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The 'For Sale By Owner' Handbook - Information, Tips, How-To and Articles
ByOwnerMLS - Home Sellers Guide
Hundreds of thousands of homes are sold every year by their owners, without additional support from a real estate agent. The National Association of Realtors estimates that about 13% of American homes are sold each year as “For Sale by Owner” (or FSBO), but some experts suggest that as much as 30% of the market is FSBO. The movement towards more homes selling as FSBO’s is actually a return to the way real estate was bought and sold in the days before the professional real estate agent.
This guide will help you sell your own home, so that you too can join the growing ranks of FSBO home sellers.
Preparing your home for sale
Before you put your home on the market, it just makes sense to know what shape it’s in and how much it might be worth. To help with that, many people hire a professional home inspector as a first step.
This general home inspection is valuable for a number of reasons, but most importantly because it will allow you to know which repairs will be needed to make your house more attractive to the buying public. An inspection of your home before sale is often a legal requirement and many problems such as environmental hazards (lead paint, radon gas etc), geological hazards or termite damage may be discovered. Most states also have disclosure laws that require you to share any knowledge you have regarding problems with your home with the prospective buyer before the purchase.
A pre-sale inspection will also increase your confidence in what your home is actually worth and will help you set a realistic price before putting your home on the market.
Before advertising your house for sale you should make sure that any repairs you need to make actually increase the value of your home in proportion to the final asking price. For instance, if you have a leaky roof that is going to cost $10, 000 to repair, it might be better to lower your asking price by $5, 000 and let the buyer know that the roof is damaged.
To get your home in the best possible shape for sale it will often take some minor painting, yard work, cleaning and small repairs. The kitchen and bathrooms should also be immaculate, as these are major selling points for potential buyers. The smell of your house should also be pleasant. Scented candles in the dining room can influence potential customers in a positive direction. Any clutter should be put away and beds should be made. Taken together, these steps will increase the value of your home in the eyes of your prospective buyer.
Setting your asking price
When it is time to set the price on your home the most important thing is to be realistic. According to experts at ElectronicAppraiser.com, setting your price too high is the most frequent reason that homes don’t sell. It’s a common trap that FSBO sellers fall into. Many buyers look to buy FSBO properties in hopes they can get the property for a good price. A price that is perceived as too high turns them off.
There are several good methods for pricing your home. One of these is a “desk top appraisal.” In this case, a professional appraiser will research how similar houses in your area were priced when they sold and then arrive at a range of possible values for your home. With this type of appraisal, the professional does not actually visit your home. Even so, the result is a professionally prepared document that you can show to prospective buyers that should cost you less than $100, significantly less than a full appraisal. Appraisers can be found in your local telephone book or on the Internet.
Another option for pricing your home is to contact a local real estate agent and ask them to do a Comparative Market Analysis (CMA) for you, which will once again give you a basic idea of what your house is worth by looking at similar houses in the area. A CMA will also let you know how long comparable houses were on the market, and how close their final sale price was compared to the asking price. Some agents will gladly offer their expertise knowing that you plan to market your property as a For Sale By Owner. They do this in hopes of you listing your home for sale with them if your are unable to sell it on your own. It is a good practice to inform any agent up front that you plan on marketing your home as a FSBO prior to them helping you price your property.
Increasingly, home sellers are turning to the Internet for accurate estimates of home values through the use of automated valuation models (AVMs), computer programs that take into account many aspects of the home and community to arrive as an estimate of value. Appraisers, Wall Street and Lending Institutions all use AVM technology in their analysis of residential property. An AVM is a residential Valuation Report that can be obtained in a matter of seconds. It is a technology driven report. The product of an automated valuation technology analysis, public record data, and computer decision logic combined to provide a logical calculated estimate of a probable selling price of a residential property.
There are many options for the homeowner who wants to use these computerized models. You can find many useful resources on the ByOwnerMLS.com website.
Putting your home on the market
Once you have established a price for your house it is time to market it. The most effective marketing tool is something you see in front of houses every day. A “For Sale By Owner” sign. Yard signs should be large enough for anyone driving by to see, and clear enough that your telephone number is easily visible.
Another effective marketing tool is the printed flyer. Include a photograph of the property, some basic facts about the home, including the number of bedrooms and bathrooms, and your contact name and telephone number. Advertising in local newspapers can also a cost-effective way of getting your house noticed.
Some homeowners host Open Houses, using special signs strategically placed throughout the neighborhood to draw people to your home. Make sure your house is and in a presentable condition, radiating a homey atmosphere. Make all potential buyers feel comfortable by letting them browse through the home and by offering snacks. Make sure all valuables are securely put away.
Answer all questions truthfully, as you are setting the stage for future negotiations. It is important to keep a log of people who have expressed interest in your home. Contact them a few days after they have looked through your house.
The buyer may say they are interested in the house, and ask what the next step is, a question you must always be ready to answer. When a buyer makes an offer that you are willing to accept, it’s time to put the paperwork together.
Putting together the deal
Because most states require certain actions and legal documents in order to complete a transfer of real estate, it’s a good idea to contract with a real estate attorney or title company to prepare the paperwork. If you do not wish to hire an attorney, you can access real estate forms on the Internet from literally hundreds of websites around the country.
The sales contract should include at a minimum the final sales price, the full names of both buyers and sellers, the address and legal description of the property, what items are included in the sale and how much money will be deposited as an initial payment—typically between 1 and 10 percent of the agreed-upon purchase price—which escrow company will be used and who will be paying the closing costs. The contract will also typically specify when the new owners hope to take possession of the property.
This period of negotiating can be difficult for many FSBO sellers, which is why many choose to work with real estate agents. The key is not to make any quick decisions; to carefully think through the terms of the proposed deal.
Even if the buyer seems to be difficult remain friendly. Don’t take negative comments about your house personally as it could simply be the buyer trying to get you to lower the price. Try not to let the buyer know that you need to sell your home by a certain time as it will stand against you in the negotiations. Relax and affirm the value of your property.
When you get an offer, make sure that the buyer has been pre-qualified for a home loan from a bank or lending institution. The buyer should give you a pre-approval letter with the purchase agreement. If not, then this should be a requirement to close the deal. You can then either accept the agreement as it is, which then becomes a binding contract, or can make a counter-offer.
Closing the deal
Once the contract is signed, the buyer’s lender will have some requirements that must be met before the financing will be made available. These might include another inspection and will likely include a full appraisal.
A title insurance company will then examine all previous owners of the property to make sure there will be no difficulties in getting a clear title. Any tax liens or other problems that could jeopardize the title are uncovered and an insurance policy is provided.
Signing the contract for sale does not transfer title of the property. That paperwork, along with the lender’s loan closing documents are generally signed in the presence of a notary at the title company, the offices of a real estate attorney or some other closing agent.
This closing agent checks all the paperwork involved in the transaction to ensure that all financing requirements have been satisfied and that all monies due to the seller have been delivered. A good closing agent will help make sure that everything is in order and that the deal is legal and binding for both parties by ensuring that all required documents have been correctly signed and notarized.
This agent will generally handle the recording of the required documents in the County Recorders Office after the transaction is finalized.
How Much Can You Afford? This calculator provides an estimate of the maximum mortgage loan a prospective Buyer can expect to get from a bank or other lending institution.
Seller's NET CASH Calculator Use the calculator below to estimate proceeds from the sale of your house.
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State Specific Real Estate Forms are a Must!
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