Citing a dual desire to maintain control over the process and save money, more and more younger people are opting to upgrade their living situation, taking advantage of For Sale by Owner (FSBO).
FSBO has been around for decades, but as more millennials move from their first to their second home, 36% are choosing to go it alone, as are about a quarter of GenX-ers.
Here's what to know when selling a house by owner.
Should You Sell Your Home Yourself?
Before deciding to sell your home without a real estate agent, there are four considerations.
1. Are You Willing To Deal With Buyers’ Real Estate Agents?
While you may not have an agent, many buyers do. And they expect you, the seller, to pay their sales commission, traditionally 3 percent of the sales price, if an agent brings you a buyer. No commission to selling agents means a smaller pool of potential purchasers.
2. How Comfortable Are You With Sales and Marketing?
Selling a home is work. You'll need great photos or video, signage with your contact information, an online listing and/or property web page, and attractive, descriptive fliers.
3. Can You Stand Rude Comments About Your House?
Some buyers will hate your house or may put down your home to reduce the price. That's why professional agents have their sellers leave when buyers come in. Criticism can make you too emotional to negotiate properly.
And if you have pets, you'll have to remove them before showings — you'll need someone to watch them while you show the house.
4. Are You Willing to Screen Your Own Buyers?
Professional agents supervise home showings and make sure your personal items don’t walk out the door. They screen out those who can't get financing or who aren't serious about buying.
Your first line of defense – require potential buyers to provide a mortgage pre-approval letter or at least a pre-qualification letter. That shows they are serious enough to have gone through the process with a mortgage lender. A pre-approved borrower is better than a pre-qualified one. A pre-approved or “credit approved” buyer is almost as good as a cash buyer. As long as your property appraises for at least the purchase price and meets the lender’s standards, you should be able to close fairly quickly.
If you can say yes to the above questions, it's time to learn about the home for sale by owner process.
Pricing Your Home
There are four accepted ways of checking your property value. They are, from the least to most accurate: AVM, CMA, BPO, and appraisal.
- The Automated Valuation Model (AVM) is what you see on Zillow or other sites. It works if you’re willing to be off by 10–30 percent.
- Realtors usually include a CMA, or Comparative Market Analysis, when they meet with you about listing your property. However, some agents may overstate your value to get your listing.
- Brokers with BPOR certification from the National Association of Realtors have special training, and only they can perform Broker Price Opinions (BPOs). BPOs cost $50–$250.
- Licensed residential real estate appraisers perform home appraisals. A full appraisal costs several hundred dollars. A limited or “drive-by” appraisal costs much less.
Don't make the mistake of overpricing your home. Agents will use your home to make their own listings look cheap by comparison.
Advertising Your Home
Plan to buy advertising and yard signs. And pay to get your house listed on the local MLS. While the MLS is not available to consumers listing homes, some brokerages or platforms offer the service for a flat fee.
Hire a good photographer to shoot a virtual tour. Most pros also offer drone photography. Many sellers are also using their phones to create quick TikTok and Instagram walk-thrus. Advertise the virtual tour links in your brochures and fliers.
Showing Your Home
Be as flexible as possible about showing your home. You will probably have to put your life on hold while selling your own house.
If your floors are delicate, offer a place for shoes and socks or slippers to visitors. Turn on lights, set the temperature to a comfortable level, and keep everything neat and clutter-free.
Plan on putting a lockbox on the house if you offer commissions to buying agents so that they can tour the home with their clients, and you won’t have to be there.
If you have open houses, get some help from someone to:
- Sign in visitors
- Pass out PPE
- Check IDs
- Keep an eye on various rooms as people walk through.
- Answer questions from potential buyers and agents
Negotiating the Sale
The buyers or their agents normally draft the sales agreement. You’ll evaluate offers and perhaps counter them, eventually agreeing. Learn in advance how to write a counter offer. You don’t have to accept the buyer’s offer, but you should always counter. Many buyers try to see what they can get away with on the first go-round and expect to negotiate.
Remember that price is just one factor. You may be able to make the deal more attractive to a buyer by throwing in a snowblower, paying closing costs, or offering incentives to buyers’ agents.
Make sure your buyer has the cash to close or approved financing before accepting an offer. Require an earnest money deposit that the buyer will forfeit if he or she does not adhere to your contract and close as agreed.
Understand that contingent offers let buyers back out under some circumstances. For instance, most standard contracts allow the buyer to exit if a mortgage lender declines their loan application or the home fails to appraise for the sales price. Make sure you can accept a better offer at any time or force the buyer to remove the contingency. This is called the “right of first refusal.”
You’ll probably need to address repairs if the buyer requests an inspection. You can insist on selling “as-is” or include a clause stating that you’ll cover repairs up to a specific dollar amount. Anything above that would have to be renegotiated.
How To Sell by Owner: Paperwork
Federal and state laws mandate that you disclose “material” facts. You must give the buyer a copy of all required disclosures. Have your buyer sign a receipt indicating that you provided them.
If you live in a community with a homeowners association (HOA), your buyers and their mortgage lenders will also want copies of the covenants, conditions, and restrictions (CC&Rs). That’s a set of rules homeowners must abide by.
Alternatives to Fsbo
You're not limited to high-priced full service or “free” FSBO. Other service levels at varying price points let you save money by doing things you don’t mind while paying someone to do things you don’t like. Online self-help platforms let sellers decide how much service they want and what they want to pay.
According to the American Economic Review, paying for a listing in your local MLS is the minimum you should do. Researchers claim that “the probability of a quick sale is higher for houses initially listed on the MLS.” Premium options include signage, fliers, MLS listing, and more.
The FSBO option is work, and it may take a while. But depending on your goals and work ethic, it may be worth it.
This article was produced and syndicated by Wealth of Geeks.
Ben Mizes is the co-founder and CEO at Clever Real Estate, the nation's leading real estate education platform for home buyers, sellers, and investors.