Mistakes to Avoid When Selling Your Own Home
This article originally ran on June 23, 2003 Owners who’ve sold their homes without a real-estate agent say it isn’t difficult once you’ve mastered the basics. You need to price it correctly, make sure enough people know it’s for sale, understand what paperwork is required, and be able to negotiate with. Yet many people start the process and give up. I know, because I did.
In 1999, while planning to move to another state, I thought I could quickly sell my three-bedroom townhouse near Princeton, N. J. , and save the 6% commission. I spread the word that my desirable end unit was for sale and soon had an offer at my asking price from a friend of a friend. He was a university professor, so I assumed the deal was solid. But a few weeks later, the professor didn’t get the job he’d hoped for and said he couldn’t purchase my home.
With the move looming, I was under the gun to sell my house. Since no documents had been signed, I returned the professor’s deposit. I then began passing out fliers in my neighborhood advertising my home. Unknowingly, I handed one to a real-estate agent.
He told me he could sell my home swiftly for thousands of dollars more than I was asking. I hired him, and we raised the price of the house. The day after my house went on the market, a bidding war ensued, and I was offered even more than the new higher price. Instead of accepting an offer involving a bank mortgage, we chose one that would be paid all in cash, and I was glad to pay my agent his full commission.
It didn’t work out for me, but hundreds of people every year sell their homes in For Sale By Owner (FSBO) transactions. In fact, between 1997 and 2001, 13% to 18% of all U. S. home sales were FSBO (pronounced fizbo) transactions, according to the latest data from National Association of Realtors in Washington, D. C. Steve Schleuning, a 50-year-old Overland Park, Kansas, resident, has sold five homes this way since early 2002. He fixes up slightly distressed properties and resells them at a profit. He says if he paid real-estate commissions Б which average between 6% and 7 1/2 % — the business wouldn’t be worth the investment.
All I have to do is look at the money I’m saving and the money I’m making, and it’s well worth the effort, says Mr. Schleuning. What do Mr. Schleuning and other FSBO sellers know that those of us who use real-estate agents don’t?
FSBO Services For starters, you don’t have to go it completely alone. A mini industry has sprung up to help FSBO sellers with the details for fees that are usually a fraction of a typical realtor’s commission. Among the services they may offer are: These companies know what sellers are required to disclose in their respective states. They sometimes help owners price their homes correctly or ensure buyers are financially qualified.
Some are affiliated with title and mortgage companies. Fees vary depending on the package of services owners select. For listings of FSBO services nationwide, visit or. Mr.
Schleuning uses Pearson’s For Sale By Owner Services Inc. , based in Overland Park, Kansas. It charges 5 for a package that includes a three-hour seminar, ads in its FSBO magazine and Web site, a real-estate lawyer’s services, necessary documents, yard signs, and other aids. Other owners simply hire a lawyer. Karen Jones, 43, of Oak Brook, Ill. , paid a real-estate attorney 0 to handle the sale of her four-bedroom suburban Chicago home two years ago.
However, she cautions sellers to be sure to use a real-estate lawyer. This way, they will be sure to comply with the disclosure and other requirements in their states. Of course, you also can purchase necessary forms and do the documentation yourself. Ms.
Jones’ mother, Martha, sold four homes herself over a 30-year period and is readying a fifth for a FSBO sale. She did all the paperwork on the first three transactions, but now hires an attorney because real-estate laws have become more complicated, says Ms. Jones. Tips for Selling Swiftly So does the prospect of keeping the 6% to 7% realtor commission in your own pocket appeal to you?
FSBO sellers say if you decide to sell your home on your own, knowing the following sales tactics will increase the likelihood that it will sell easily and swiftly at the price you want. 1. Your home must be priced correctly. You can’t just pull a price out of thin air, as I did initially for my townhouse. It may be either too high or too low.
Consider paying for an independent real-estate appraisal or do a survey of the actual prices comparable homes (comps, in realtor lingo) in your area have sold for recently. This information is public and available in county courthouses. It’s also published on Web sites such as and and in local newspapers or the newspapers’ Web sites, although these don’t offer square-footage information and other details. You can have this information ready to show buyers who question your asking price.
Ms. Jones reviewed such comps when pricing and selling her home. Within two months, Ms. Jones’ house went for her asking price — 2,000.
Mr. Schleuning also uses comps to determine the price of his homes. For him, it’s important to price his homes correctly so he doesn’t have to hold them long and keep paying carrying costs. Don’t be greedy, he says.
I never assume that my home is worth more than the top price of a similar house in the neighborhood just because it’s fixed up. Boise, Idaho, real-estate attorney Barry Peters recalls an owner who bought a Boise home for ,000 years ago and decided to sell it herself in 1998. She decided on her own to price it at 0,000, and thought she had gouged a buyer, who agreed to pay it, says Mr. Peters.
But an appraiser hired after the deal went through valued the home for ,000 more than the purchase price. The original owner wanted to cancel the deal and ask for more but couldn’t because she had signed a contract, Mr. Peters says. This was a tragic situation, he says.
To avoid it, you need to get your home appraised if you have owned it for more than two years, he says. 2. You can get the price you want. Some buyers assume that owners selling homes themselves should deduct the amount of an agent’s commission from their asking price. FSBO experts disagree.
They say that homes sold by real-estate agents have prices that are marked up to cover their commissions. Whether you sell it or an agent sells it, a property is worth what it’s worth, says Dale Pearson, publisher of Pearson’s For Sale By Owner Services. You make money by not paying the commission, not by discounting the property. Some FSBO sellers think they need to start with a high price and then lower it during negotiations, says Mr.
Pearson. But their initial price is too high or isn’t based on the home’s actual worth, and they typically don’t get it or can’t sell their homes, he says. He tells owners they should ask for a little more than what they want. For instance, if your home is appraised for 0,000, and you’d like to sell it for that amount, start by asking 0,000.
Then, during negotiations, if a buyer makes a 0,000 counteroffer, you bring them back up to the price you want, he says. 3. Enough people must know your home is on the market. You can’t plunk a For Sale By Owner sign in your yard and expect buyers to show up if your house is located off the beaten track. Have a plan for marketing your home to a wide audience.
FSBO services publish monthly magazines distributed free with all the homes they’re helping owners to sell in the area. A Boise FSBO service, Property By Owner, distributes 29,000 copies of its magazine advertising about 250 to 350 homes monthly, says publisher Rudy Weisshaupt. Pearson’s contains about 400 to 500 advertised homes and about 30,000 copies are distributed each month in the Kansas City area. Another option is to advertise in local newspapers or on a Web site listing homes for sale in your area.
Ms. Jones did both, but says that no one responded to the Web-site listing and only a few people called after reading the newspaper ad. Her yard sign was her best marketing device, she says. The main thing that helped us sell our house so quickly was that there were several houses in the neighborhood for sale through realtors, she says.
People would drive through and then give us a call. 4. You must be aggressive about weeding out unqualified buyers. If you accept an offer from an unqualified buyer, you’ll delay the sale of your home and need to start the sale process over again. But you can prevent this by asking potential buyers to contact a lender and become prequalified before accepting their offer and taking your home off the market.
If a potential buyer claims to be prequalified already, contact the lender and verify the terms of the approval. When buyers already have letters of approval from lenders, determine if they’re preapproved — meaning a lender has examined their finances and believes they can secure a loan — or prequalified, which means the lender has agreed to finance a certain amount, says Ms. Jones. Mr.
Schleuning says he had a sale fall through because a buyer wasn’t prequalified. Other buyers have so many conditions attached to their loan approvals that they can’t get financing for certain homes, he says. For instance, one buyer had been preapproved for a mortgage, but not if the home was an A-frame, which Mr. Schleuning was selling.
In others cases, buyers have been required to make down payments they couldn’t afford. I had some deals falter because I took [buyers] at their word about their preapprovals, he says. You need to really get involved with the sale and call the lender and find out what they’re qualified for. Mr.
Schleuning also cautions owners to find out if lenders are legitimate. With the low rates, a lot of fly-by-night lenders are out there, he says. 5. You can show your home at your convenience. To avoid the headache of having to straighten up your house and show it at a moment’s notice, FSBO experts advise deciding which days and times of the week you want buyers to view your home and take appointments for only those times.
We say you can sell your home in two hours and people say, ‘What do you mean? ‘ says Mr. Pearson. It means telling buyers you’re showing the home on Saturday between 1 p. m. and 3 p. m. and asking, ‘What time would you like to come? ‘ Ms. Jones also showed her home by appointment only.
Putting this condition on your For Sale By Owner sign is important, she says, or you could have people ringing your doorbell at 10 p. m. wanting to see your house. If you’re leery of having strangers in your home, you can increase your security by arranging to have another person in your house with you during appointments, adds Ms. Jones. She says she learned a lot about the process from How to Sell Your Home Without a Broker by Bill Carey (John Wiley Sons, 2000), which includes tips for first-time FSBO sellers. 6.
You can’t be in a hurry. It takes time to sell a home yourself, but be patient, both Ms. Jones and Mr. Schleuning say.
Otherwise you may not get the price you want or you’ll be tempted to give up. Ms. Jones says real-estate agents who saw her For Sale By Owner sign dropped by her house and asked if she’d be willing to work with them. I said I’d consider it, but I wouldn’t pay a commission, which settled the matter, she says.
If my house had been on the market a long time, I might have considered it, but we were in no hurry. — Ms. Capell is a senior correspondent for RealEstateJournal. com. She can be reached at.