By Adam Jusko, ProudMoney.com, adam@proudmoney.com
My wife and I have sold two homes by owner (in Chicago and in Cleveland), without the help of a real estate agent. While I think agents can be helpful in some instances, we felt that both of our homes were desirable to a good number of buyers, making the sales likely to be fairly easy. We were right; both sold in less than two weeks.
Here are some tips based on our experience of successfully traveling the “For Sale By Owner” route, as well as some general home selling tips.
Preparing Your Home
Curb appeal is huge when it comes to selling a house. Remember that people want to picture themselves living in your house, so their first impression is extremely important. The nicer your house looks from the outside, the better. You can’t necessarily change the overall look of your home — it is what it is — but you can spruce it up through landscaping, a paint job (if applicable), fixing anything that is obviously broken, and un-cluttering porches or patios that can be seen from the road.
Inside, same thing. People want to picture themselves living in that home, not you. Obviously the house should be clean, but it should also be uncluttered. In particular:
- Don’t clutter the home with too much furniture and especially “knick knacks.” You may love to fill every square inch with stuff, but potential buyers want to see the actual home, not your Santa collection. In addition, I always remember one home we visited that had so much furniture you could barely move. They even had a sofa in the middle of the hallway!
- Continuing on the “less is more” theme, go easy on the photos and other wall art. I remember visiting one home that had pictures on every inch of the walls in every room — there’s wasn’t even space between the pictures, they overlapped! It was like a teen girl’s bulletin board in there. You love your family and your memories and your art, but if you’ve gone overboard, take some of it down while buyers are coming through.
The Legalities
When you don’t use an agent, you’re on your own to understand your local real estate laws. Well, don’t be. Find a real estate lawyer who can help you through the process — you don’t want to screw this up on the legal front. Your attorney can help with disclosures (telling potential buyers about current and past problems with the home, very important) as well as the sales contract and the closing. You do not want to DIY this.
On one of our FSBO sales, we had a local attorney who offered a package deal. There was a set price, and we could call on him as much or as little as we needed to. That was preferable to paying a per-hour rate, so ask potential attorneys if they’ll work that way.
Pricing Your Home – Get an Appraisal!
It’s very difficult to be objective about your home and its value. If you decide to sell by owner, there is a good chance you will overvalue your house, but it’s also possible to undervalue it. I highly recommend hiring an independent appraiser to give you an objective opinion about your home’s value.
An appraiser will compare your home to others with similar features, has a good sense of the current market, and is not emotionally invested in the home’s sale. He or she will give you a report that tells what the value is and why.
This is good for two reasons:
- It helps you decide on an asking price for your home. If you want your home to sell quickly, price it at 10% to 20% over that appraisal. If you’re not in a hurry, maybe a little higher to see if anyone will bite.
- If you get into negotiations and a buyer just won’t seal the deal, keeps pushing you on price, you have that appraisal in your back pocket. You have the option to pull it out and say, “The house has been professionally appraised at $XXX,XXX, I didn’t just make this number up.” That may help close a sale. (But don’t share that appraisal unless you really need to.)
When we had our second home appraised, I was actually surprised at how much the value had appreciated in just a few short years. I thought it seemed too high, but in fact we found a buyer at slightly above the appraised price in less than a week. Without the appraisal, I am convinced we would have under-priced it. (Though I would guess most people have the opposite problem and tend to over-price.)
Listing Your Home
It used to be that FSBO sellers had two options — local newspapers and a sign in the front yard. These days you have Craigslist and real estate sites like Zillow. And, of course, you still have the old standbys — in fact, I would still recommend local community papers that are free or cheaply distributed, because they are read by people who already have an interest in the town where you live. Having more listing options makes For Sale By Owner a more attractive route than it used to be.
My best advice for listing your home:
- Take good pictures. Most of us these days have decent cameras right in our phones. It’s amazing the quality we can get without hiring a professional. Still, think hard about what angles and lighting make your home’s exterior and interior look most attractive. You want potential buyers to be hungry to see more.
- Describe your house accurately. No sense in having people show up to a house that doesn’t fit the description. Don’t pretend a large closet is a bedroom or that some half-finished shower stall in the basement qualifies as a bathroom. You’ll waste everyone’s time, including your own. Talk about your home positively, but describe it honestly.
- Decide if you are going to have an Open House and/or do private showings. There’s no right answer here, but you need to tell buyers how they can see the home. We always enjoyed having Open Houses to see how people reacted to our homes. One of our homes sold to a person who visited our Open House, the other buyer contacted us privately.
The Sales Process
You have your house looking great, it’s listed, people are starting to show interest. Here are some tips to remember when strangers are coming through your home and negotiating to buy it…
First Rule: Be Safe!
You are inviting people you don’t know into your home. It is not unheard of for people to see homes (and other things) for sale on Craigslist and decide to show up and pretend to be an interested buyer — then rob you.
If you are a couple selling a home FSBO, you at least have a second person around. If you’re a lone seller, you’re more vulnerable. Some people choose to have an agent for this reason alone — they are nervous about dealing with buyers that could be dangerous. So, if you are determined to sell by owner, a few safety tips:
- Don’t be alone with a potential buyer.
- Tell others in your family or friends when a potential buyer is coming to your home.
- Try to get potential buyers’ names if you are doing a private showing. Google them to see if the name appears to be real or if there’s anything to be nervous about.
- Get a license plate number off of their car in case there is an incident.
You probably will have no problem with anyone who visits your home. That doesn’t mean you should just hope for the best, though. Be safe.
Those Pesky Real Estate Agents, Part I
Just because you’ve decided to sell by owner does not mean you won’t hear from real estate agents. You are like a warm lead to them — they will call (and call) to see if they can convince you to sign on with them instead of going it alone. The longer your house sits without a sale, the more you’ll hear from them.
Those Pesky Real Estate Agents, Part II
Many potential buyers — especially first-time home buyers — won’t think twice about asking their real estate agent to join them on a tour of your home, not realizing that you as the seller don’t want to pay their agent a commission. (Buyers technically don’t “pay” the commission so it doesn’t occur to them, even though that commission does factor in to the price negotiations.) When the agent shows up, he or she will want a signed agreement from you that you are going to pay them a commission if their client buys your home.
So, be prepared for this. You might want to include in your listing the fact that you want no buyers’ agents, or you might make it clear on an individual level if someone visits your home alone and then wants to call their agent. You also have the option to pay the commission if it will make the home sale happen faster or get you the price you want.
My wife and I had awkward agent experiences on both of our FSBO sales. In one case, we had to say no to a couple who really wanted to buy our house but had brought their agent into the process. It was our fault, too — we’d never sold on our own before and didn’t realize that the agent would expect a commission. (Seems obvious, I know, but we were young.)
Those Annoying Buyers
When you sell through a real estate agent, you have a buffer between you and the buyer. When you do a For Sale By Owner, it’s all on you. Potential buyers will ask rude questions. They’ll say bad things about your home. During negotiations they will ask for unreasonable things. This can be unpleasant — you may even get to a place where you actively dislike the people who are buying your home.
Keep your eyes on the prize. You are doing this to save thousands of dollars in real estate agent commissions. Be strong. You can get through this.
Should you really be selling by owner?
This final point maybe should have been the first point, but I save it for last because I wanted you to understand the FSBO process first. The point: Is “For Sale By Owner” right for your home?
Here are things to consider when it comes to answering this question:
- Is your home attractive or just OK? If it “sells itself”, it makes more sense to sell by owner. If it’s a tough sell because of looks, location, condition, etc., you may need an agent who can do a better job of drumming up buyers.
- Is your home very expensive for your area? The higher you go up the price scale, the fewer buyers there are who can afford your home. Your house could sit a while, and some potential buyers may never know it exists (because you can be sure their agents aren’t going to show it to them). As tough as it might be to pay that agent commission, it might make sense if the buyers for your high-end home are few and far between.
- What’s your timeframe? Do you already have another home and need to get out of this one, or do you have flexibility? Being desperate for a sale is never good from a negotiating standpoint. Plus, if time is of the essence, an agent can bring you more potential buyers than you’ll find on your own.
When For Sale By Owner is the Way To Go
The above section is not meant to deter you from going it alone. Far from it. I’m a big advocate for selling by owner. I think agents bring little to the equation in many cases. If you own an attractive home in a desirable neighborhood that is in a price range with many potential buyers, why give a real estate agent free money for something you could have easily done yourself? There’s no reason! Put up that For Sale By Owner sign!