer with a solid pre-approval letter may be a better choice than a buyer with none at all, even if they bring a lower offer to the table.
You should be very sure that you understand the terms of the offer. If you had planned to close the transaction on a certain date, and the escrow on your offer is for weeks after that date, it might be better to consider another offer, even if it is a bit lower.
Remember, just because you have multiple offers, doesn't mean that all, or even any, are good. Read them carefully.
Selling Your Vacation Home
Many homeowners today own second, or vacation homes. If you are looking to sell your vacation home, you need to keep in mind how difficult it can be. After all, most people who own vacation homes don't buy them next door. They are normally hundreds of miles from their primary residence. The distance alone can make it very difficult for the homeowner to sell by owner. It can be done, however, if you know what to expect and the proper way to list and show this home.
Probably the best way for homeowners to sell a second home is by using the internet to list.
Digital imaging is a technology that has opened up a variety of possibilities for homeowners to show their home while not having to take time to be at their home.
A digital camera can be a very inexpensive investment, but can be a very valuable resource when selling a home. You can take pictures of the interior and exterior of your home, as well as any special attractions, or qualities surrounding the home. Most vacation homes are on or near a beach, mountains, or other major attraction. Take photos of the different seasons at your property. Snow on a mountain or sailing in the summer are sure to spark interest in potential buyers.
When you have your photos, post your home on a FSBO (For Sale By Owner) site such as ChangeMyStreet.com and choose 5 to 10 of the best ones that show your property and any special attractions surrounding it. You will also post a thorough description of your property.
Next post a sign on your property. You should be able to get these signs at any site that offers “by owner” listings. The sign will refer the potential buyers to the website where they will be able to “look” at the home and property. In addition, if someone calls about your property, you would also refer them to the website where your property is listed.
You may also want to consider advertising in newspapers local to the area where your property is located. You may want to list in papers in a few cities surrounding the area also.
This technique will help you weed out the buyers that aren't really interested in the property. This will save you time in having to travel to the property to show it to every interested buyer. It will also save you the expense of having to retain a real estate agent if you can't be at the property to show. When you do get an interested buyer, you can then go and show the property. After all, they have already seen all your photos, and if they want a personal showing, chances are they are ready to make an offer.
How to Handle Rejection
“No” doesn't necessarily have to be a negative word. After all, a “no” is better than no response at all. Before the buyer commits themselves to an answer, be it “yes” or “no”, they are merely lookers. If you get a “no” then you have reason to start negotiations. You have to assume that a “no” means that they have at least considered the possibility of an offer.
If you do get a “no”, you need to determine the reason the buyer is rejecting. You may be able to negotiate with them and turn them into a “yes”.
Thus, as a "by owner" seller you should be listening carefully and occasionally asking if the buyer wants to purchase, just so you'll get to the point where they say, "No." (Of course, if the buyers first words are, "I'll take it!", then disregard what follows -- however, a quick agreement to purchase is not usually what happens.)
Positive Answers to Negative Responses:
“It doesn't have enough storage room” - You need to show them the closets, the pantry, the shelves in the garage. If they have an unusually amount of storage, you could maybe let them know about any storage rental in your area. ?
“The garage is only a 2-car”- Point out that most homes only come with 2-car garages, and that 3 or 4-car garages would be far more expensive than your property. "Only a 2-car garage."
“It only has one bathroom”-This is one reason that the asking price is so low. Let them know of any area, closets, extra bedroom space, etc. that could easily be turned into a second bathroom.
“The price is too high” - Be sure to show them a list of homes similar to yours that have sold in the last 6 months. Point out the prices of those homes in comparison to yours.
“It's just too small”- Point out that it would make a good starter home, and if applicable, point out the space around the home that would be good for adding on extra space.
If they don't like something in particular, for example carpet or wallpaper, point out that they can change that item when they move in.
“I don't want a swimming pool” - point out that their children or grandchildren will love a swimming pool. Tell them about the great 4th of July parties you have had in the pool, or remind them that it will make a great asset if they decide to
If they don't like the neighborhood - point out that you love this area. Let them know about any special features, i.e. Low crime rate, neighborhood watch groups, etc.
Keep in mind that sometimes a buyer just can not be pleased. You may have to consider lowering your asking price if you want this buyer to make an offer. But many buyers have been turned around by using positive answers to overcome their objections.
|
|
