In today’s tough housing market, some sellers are looking to cut costs by selling their property without using a real estate agent.
Sellers who skip the listing agent and offer their home as a “for sale by owner” — or FSBO (pronounced FIZZ-bo) — have the potential to save thousands of dollars in agent’s fees, says Piper Nichole, author of “The For Sale By Owner Handbook.”
But FSBO sellers should be prepared to do a lot of legwork to manage the sales process, with no guarantee of a final sale, she says.
Here are five questions experts say homeowners should ask themselves before selling a home on their own.5 questions to ask
- Do I know the value of my home in today’s market?
- Am I ready to work with a buyer’s agent?
- Will I take charge of sales and marketing responsibilities?
- Can I bear criticism of my home?
- Am I willing to screen potential buyers?
1. Do I know the value of my home in today’s market?
A common mistake FSBO sellers make is to price their home too high, Nichole says. As a result, the property languishes on the market.
“When a home sits for a long while, buyers start to wonder what is wrong with it,” she says. “The best option is to come out of the gate priced right.”
To market a home competitively, sellers should research the final sales price of similar properties in their community.
Updated sales information is available to agents through proprietary reports, but individual owners can also dig up sales data from public sources, says Amy Bohutinsky, vice president of communications for Zillow.com, a Seattle-based online real estate service that provides data on homes.
Online real estate sites may offer sales trend information for local neighborhoods, sales prices for comparable homes in the community, known as “comps,” and the average length of time homes have remained on the market, Bohutinsky says.
“It takes a lot of work to look at this data and figure how to price your home, but it’s important in order to come up with the right value,” she says.
It may even be worthwhile to purchase an appraisal from a certified licensed appraiser, says Dale Siegel, a mortgage broker and author of “The New Rules for Mortgages.”
Buyers eventually have to pay for their own appraisals. But homeowners who buy an appraisal before putting their home on the market can eliminate the risk of a pricing surprise when a buyer applies for a home loan, Siegel says.
Even if sellers think they’ve arrived at fair home values, potential buyers may still try to negotiate prices downward.
According to Bohutinsky, a report from Zillow determined that 23 percent of real estate listings nationwide had a price cut in August 2009. And nationally, homeowners are selling for less than 3 percent of their listing price on average, Zillow says.
“If you want to sell quickly, the strategy is to sell about 5 percent below the most recent comps in your area,” Bohutinsky says.
2. Am I ready to work with a buyer’s agent?
In a typical real estate transaction, the listing agent represents the seller. But the buyer may choose an agent to represent his or her interests, too.
When a real estate deal is made, the seller usually pays both agents involved a commission based on the sale price of the house. That commission is negotiable, but it has traditionally been about 6 percent of the purchase price, says Nichole. The buyer’s agent and seller’s agent generally split the commission in half.
As a FSBO seller, you may decide not to use a listing agent, but you can’t control whether or not a potential buyer wants to use a buyer’s agent.
If the buyer does use an agent, homeowners should consider offering that agent the typical commission, which would be about 3 percent of the sales price, says Leslie Tyler, vice president of marketing for ZipRealty, an Emeryville, Calif.-based realty company.
Sellers who decide not to offer to pay the commission will probably shrink their pool of potential purchasers, because buyer’s agents would not have an incentive to show their clients the seller’s home.
3. Will I take charge of sales and marketing responsibilities?
Some FSBO sellers underestimate the amount of effort it takes to market their home, Nichole says. Sellers should be prepared to keep the home clean, clutter-free and “show ready” at all times.
“Prepare the look of your home, both inside and out,” Nichole says.
Other steps sellers should take include:
- Take good photos of their property and write effective sales descriptions.
- Buy and install a “for sale” yard sign with promotional fliers that include contact information.
- List the property in multiple classified ads and real estate Web sites.
Placing the home in the Multiple Listing Service, or MLS, is another important way to market the home, Tyler says. The MLS is a database of homes for sale offered by brokers.
FSBO sellers can’t submit to an MLS, but some companies have brokers who will list the seller’s home in the MLS for a flat fee, Tyler says. Sellers may pay a few hundred dollars for this service.
Before paying any money to a third-party company, research to determine if it has been in business for a while, has a good reputation and has earned favorable reviews, Nichole says.
In addition to marketing their own property, FSBO sellers often need to find and hire people to help them complete the sales process, Siegel says. These professionals include real estate attorneys (to review contracts and offer advice), appraisers and contractors (to make any necessary home repairs).
4. Can I bear criticism of my home?
The emotional aspect of selling a home is often overlooked, but it’s an important part of the selling process, Tyler says. Owners will probably hear a lot about their home’s shortcomings from buyers trying to negotiate a lower sales price. Or worse, they may not receive any interest in their home, especially if the price is too high.
You have a better chance of being a successful seller if you don’t take negative feedback personally, Tyler says.
“If you don’t live in your home and you don’t have an emotional attachment to it, it’s a little easier to sell FSBO,” she says. “You can have a more objective view of the home’s value.”
5. Am I willing to screen potential buyers?
It may seem pushy, but FSBO sellers must be willing to screen their own buyers, Siegel says.
“You don’t want to take your house off the market to negotiate with someone who was never qualified for the home in the first place,” she says.
Before you sign a contract with a buyer, make sure the purchaser will be able to come up with the necessary funds, Siegel says.
“It’s harder to get a mortgage these days because the bar is higher,” Siegel says. “Applicants need better credit, higher salaries and a bigger money reserve than they needed just three years ago.”
Before accepting an offer, ask for a current pre-approval letter from a reputable lender, Siegel says. The preapproval letter should show that the buyer spoke to the lender and has been preapproved for the purchase price of the home, she says.