Make sure everything works
The roof doesn’t leak; the house is warm in winter and cool in summer; the hot water is hot. But pay attention to the little things too — no running toilets or burned out light bulbs. You want to create the impression that you take good care of your home.
Neutralize, neutralize, neutralize
The house shoppers who visit your home may have different taste in decor than you. So your best bet is to neutralize as much as possible. Repaint walls to neutral colors and remove items that distract from the house itself — that includes furniture that dominates a room, potentially controversial art work and all family photos. You should declutter in the extreme — empty kitchen counters, minimal furniture in each room, few if any frames on the walls. You want the house shopper to be able to imagine the house with their stuff, not yours. The same critical eye is needed outside the house — one person’s nature paradise is another’s neglected jungle.
Take professional quality photographs
Once your house looks like a showcase model home, you are ready to take pictures to show it off. Look through the real estate websites to get a sense of the range of quality. The best ones will give you an idea of what you are aiming for — that’s your competition. If you can’t match them, then give serious consideration to hiring a professional photographer. Here are some common mistakes: cluttered rooms, not enough pictures, too many very similar pictures that highlight the furniture rather than the house itself, and failure to include good shots of the kitchen, the bathrooms, and the master bedroom. If your home has special landscaping, a pool, or a large property, you should include photos of those too.
Price it right
You probably have an idea what you think your home is worth, but what is the right price? The easy answer is that it is the price that a motivated seller and a motivated buyer agree upon. Since you don’t have a buyer, how do you set that price in advance? The best starting point is to look at recent selling prices of similar homes nearby. One big challenge is to correctly identify similarities and differences. When there are differences, how much of an adjustment is appropriate? For example, if a house has an extra bathroom, a smaller lot, more street traffic, a swimming pool, or 300 more square feet than your home, how much does each of these add to or subtract from the price in the current market? What if the kitchen needs updating? How about a new roof versus a fifteen year old roof? These are some of the detailed questions that professional realtors deal with in conducting a Comparative Market Analysis (CMA). The answers involve both mathematical analysis and judgment based on extensive experience in a good brokerage. You need to do your best without that data and experience. A big mistake that many FSBO sellers make is to set the price based on what they think their house “should” be worth. In the real world, the market is always right. If you set your price too high, the market will tell you so — you won’t get any offers close to what you’re asking, or maybe no offers at all. If you aren’t in a hurry to sell, you might be happy to wait until the market catches up to your expectations. If you do have near term goals and gradually lower your price, this can raise red flags. A competent professional CMA can also ensure that you don’t leave money on the table just because you’re in a rush to sell.
Get the word out
Be sure your house, with all its photographs, is listed on the major public real estate websites. You will need to enter a lot of information, and be sure it is accurate. Misrepresentations at this stage will almost certainly come back to haunt you, and may even lead to failed contracts or lawsuits. One common mistake is a badly written description of the home. A simple statement of basic facts runs the risk of just sounding boring, not something that would attract the interest of buyers.
If you’re selling your house on your own, use a lawn sign. Just like your listing on the websites, the quality of the sign makes a statement about the quality of your home. Handwritten signs or the ready-made ones you pick up in a hardware store won’t cut it. Remember, you’re competing with the professional signs used by professional realtors. If you also use lead-in signs that direct shoppers from major intersections to your home, be sure you familiarize yourself with local regulations about size and placement. Also, be aware of the downsides to “For Sale by Owner” lawn signs — you may attract people who are not good prospects, like curious neighbors, bargain hunters, or those who couldn’t qualify for a mortgage. The other downside is that people know the “agent” lives there; so they might just knock on your door at inconvenient times.
Some free marketing vehicles you can use include email and social media. Whatever you write needs to have marketing appeal, but also avoid misrepresentations that will get you in trouble later on.
You can spend money on brochures like those used by professional realtors. But be sure the copy, photos, layout and paper look professional. An amateurish effort can be a waste of money and even convey a negative message about your house. Of course there’s no point in spending money on brochures if you can’t get them to your target market. So be prepared for the additional expense of postage and mailing lists.
Show your home often
The more qualified buyers visit your home, the more likely you are to receive an offer. All else being equal, FSBO homes get fewer qualified buyer visits than homes listed with an agent (more on that later). You can’t really afford to pass up a potential opportunity. So be ready to show it when it’s inconvenient, and do it yourself. Most shoppers will not be accompanied by an agent of their own (more on that later too).
If you get an offer…
Before you enter into negotiations with a potential buyer, you should ascertain whether they are “qualified” to buy your home. There are two major factors to look for: Do they have the financial wherewithall to close the deal? This is usually determined by whether or not they have preapproval from a mortgage lender. Is the offer in the form of a legal commitment such as that represented in the Purchase Contract used by professlonal realtors? A legally-binding offer should also stipulate how much they are willing to deposit into escrow as a sign of their good faith.
If you are in a seller’s market (many buyers chasing fewer houses), you can be more aggressive in your negotiations than if it’s a buyer’s market (many sellers competing for fewer buyers) when any sign of interest might tempt you to drop your price. Experienced local realtors know that market status is not consistent throughout the region, but may vary a lot for different neighborhoods or house styles. If you assume you are in one market, but are actually in another, your negotiations may end unhappily. In general, FSBO homes are in somewhat more of a buyer’s market than otherwise because they usually receive less exposure to qualified buyers (more on that below).
From contract to closing
Once you have a ratified contract with a qualified buyer, you are still far from ready to celebrate the success of your FSBO home sale. You will need to open your home for inspections arranged by the buyer and his or her agent; the buyer will need to obtain a fully underwritten mortgage; you will need to arrange a termite inspection, hire a real estate attorney, sign various documents in preparation for closing. If the buyer is unable to obtain a mortgage, then the deal is off. But the biggest challenge the seller faces is often due to the inspection. Inspectors can identify many issues with the house that may range from cosmetic to threats to safety and functionality. Malfunctioning equipment and structural defects must be resolved by the seller. In some cases, you simply arrange and pay for repairs; in others you may be able to get away with negotiating a credit to the buyer. If the cost is too great, you may choose to withdraw from the contract.
Use an agent instead?
The truth about commissions
People often try to sell their home without an agent to avoid paying commissions. But, in addition to doing a lot of work and taking risks, most FSBO sellers save less than expected. Let’s work through an example. Commission rates aren’t fixed, but the most common in RVA for a full service agent is 6%. For a $300,000 house, that works out to $18,000. But half of that amount is usually reserved in the listing contract for the agent representing the buyer. Over 80% of buyers are represented by agents — so even FSBO sellers end up paying half the commission. Now your saving is down to $9,000. Out of that amount, the listing agent would pay for photography, brochures, and other forms of advertising. A typical investment of $1,000 in these professional services turns out to be money well spent. So either you pay for them yourself, or you hope for the best with amateur efforts. Now we’re down to $8,000.
Much larger buyer pool
Perhaps the biggest value of working with a listing agent is access to a much larger pool of potential buyers. The great majority of buyers are working with agents to find them a home. Those agents find homes through the Multiple Listing Service, but homes for sale by owner are not listed on MLS. Buyers’ agents are often reluctant to show FSBO homes for several reasons — they know they will not be dealing with a professional who is fully familiar with the regulations and complexities of negotiating and closing real estate transactions; they are also concerned that there is no contractual guarantee that you the seller will pay their commission, rather than their client the buyer. This places additional pressure to negotiate a lower selling price. At the time of this writing, 95.4% of the homes for sale in the Greater Richmond area are listed with agents, leaving only 4.6% for sale by owner. In general, buyers’ agents know they have lots of choice and can safely ignore FSBO’s when seeking a home for their clients.
Your agent’s job
In addition to much greater market access, what do you get in exchange for the fee you pay an agent? Your professional agent performs all the tasks listed above on your behalf. We communicate directly with all the agents whose clients are currently seeking homes in your area. We use marketing tools that are proven to get results and comply with all regulations. We are highly motivated to sell your home, since we don’t get paid unless your home is sold. Meanwhile you the seller are completely in charge concerning the price and terms of any sale transaction.
If you decide to try to sell your home without an agent, I hope the information in this post will help ensure a smooth and successful experience. On the other hand, if the potential savings no longer seem justified by the effort and risks involved, then please contact me to continue the conversation with no obligation.
Martin Ahrens 804.658.7718 firstname.lastname@example.org