I love this business and have been selling homes for 19 years and have helped sell over 425 homes! I respect that you want to sell on your own and will not “high pressure” you into trying to list your home.
My hope is only this: if you decide to hire an agent (discount firm, traditional or somewhere in between) that you at least talk with me before making a final decision.
The purpose of this booklet is to give you the tools you need to get your home sold in todays’ market in light of the economic changes in the past year or so.
Using these tips and techniques will give you the competitive edge you need to conquer not only the other “For Sale By Owner’s” in your community… but also the competition of all homes for sale.
Selling on your own requires that you think like a buyer. When you put yourself in a buyers’ shoes you realize that every home for sale competes with every other. This competition includes all the other “For Sale By Owner’s” and professionally listed homes in your market area… short-sales, foreclosures, real estate owned (REO’s) must be factored into this competition … and in order to be successful selling on your own you need to have a proven plan in place to capture that elusive “right buyer” at the right price.
*IF you have the knowledge, IF you have the marketing expertise, and IF you know the process involved in getting a home sold on your own than you will have an above average chance to do just that… and save literally thousands of dollars in commissions.
One thing you need to understand right up front is that the only differences between you and a real estate professional or another “For Sale By Owner” are knowledge and experience. Experience is tough to gain but knowledge is available here and at other sources.
In 2014 roughly 9% of all residential real estate sales were “For Sale By Owner.” The National Association of Realtors Profile of Home Buyers and Sellers reports this and several other interesting facts;
about half of all FSBO sellers knew their buyer before they sold their home (i.e. they sold to a friend or relative or neighbor.) That leaves 3% to 5% (out of roughly 5 million sales) selling on their own to a buyer they didn’t know before they started this process.
On the Peninsula that translates to 150 or so (out of about 4,313 listings sold) of Successful FSBO sales. That’s a lot of successful for sale by owners. This booklet assumes you don’t already know your buyer and need to find them.
The truth is that you can sell your home on your own. I talk to people every month that sell on their own. It’s hard work. It involves time, creativity, some expense, and having a plan. Only you can decide whether the potential costs savings are worth the effort involved.
The first step is to decide why you want to sell and what you are hoping to accomplish when you sell your property. Right now, in most markets in the country, we are in a real estate recovery, lower inventory and rising prices. If you’re just “testing the market”; or need to net more than your home is really worth to move; you should consider staying put and not selling. If you’re looking to upgrade it may be the best time in our lifetimes to do just that because of the low interest rates, low prices and the fact that higher priced homes are just beginning to recover price wise (lower priced homes historically rise first) and there’s ample selection. Price your home correctly and it should get you offers.
The next basic thing you need to understand is that your home must have “bragging rights” in order to stand out from the competition. In this market, with the bad taste many were left with about real estate, buyers are sometimes unsure of making any large buying decision.
If your home doesn’t offer the buyer the opportunity to tell their family and friends what “a great deal they got because of __________.” These friends and family may dissuade them from buying your home.
Your home must be priced correctly, marketed correctly, and all obstacles to buying your home must be minimized. If it’s priced too high it will simply not sell in this or any market to a qualified buyer. Not even if you list with a real estate professional or offer a “rent to own” or “lease purchase” option. Not even with owner financing. Those gimmicks will only get you involved with “unqualified” buyers or investors hoping to buy low and sell high at your expense.
All sales are a numbers game. The more buyers that know your home is for sale the higher the likelihood it will sell. And the more who see it; the more offers you’ll receive; and the more offers your receive the more money you will make. Let’s keep in mind why you’re doing this on your own. If you’re like most of the other FSBO’S I talk you’re looking to save the commission.
Rather than paying a real estate agent 6% or 7% commission of the sales price… you are attempting to go it alone and save that money. Many of you will offer 2% to 3% to a real estate agent if they bring you a buyer so you’re really just looking to save that other 3% to 4%.
In order to save the commission you will be required to spend some of your time on the process. Banks list their homes with a realtor. Short-sales are required by the lenders to use a real estate agent. 95% to 97% of all sellers who don’t have a ready-made buyer use a real estate agent. Agents do a hard job, provide a valuable service, and earn their commissions. If they didn’t they’d go the way of travel agents, 8 track cassette decks, and encyclopedia salesmen.
You have decided to try on your own. I respect that and the money you are trying to save. This is what I do everyday, all-day. I’ve prepared a short quiz to help you determine is you are likely to be able to handle selling on your own. All of the questions below require a simple “yes or no” response… and please save yourself a lot of time and hassle by answering them honestly right now.
These questions and your answers should help you determine right now if you have the time, patience, expertise, motivation, insight and will to sell your home on your own.
If you can’t answer “yes” to all of them – it may be better to stop now and hire a professional real estate agent, like me, to handle the transaction for you.
However, if you did pass the above test… let’s get into how to successfully sell your home – on your own – in the right time, with the least stress, and for the most money!
Five steps to selling your home …after you’ve priced it correctly.
“Make your Home look great to any buyer who comes to see it!”
The way you live in a home and the way you sell a home are two very different things. There’s a whole industry of “home stagers” out there who realize this fact. You are able to find lots of ideas and tips on the Internet and in your bookstores – the following is a basic overview of preparing your property for sale.
Homebuyers ideally want to their new home to be a “model home.” No nicks, scuffs, or dings. They want lots of room and things to look like new. Your job when preparing your home for sale is to begin to give the buyer what they are looking for in terms of condition, features, benefits, and amenities.
Items such as a busy street, sloping lot, number of bedrooms, etc. are generally fixed and unchangeable. But there are others that can be improved upon easily and inexpensively. Doing the work up front will allow you to sell quicker and net more money. Getting your home ready for sale and keeping it in showing condition during the selling process is one of the most important and crucial aspects of doing this yourself.
In fact, if there is one thing that I’ve learned in my years of real estate experience – it is that most buyers have really no imagination whatsoever. If they can’t see it they can’t buy it. And those buyers that can see it expect to discount the purchase price for their ability. The condition and presentation of your home may cause it to sell or not sell.
Buyers almost always see only what is right in front of them. Which means don’t ever expect a buyer to see the “potential” your home has to offer without a huge decrease in their eyes about the price value of your home.
In the real estate business we call this the law of the “thousands.” A buyer will see a old dishwasher and subtract a $1000 from their offer even though a new dishwasher may only cost $600. New carpet may embolden them to subtract $5000 when it will cost them only $3000.
Go over the items below and complete as many tasks as possible can cause your home to sell quicker and for more money.
Too much clutter and lack of home preparation is one of the biggest mistakes I see many “For Sale By Owners” make.
This subject probably has the most expert advice available on the Internet and in the bookstores. Feng-shui, staging, and “How to sell a home” books and articles abound. I’ve put together a short chapter for your review here.
Cleaning and packing stuff away is the most important of all the basic preparations. Rooms, closets and garages need to look neat and clean and as roomy as possible. Cluttered rooms and closets full of boxes and “stuff” make the home look smaller and buyers wonder if their stuff will fit.
The solution to the clutter is to simply get rid of it. Everything that you don’t use on a regular basis (which means every other day at least)… put in storage or at least out of plain sight. Seriously get rid of a lot your things by packing them away.Lighten and brighten every room with new lights, bulbs in every outlet, open windows, install new shades etc.
The number one spot in most homes for clutter. Quick, count the appliances and other items on your counters. Where can you put all of them? A few weeks of inconvenience in getting them out and putting them away or doing without them is well worth it. Now go through each of your cabinets in your kitchen, all of the counter space, and all of the cupboards to make sure all are clean and neat of “unnecessary stuff.” I’m especially fond of putting away about 2/3rds of all the coffee mugs and glasses into a box and storing them.
Remember that in your bedrooms less is more appealing. Pack away your clothes and shoes; only save the 25% to 35% that you’ve actually worn recently. Take a close look to determine what can go. Remove that comfy, bulky chair. Create space and easy flow in this and every room.
Pack away the books, toys, and gadgets you have lying around. You might buy new bedspreads. Make sure there is plenty of light in each bedroom; curtains and blinds open, freshen the air if needed. Make sure all nook and crannies are clean.
Clean out under the sink and the medicine cabinets (people will nose around) make sure there is plenty of light and
they are spotless. Do you need to re-caulk the tub and sinks? No mildew allowed. Air fresheners might also be in order. Living rooms, family rooms, and dining rooms: pack away the stuff. Make them well-lit and immaculately clean.
Clean or re-paint: all nicks and scuffs. Magic Erasers sponges work wonders on minor scuffs and may preclude the need for repainting. Prepare the home when you can for each showing, dust, clean, spruce up, put out fresh flowers, turn on all the lights, and leave with your pets if they’re with a professional real estate agent! If the buyers are on their own be prepared to answer questions honestly but don’t get emotional if they speak poorly about your house; someone has told them they can get it for less if they “tell you” why it’s in poor shape.
Should be free of debris, toys and clutter too. Nice flowers can brighten up any area! Coil your hoses. Put tools away. What can you do to make the yard more appealing – a table and chair under a shade tree? Repainting the swing set? New mulch or flowerbeds? Tree or shrub trimming?
I don’t recommend spending a lot of money on granite countertops, new cabinets, appliances, etc. Home improvements of this type rarely provide a good return on dollars spent. Some real estate agents advocate spending a lot of your money without any supporting evidence that you’ll sell quicker and for more money. For example spending $15,000 in a kitchen might only bring in $8000 at resale. In some parts of the country swimming pools, spas, and upgraded appliances add no value at all according to the appraisers.
Here’s a continuation of some items that you might consider. They are inexpensive – but prudent – when getting your home ready for sale:
“Curb appeal” is “real-estate-ese” for everything prospective buyers can see from the street that might make them want to take a further look. If the curb appeal is negative they’ll drive by slowly and move on. Enhancing curb appeal is critical to getting buyers to want to come inside. You can sum up curb appeal by driving by your house and seeing if it invites you to come inside.
Neatness sells. Crisp paint, trimmed lawn, neat shrubbery, a clean driveway, potted plants at the front door—put them all together, and drive-by buyers will probably want to see the rest of the house.
Hand in hand with neatness is “neutrality.” If you are going to repaint, stick to light, neutral colors. Keep the yard free of gardening tools and toys. Remember, when a family looks at a house they are trying to paint a picture of what it would be like as their home. If they say: “I like the house but need to change that pink color” you may lose them.
When someone is coming by to see your home, I suggest a few practical preparations such as:
Keep all doors unlocked within the home. Buyers want to see all the rooms (and closets); if they can’t, it slows up or even stops the buying process.
Turn on all lights—day or night! For a night showing, turn on all of your inside and outside light fixtures, create a glowing warmth around your home as the potential buyers drive up. Open all the drapes and shutters. Make your property as bright as possible. Buyers these days typically want homes with lots of light!
Make sure the sink is clean and free of dirty dishes. De-clutter the countertops: they appear more spacious when clean and uncluttered. Freshly mop the floors and baseboards of your kitchen — sparkling is the goal.
Place your property brochures in a conspicuous place; you could place a small sign asking agents to leave their business card.
*This is for your safety and it allows you to track who has shown the property and call them for feedback.
Keep pets out of the way when showing, preferably out of the house. Some buyers get annoyed or are allergic or are scared and another gets their attention diverted and can’t remember anything about your house except for your pet.
If at all possible don’t have too many people present during a showing since the potential buyers may feel like intruders and want to hurry through your house. Worse still, that they’ll put you on the spot by asking you direct questions. “Is that staying with the house?’ and force you to make a hasty decision. Your goal should be to get them to spend as much time in your home as possible so that they can “see how it could be their new home.”
Take a short walk with your children and pets. Leave the premises to the potential buyers or, if that is not possible, let them go through the home without interruption or discussion! If they’re on their own, walk them through your home but don’t be overly chatty. Do not have guests over during the time a showing is scheduled, if at all possible.
Buyers look at more than one home. Give them something to remember yours by. I recommend preparing a simple brochure: Basic information on the front, how to buy it on the back (meet with a local lender to discuss various financing options that might make sense for your home.). Prepare a single page web tour of your home (see ideas for this later in the booklet) and highlight in on your sheet so the potential buyers can send it to their family, friends, and advisors so they can help everyone get excited about buying your home.
Understanding how to value your home so that a buyer has bragging rights!
Simply stated if the buyer doesn’t have a quick and logical answer as to why your house is a “great deal” for them they don’t have bragging rights. Bragging rights are what allows them to feel good about buying your home when someone tells them “it’s a horrible time to buy”; or that “prices are still dropping”; or “this is a bad decision.”
They need to be able to counter with – it was too good of a deal to pass up because “the sellers paid closing costs”; or “we bought for $XX less than the last sale”; or “it was bought for under appraisal.”
Pricing the home correctly is the first component to creating bragging rights.
“All the marketing in the world can’t sell a nickel for a dime.”
I don’t know who said it originally but nothing could be truer in our marketplace. Buyers have a lot of communities to live in and a seemingly endless amount of houses to choose from. You can have the best marketing, every buyer can see the home, it can look terrific and no one will buy your home if you are overpriced. All the preparation we just completed getting your home looking great won’t matter if no one comes to see it. So pricing it correctly and marketing it properly is very important after it’s ready for showings.
Now, undoubtedly you have an idea what your home is valued at; you’ve researched the websites, you’ve visited other homes for sale, and you may have even talked to a real estate professional.
You should look for homes with a similar number of bathrooms, square footage, condition, lot size, number of bedrooms, garage spaces, amenities and location if possible. It shouldn’t take you to too long to determine what ballpark your asking price should be in.
Call the ads and talk to the owner or real estate agent about the details of the home. Better yet go visit them. This will help you to narrow down the range even further to a realistic price. Ask lots of questions about the condition, how they arrived at their price, amenities, and their motivation for moving.
It’s easy to see why many FSBO’s over price their homes. They’re attached to them, they’ve poured money, time and sweat into their property, and “they need to get X $ out of it.”
Overpricing a home is a FATAL mistake.
Many good real estate agents will show your home and then “sell” another one using yours as a comparison to show why the next home is such a good value!
While all of this is important, some For Sale By Owners will occasionally “leave money on the table” by underpricing a home. This is why pricing a home correctly is so critical.
Another opinion you should get is from a real estate professional or two. Make sure they sell full-time and consistently works in your area (many real estate agents have a “real” job in addition to trying to sell a home or two a year.) A real estate agent should also be able to tell you more about the current conditions of the marketplace… such as where buyers are coming from (internet, newspaper, relocation or other). They should provide you with statistics and charts to help you justify your pricing to a buyer that is interested.
There’s no obligation to a real estate agent to conduct a “Market Analysis” for you… but it is a good policy to be direct and honest with him or her about your situation and that you are planning on trying to sell your home yourself.
Most real estate agents will be glad to conduct a FREE “Market Analysis” for you even if you tell them that you plan to go “For Sale By Owner”. This is because the odds that you will eventually list are still in their favor… but they don’t know you have this manual and will interview me. J
Remember also that some real estate agents tend to overestimate homes value as an enticement for you to list your home with them. This is called “buying the listing” in the business. Agents does this knowing that once you are under a contract you have to work with them and they’ll beat you down week after week after week to get you to lower your price.Make sure you use homes that have actually sold in your area, not just ones that are actively on the market. Sold versus Active is an important distinction. The difference between asking prices and selling prices can be substantial, which means, you want a “Market Analysis” from homes like yours that have actually sold… not from homes that are still currently on the market and unable to sell. Check to see what credits the seller may have paid also – effectively lowering their net.
Remember what your ultimate goal is: to put the most money in your pocket at closing. So don’t get over excited or have unrealistic expectations based on a “Market Analysis” from an overly-optimistic real estate agent. They are trying to “buy” your business by telling you, you can sell for more than your home is worth, in the hopes of getting the listing and then getting you to lower your price over time. .
If you take a more conservative approach to pricing your home (especially because you are a “For Sale By Owner”) you’ll have a much better chance to sell your home inside of 30 to 90 days. Remember: all the buyers and agents who bring their buyers to see your home, know that you are selling “by owner.” They expect the home to be priced more than fairly.
Pricing is not an exact science; even appraisers give themselves a margin of error of 3 – 4% (this can be up to $8000 on a $200,000 sale) so don’t be discouraged if some of the information you get from the appraiser, the agents and the title companies contradict each other a bit. Each home is different and unique. You may have to “weed” through the piles of information you get to determine the most probable asking and sales price.
If you really want to be sure about the fair market value of your home before you try to sell it, you may want to consider having it professionally appraised yourself. Appraisers are professional estimators of the official value of properties around the country. They are used by lenders to determine the terms of real estate loans.
Appraisers will use objective business-like techniques to derive a reliable estimate a price. Since most buyers are going to need to obtain a mortgage to buy your house it’s wise to know what an appraiser is going to say about the value of your home.
If you do hire an appraiser you can expect to spend somewhere between $300-$600 per professional appraisal. (Depends on the size of the home)
After all your research there are a few other factors to consider before setting your asking price:
Factor in your answers and arrive at your price. If you find yourself saying “it’s worth $150,000 but I need $175,000” or “I’m not going to give it away.” Do some more research and you may find you are overpriced. You cannot ignore the bank owned properties or other distressed properties for sale because the buyers won’t ignore them. Determine what bragging rights you can offer potential buyers and then it’s time to go to the next step.
The next step in the process is going to be on marketing your home effectively to the buyers out there… and how to grab their attention with the right type of marketing approach.
Ok, you are motivated to sell. You are confident you’ve got the right price. It’s time to let the world know. When you market the home it’s important to understand that you are marketing to two very distinct markets: 1) The buyers out there looking on their own for a home; and 2) The agents who have buyers committed to working with them.
There are disadvantages and advantages to each of those two markets. The buyers out there on there own will either be looking for a bargain (because that’s what every financial investor guru tells them to look for when shopping FSBO’s) or need a lot of hand holding.
The real estate agents out don’t like to show FSBO’s in general because of the negotiated commission, increased workload, and increased liability. If an agent has other options to show their buyers they will skip over a FSBO like yours in favor of a comparable property listed with another agent. This is a reality. So your marketing to the agents needs to show them why showing your home is important to their clients. Thus the “bragging rights” we discussed in the last chapter.
Marketing is a numbers game. You want as many potential buyers as possible to see your offering and then decide to come see it. Because you priced it fairly you’ll be able generate offers. The more offers your get the more money you’ll put in your pocket. This means you may have to answer dozens of phone calls and emails for every showing. You’ll need to be prepared to talk with real estate agents and bargain hunters. You may have to hold open houses every Saturday and/or Sunday for 4-6 weeks. You’ll need signage and flyers.
You’ll need to be able to talk to people who really want your home but can’t buy it because of poor credit, they have a home to sell before they buy, or just plain old can’t afford it.
You have to realize that you may have to show several unqualified buyers through your home… because they lied to you over the phone.
All of this is part of marketing your home… and it’s what your real estate agent would deal with if you were working with one. But you’re not – so you have to prepare for and handle it as it comes up.
Buyers must be able to see themselves living in your home. You have to understand this a key point when you are creating marketing pieces to advertise your home. I like to suggest you write down the 10 things you liked best about the home and living in that neighborhood. You can expand these points into emotional marketing points that will appeal to buyers. For example if there’s a great family room with a high ceiling you might tell about the large Christmas gatherings you have around the 12 foot tall tree.
The most crucial, important aspects of your home – and why buyers would be attracted to them – need to come out in every ad, letter, flyer or brochure you create to sell it. If it does not come across loud and clear – you have little chance of selling your home. Ads like “4/2 splt lvl with mstr on main” don’t sell. “Room to roam in this expansive home with a huge master suite on the main level” is a more attractive, descriptive and more likely to interest a buyer.
The first step in marketing is your “For Sale By Owner” sign. The quickest way to get one is to go to a local sign maker that the real estate agents in your area go to for their signs. You can call a real estate company for this info. The sign is part of the curb appeal and first impression so don’t chinch on it. Expect to pay between $75 and $150 for a decent sign.
Next it’s time to prepare a flyer. I suggest both a printed and electronic (.pdf preferably) version with the price, the address, bedrooms, baths, square footage, lot size, some pictures, and the main emotional selling points. Make sure you post ways to get in touch with you (email, cell phone at a minimum.) You might also create a single address webpage.
Next it is time to get the word out. The best place to start is with everyone in your “sphere of influence.” This includes all your neighbors, friends, relatives, co-workers, church and little league contacts, etc… Facebook, email, and text them all with an electronic flyer, announcing your home for sale. It’s amazing how many people you know that know of someone who is looking to buy a home. Many “For Sale By Owners” have had success in the past without having to do any marketing whatsoever… by just telling everyone they know about their home for sale. So please start here and capitalize on all of your personal contacts first.
**If you don’t have success with your “sphere of influence” then you must market your home in other ways. Newspapers have diminished greatly in effectiveness as an advertising venue. Unless you have a small hometown type paper, don’t waste your money on print advertising. The Internet is the way to go.
Creating winning ads is critical to your success as a “For Sale By Owner.” It’s something that you can learn to do. I think.
Online and craigslist ads can be a powerful and inexpensive marketing tool if you do it correctly. They can reach a lot of people. There’s nothing clever, nothing elaborate… I think that “the simpler the better” when it comes to creating winning classified ads. But, there’s one thing that you’ve got to understand from the beginning. And that is this:
These are only a few examples of the mistakes that cczzxcsdsfsmost “For Sale By Owner’s” make.
Transforming Your Features Into Benefits That Will Make Your Prospect Pick Up The Phone And Call You, NOW!
If you don’t know what your prospect wants to buy, then how are you going to sell it to them? You can’t. In general a buyer needs to know how much they need down and per month. Then they see if they like the house, can get qualified, etc…
Thus, if you want to write successful ads then you’ve got to get good at transforming features into benefits.Having said that, let’s assume that you know what your prospect wants and why he needs to look at your home, and talk about how to turn your features into benefits. Features are the elements of what you’re selling. They are the parts of your property that are desirable for your prospect.
One of the basic rules of successful ad writing is this…
You must always Lead with the Benefits, and THEN you can follow with Features.
Prospects always want to know what’s in it for them first. After they know that, they might want to know the in’s and out’s of your home. If you have a feature that doesn’t offer a strong benefit, then leave it out… don’t even waste your time with it, or consider it. You should never list features of your home as if they were in and of themselves, something meaningful. They aren’t
A feature is only meaningful if it tells your prospect what he gets from the feature… and by their very nature, features don’t do it. If you understand all of this, then you are ready to begin the process of turning features into benefits.
You see… all of this is critical to your classified advertising success. A prospect doesn’t care about your features…. they just want to know what’s in it for them.
They care only about what you or your home provides for them.
Remember, the main question to continually ask yourself, with each word or sentence you write, with each paragraph you finish, is this:
Does This Help Get My Prospect To Act Now, Or Not?If It Doesn’t It Should Be Pulled-Out And Thrown Away!
The purpose of your advertising is to get your prospect to respond NOW! If the copy does not have a call to action, then it won’t work as well as it should!
Never forget this!
Identify With What The Prospect’s Wants and Needs Are
More basic rules for writing classified ads that sell:
Basically, you should use anything that lets your prospect know that
THIS IS IMPORTANT.
I’VE GOT THE PROPERTY YOU’VE BEEN LOOKING FOR!
These emphasizing devices work, and will guide your prospects eyes across the page to the important messages you are trying to convey to them to get them to act in their own best interest.
In this chapter you’ll find many winning classified ads that use these highlighting techniques. Try to use these as a model for just how much highlighting you should do. Obviously it can be overdone… and that’s not what you want.
Following this rule alone will help increase your response to a large degree. Make sure these benefits:
In short, motivate your prospect by leading with the benefits he gets, not with you, your property or its’ features.
Writing ads that compel an immediate response is something that you can do, if you work hard at it and follow the guidelines in this section.
This section is full of the tips, hints and techniques that I have learned and used hundreds of times across the country –they will help you write classified ads that will get your prospect to call you NOW and buy your property.
Here are some sample Ad headlines that may grab a prospective buyers’ attention:
With many Internet sites pictures are allowed –the more bright and clear photos the better. Nothing sells as well as a good picture. Put in as many photos as the site will allow. Do NOT put in duplicates! Below are some marketing ideas you may not have thought of:
Progressive Marketing Techniques You Can Use To Get More Exposure For Your Property:
So marketing involves getting the word out to everyone out there looking to buy or sell a home.
If you are willing to work with real estate agents make sure you state that in your ads. “3% commission to buyers agent, buyers agent protected, agents welcome. Etc.” will let them know that you are at least willing to show them the house. Prove to them you’re easy to work with, return calls or emails promptly, allow showings, meet them, etc. One note of caution 90% of the agents who say they have a buyer for your home are trained to say that even if they don’t have one. Their goal is to get in the door and pitch you on why they should be your agent.
The first thing to do when a potential buyer calls is to be polite and positive (even if it is a real estate agent on the other end.) You should then try to get the caller to give you as much information about themselves and what they are looking for as possible without driving them away. This balancing act is one of that only experiences and training with different personality types will allow you to perfect. You might want to allow every showing request and then “prequalify” them once they arrive in your home.
The first call or email is your opportunity to “pre-qualify” the buyer prospect and eliminate time wasters. Asking the following questions will help you’ll eliminate most of the “tire-kickers.” These are direct questions that get to the point with your buyer prospects and are crucial to your success. Remember the balancing act of gathering information versus chasing them away. You don’t want to waste your time showing to some who’s just declared bankruptcy and is looking for you to owner-finance the home however you also don’t want to have the home not shown because you ask too many questions. A conversational, friendly tone will get you more answers and feel less like an inquisition. Notice also that most of the questions are open-ended to allow them to share with you and build a relationship.
In addition to these questions you may want to compile other questions that come out of your time on the phone with prospects.
Remember to keep it conversational and easy.
Another suggestion that I have for most “For Sale By Owners” is to make contact with a local lender… someone who will be glad to pre-qualify prospects as they come through or contact you through your ads. This saves you time and gives you peace of mind when showing the property. I know of some great lenders if you want a referral.
As a serious “For Sale By Owner” (besides notifying your “sphere of influence” and running smart classified ads) it’s also a good idea to hold open houses – every weekend until your home is under contract.
The reason for this is simple – the right buyer for your home may be someone who is just out driving around on the weekends. Since you don’t have it on a multiple listing service more frequent open houses are necessary.
You can hold an open house for a minimal amount of up front expense or hassle. You’ll need a large “OPEN” sign for the front yard ($50) and at least 6-8 directional arrows ($5 to $10 each) to direct people through the maze of side streets and into your home.
That’s it! along with your normal flyer that you’ll have already created. Most areas have “normal” open house times but don’t be afraid to be a bit different. Saturday instead of Sunday, 1-4 instead of 2 -5. Thursday Evening if you’re in a place where there is walk-by traffic.
The main rules when conducting an open house are the same as when you prepare your property for sale. There are two other keys items to remember when holding your house open.
Understand that many of the people who come through your home are not qualified and are only there to see what type of decorating or upgrades you have done – often times neighbors come by to compare their house, and value, to yours. There is no way to avoid this. Be gracious.
When showing your home – never, ever give buyers the “Grand Tour” of your home. This is a mistake and will cause even a serious buyer to delay making a decision on your property. Buyers don’t need tours – they need space. Give it to them. If you give a tour you can turn into an over-eager seller or a slimy salesperson. People don’t like slimy salespeople and they take advantage of over-eager sellers.
**Maximize every opportunity that you have in an open house situation by making everybody sign in. This makes it easier to follow-up with them later if you lower your price or change some term.
Next let’s go on to closing the sale. The most crucial aspect of the whole process after pricing the home… why? Because if you can’t take an interested buyers and close them – you will lose the sale.
Once you start to advertise FSBO you’ll likely get calls from real estate agents trying to secure your listing. Many real estate agents with motivated, qualified buyers will not show FSBO offerings unless there is simply nothing else to show. In a buyers market the agent has multiple properties within most price ranges and communities to show their buyers. Some of these agents are trained that FSBO’s are to be avoided because of three basic reasons.
Reason #1 – The commission is negotiable. Decide whether you will be offering payment to an agent who brings you an acceptable offer. This compensation to the agent is sometimes called a finders fee, a commission, a courtesy, or advertised as “agent protected.” The agent is taught that the FSBO doesn’t have a contractual agreement to pay this fee and therefore the commission is negotiable. If the home is on the multiple listing service the cooperating broker commission is contractually set and stated. As FSBO it is a negotiated item.
Reason #2 – The work involved in closing a FSBO may be up to two times the work needed to close a home listed by another professional agent. Since you are only selling this one house even if you are willing to do the work you may not know how to do it. The agent is licensed by the state and must “”protect the consumer” and this means they must do both sides of the work if you can’t.
Reason #3 -There is increased liability. Virtually all professional agents and their company’s carry what is called E& O Insurance (errors and omissions.) It is business insurance that protects the agent and their company if they get sued over a transaction. You as a FSBO cannot get this insurance and therefore there is increased liability is there is a lawsuit because the attorneys always go after the money.
Since almost all of the motivated, qualified buyers work with agents (over 90% of them and a lot of the rest buy from someone they know already) you might be asking yourself “how can I get agents to show my home to buyers?” Here are a couple of thoughts:
Ok now you have a seriously interested buyer – what’s next?
The easiest way to move the process forward is to have sample contracts available for them to review and sign. Having it mostly filled out allows you to be in control of a lot of the negotiation items by having them typed in so they don’t question whether it should be there or not.
A common question that many “For Sale By Owners” have is “How do I do the paperwork?”
Rest assured that it’s not as hard as you might think and it can be done with a minimal amount of investment on your part. The paperwork is designed for two things:
1) Your home gets closed and
2) Everyone stays out of court in the long run.
Many FSBO’s approach the close with trepidation or over-aggressiveness. A simple “let’s see how it looks on paper” generally suffices. You can do all the paperwork yourself and save even more money… but with the ever changing real estate laws… I think it’s a wise move to have a professional do it for you.
You can hire a real estate attorney or real estate agent to draw up the contract for you. This will protect you, the buyer and the entire property in the long run… plus, in most cases won’t cost you more than a couple of thousand dollars if you are a decent negotiator. Get a copy of the local offer and disclosure forms before you start showing so you can familiarize yourself with the terms and conditions and blanks that need to be filled in. If you don’t have them I can share the standard forms with you. Be sure that you have the following in your contract:
Once an offer is accepted “Be Reasonable!”
One thing is for sure if you want a hassle-free closing… and that is Be Reasonable!
Realize that real estate contracts fall apart at an alarming rate due to home inspection issues, obtaining the loan issues, and buyers “cold feet” issues. Many real estate agents feel more than half their job is holding a contract together. Become very aware that buyers have several contractual “outs” in addition to the ones just mentioned. Prepare your offer carefully and do everything you are supposed to do.
There will probably be something in the sale of your home that may delay the dates laid out in the contract; or require you to do a little more that you expected. No big deal. As long as the buyer is still serious about buying your home, my suggestion is to be reasonable during the process.
A big issue in today’s market is the appraisal coming in at a price below the contract price. Meet the appraiser and show him or her (actually give them copies) of your documentation of your pricing. He’ll be looking specifically for comparables. Having 4 to 5 active and 4 to 6 less than 6 months old sold comps will be extremely helpful. If you do all this and the home still appraises low – seriously consider negotiating the price with the buyer as the appraisal may be an accurate valuation.
Obviously you want everything on a tight timeframe and the buyer to fulfill all their responsibilities… but to save your long-term sanity… relax a little and be reasonable.
As a buyer or seller, you want to be certain all conditions of sale have been met before you get to the closing table.
The transfer of large sums of money is handled usually by a disinterested third party called an escrow agent. This third party holds the money or items for disbursement upon the actual closing and makes sure the contract terms are met, the legal documents are properly executed, and the government is notified.
Simply stated, the escrow holder impartially carries out the written instructions as specified in the contract. This includes receiving funds and documents necessary to comply with the terms of the contract. Giving instructions, completing or obtaining required forms, and handling final delivery of documents and funds, securing all items to the proper parties upon the successful completion of the escrow.
When all of the instructions in the escrow have been carried out, the closing can take place. At this time, all outstanding funds are collected and fees—such as title insurance protection of the buyer, seller, and premiums, real estate commissions, termite inspection charges—are paid. Title is given to the lender or the buyer if there is no loan, the property is then transferred under the terms of the escrow instructions and appropriate escrow process title insurance is issued. The following items represent a typical list of what an escrow does and does not do:
An Escrow Holder serves as the neutral “stake holder” and the communications link to all parties in the transaction;
The Escrow Holder Performs the Following Duties
(This is not a complete list of expenses – consult your local professionals.)
· Real Estate commission
· Escrow fee
· Notary fees (if applicable) contract
· Payoff of all loans in seller’s name (or buyers’ names existing loan balance if being assumed by buyer)
· Interest accrued to lender being paid off
· Prepayment Penalties
· Termite inspection (according to contract) 30 days prior to first payment date
· Assumption/Change of Records fees for Home warranty (according to contract) takeover of existing loan
· Any judgments, tax liens, etc. against the property
· Recording charges to clear all documents/liens recorded against seller
· Beneficiary Statement Fee for assumption of seller existing loan
· Tax pro-ration (for any taxes unpaid at time of closing
· Any unpaid Homeowner’s Association fees due.
· Any bonds or assessments (according to contract)
· Any and all delinquent taxes
· Owner’s title insurance premiums
· Lenders’ title policy premiums
· Escrow fee:
· Document preparation (if applicable)
· Any loan fees required by buyer’s lender per •
· Notary fees (if applicable) contract •
· Recording charges for all documents in
· Homeowner’s Association Transfer Fee
· All new loan charges (except those required
· Statement Fees, Reconveyance Fees, and any by lender for seller to pay)
· Interest on new loan from date of funding to
· Termite inspection (according to contract) 30 days prior to first payment date
· Termite work (according to contract) •
· Assumption/Change of Records fees for Home warranty (according to contract) takeover of existing loan
· Fire insurance premium for the first year
· All pre-paids transfer of title
Amortized Loan – a loan that is completely paid off, interest and principal, by a series of regular payments that are equal or nearly equal. Also called a “Level Payments Loan.”
Appreciation – an increase in value of real estate. Depreciation is a decrease in value.
Assumption of Mortgage – the taking of title to property by a grantee, wherein he or she assumes liability for payment of an existing note secured by a mortgage or deed of trust against the property, becoming a co-guarantor of a mortgage or deed of trust note.
Balloon Payment – the final payment of a mortgage loan when it is larger than the regular payment. It usually extinguishes the note.
Capital Gains – the taxable profit derived from the sale of a capital asset. It is the difference between the sale price and the basis of the property, after making appropriate adjustments for closing costs, fixing-up expenses, capital improvements, allowable depreciations, etc.
Closing – the final settlement of a real estate transaction between buyer and seller. It is also known as “recording.”
Condominium – a system of individual fee ownership units, combined with joint ownership of common areas of the structure and land.
Contract for Deed – a contract ordinarily used in connection with the sale of property in cases where the seller does not wish to convey title until all or a certain part of the purchase price is paid by the buyer.
Contract of Title – a summary or digest of the conveyances, transfers, and any other facts relied on as evidence of title, together with any other elements or record which may affect the marketability of the title.
Conventional Mortgage – a mortgage securing a loan made by investors without governmental underwriting, i.e., not FHA-insured or VA-guaranteed.
Counter-Offer – a seller’s rejection of an offer made by a buyer accompanied by an agreement to sell the property to the potential buyer on terms differing from the original offer.
Close of Escrow (COE) – the loan has been funded; documents have been signed; what has been recorded at the title company. Sometimes possession of the home is immediate, sometimes after a certain number of days.
CRV – Certificate of Reasonable Value -A document of appraisal issued by the VA establishing their opinion of the maximum value.
Deed – the written instrument which, when properly executed and delivered, conveys title.
Discount Points – additional charges -made by a lender at the time a loan is made. Points are measured as a percent of the loan, with each point equal to one percent. These additional interest charges are paid at the time a loan is closed to increase the rate of return to the lender so as to approximate the market level.
Earnest Money Deposit – a down payment made by a purchaser of real estate as evidence of good faith.
Easement – created by grant or agreement for a specific purpose, an easement is the right, privilege or interest which one party has in the land of another.
Equity – the interest or value an owner has in real estate over and above the liens against the real property.
Escrow – the deposit of instruments and funds with instructions to a neutral party (Escrow Agent) to carry out the provisions of an agreement or contract. When everything is deposited to enable carrying out of instructions, it is called a complete, or perfect, escrow.
Exchange – the trading of equity in a piece of property for equity in another property.
Fannie Mae – the nickname of the Federal National Mortgage Association (FNMA), a tax-paying corporation created by Congress to support the secondary mortgages insured by FHA orguaranteed by the VA, as well as conventional home mortgages.
Fee Appraisal – the act or process of estimating values of real estate or any interest therein for a fee.
FHA Loan – a loan which has been insured by the federal government guaranteeing its payment in case of default by the owner.
Firm Commitment – a lender’s agreement to make a loan to a specific borrower on a specific property. An FHA or PMI agreement to insure a loan on a specific property, with a designated purchaser.
FMHA Loan – a loan insured by the federal government similar to FHA loans, usually used for residential properties in rural areas.
Foreclosure – The legal process in which a bank takes over a home for non-payment of the principle and interest. May also apply for State and City Taxes.
Freddie Mac – the nickname of the Federal Home Loan Mortgage Corporation (FHLMC), a federally controlled and operated corporation to support the secondary mortgage market. It purchases and sells residential conventional home mortgages.
Investor – the holder of a mortgage or the permanent lender for whom the mortgage banker services the loan. Any person or institution that invests in mortgages.
Joint Tenancy – joint ownership by two or more persons with right of survivorship. All joint tenants own equal interest and have equal rights in the property.
Land Contract – a contract ordinarily used in connection with the sale of property in cases where the seller does not wish to convey title until all or a certain part of the purchase price is paid by the buyer.
Lease Purchase Agreement – the buyer makes a deposit for the future purchase of property with the right to lease the property in the interim. This is extremely tricky (and unlikely to ever close) so get professionals involved.
Lien – an encumbrance on the property, which usually names the property as security for the payment of a debt or discharge of an obligation. Examples: judgments, taxes, mortgages, deeds of trust, etc.
Loan Commitment – a written promise by a lender to make a loan under certain terms and conditions. These include interest rate, length of loan, lender fees, annual percentage rate, mortgage and hazard insurance, and other special requirements.
Loan to Value Ratio – the ratio of the mortgage loan principal (amount borrowed) to the property’s appraised value (selling price). On a $100,000 home with a mortgage loan principal of $80,000, the loan to value ratio is 80%.
Marketable Title – merchantable title, free and clear of objectionable liens or encumbrances.
Mortgage/Deed of Trust – an instrument recognized by law by which property is pledged assecurity or collateral for debt without transfer of title or possession, to secure the payment of a debt or obligation to the lender. Title transfers to the lender during the foreclosure process which occurs in the event that the debtor defaults on the loan obligation to the lender.
Mortgage Insurance Premium (MVP) – the consideration paid by a mortgagor for mortgage insurance either to FHA or a private mortgage insurance (PMI) company. On an FHA loan, the payment is one-half of one percent annually on the declining balance of the mortgage. It is a part of the regular monthly payment and is used by FHA to meet operating expenses and provide loss revenues.
Mortgagee – the lender of money or the receiver of the mortgage document.
Mortgagor – the borrower of money or the giver of the mortgage document.
Note – a written promise to pay a certain amount of money with or without specific terms.
Origination Fee – a fee or charge for the work involved in the evaluation, preparation, and submission of a proposed mortgage loan. Origination fees are paid by the borrower to the lender.
Personal property – any property which is not real property. For instance, money, savingsaccounts, appliances, cars, boats, etc.
Point – one percent of the loan amount.
Prepayment Penalty – the fee paid to the mortgagee for paying the mortgage before it becomes due. Also known as the “Prepayment Fee” or “Reinvestment Fee.”
Prepayment Privilege – the right given a purchaser to pay all or part of a debt prior to its maturity. The mortgagee cannot be compelled to accept any payment other than those originally agreed to. Private Mortgage Insurance (PMI) – insurance written by a private company protecting the mortgage lender against loss occasioned by a mortgage default.
Privately Insured Mortgage – a conventional mortgage loan on which a private mortgage insurance company protects the lender against loss.
Promissory Note – following a loan commitment from the lender, the borrower signs a note promising to repay the loan under stipulated terms. The promissory note establishes personal liability for its repayment.
Purchase Agreement – an agreement between a buyer and seller for the purchase of real estate.
Real Property – any land and whatever, by nature or artificial annexation, is part of it.
Rent with Option – a contract which gives one the right to lease property at a certain sum with the option to purchase it at a future date.
Second Mortgage/Second Trust – also known as a “Junior Mortgage” or “Junior Lien.” An additional loan imposed on property with a first mortgage, generally at a higher interest rate and shorter terms than a “first” mortgage.
Short Sale – A process in which a bank mitigates losses by accept less than is owed and allowing a seller to sell their home.
Special Assessment – a legal charge against real estate by a public authority to pay the costs of public improvements such as street lights, sidewalks, street improvements, etc.
Straight Loan – a loan with periodic payments of interest only; the principal sum is one lump sum upon maturity.
Subdivision – a parcel of land that has been divided into smaller parts.
Tenancy in Common – ownership by two or more persons who hold undivided interest, without the right of survivorship. Interests need not be equal.
Term of Mortgage – the period during which a mortgage must be paid.
Title – often used interchangeably with the word “ownership.” It indicates the accumulation of all rights in a property.
Title Insurance – an insurance policy which protects the insured (purchaser or lender) against loss arising from defects in title.
Trust Account – an account separate and apart and physically segregated from a broker’s own funds, in which the broker is required by law to deposit all funds collected for clients.
VA (Veteran’s Administration) Loan – a loan guaranteed by the Veteran’s Administration.
Warranty Deed – a deed used to convey real property which contains warranties of title and quiet possession, and the grantor agrees to defend the premises against lawful claims of third persons.
You still have some options. One is to consider renting your home to quality tenants. This process has its benefits and risks also. You need to decide whether you can handle the emotions of being a landlord. Tenants bring a unique mind-set to living in your home. They expect you to pay for all repairs, understand if they can’t pay the rent, and may not care for it as well as you expect them to.
If you can rent and cover your costs you may be able to hold onto the home and then sell when the market improves (often times this improvement may take several years to be realized.) Of course you will continue to build equity in your home with your monthly principal payments. I’ve had some owners thrilled to be investors and others think it’s a nightmare.
You need to do the research and determine what a fair market rent is for your property. Is fair rent enough to cover your monthly expenses? Many owners under-estimate the costs they need to pay in order to rent their home out. Some costs to consider are advertising, vacancy (plan on a minimum of two weeks per year), payments to agents who bring in the tenants, credit check costs, travel costs, repair costs, increased maintenance costs, property management costs (if you hire a property manager expect to pay them for their work – costs vary widely by region), and cost to evict a nonpaying tenant.
In general a good rule of thumb is to estimate 20% of the yearly rent for standard maintenance, repair, and vacancy costs. Major repairs (appliances, roofs, etc), non-payment of rent, and eviction costs are NOT included in this 20% estimate.
Many owners also under-estimate the amount of time they will need to spend in renting a property to tenants. Showing, background checks, minor maintenance, site inspections, and monthly accounting can be very time consuming and may not fit into your busy schedule. A property manager may help here.
If you end up renting out for three years the tax basis of your home changes from owner-occupied to investment. The tax laws force you to account for the gain with no owner-occupant exclusion. This is made up somewhat by depreciation rules etc. Consult your local tax expert before making a final decision.
Another option will be to give the home back to the bank. I’ve already mentioned the benefits to you and the bank for completing a short sale. If you are considering letting your home go into foreclosure please give me a call to discuss the negative consequences of this action.
And your last option is to stay put. Ride this market out and make this home livable for you for that time period. Many owners are doing this. I welcome your call to discuss any and all of your options.
As you started this process to sell your home on your own and you wanted to save money by not paying a full commission. Obviously you want to do this in any legitimate way you can. This includes using a real estate agent to list your home and some of you may be considering using a flat-fee or discount broker to sell your home. They generally will put your home on the MLS and promise you additional exposure. Because they make their money upfront they generally provide little to no service. Most of these discount brokers are lucky to sell 1 out of every 8 homes they list. So before spending any money with them – check their track record.
Before we go through the process of picking the right real estate agent… let’s go through a checklist of questions to determine if you’ve done everything you possibly can do to sell on your own. By answering these questions honestly,
you’ll decide if going with a real estate agent is best for you at this point.
How good is the real estate market in your area?
If it’s not so good, have you tried to reduce your price?
How is the location of your home?
Have you recently checked all the comparable homes still on the market and homes that have sold like yours?
Has any buyer or agent commented negatively on your price?
Are there any other financing terms you could offer to attract more buyers?
Do you really have to sell?
Are there any major repairs that you could do to improve the perceived value of the home?
Did you do everything you could do in terms of marketing and advertising?
How does your property show?
Your goal here is to sell your home for the highest amount, in the shortest period of time, with the least amount of money spent, right?
In most cases, you can hire an agent if you have been unsuccessful on your own – without paying a commission. Which would partly cover your goal of “least amount of money spent.”
A real estate agent can provide you with many valuable services, not the least of which is to help market your home and prepare all the documentation.
In addition, an agent has resources that are not available to you as a “For Sale By Owner”, including many more contacts with potential buyers that you’re likely to have. In fact, a good real estate agent can probably get your home out to 20-50 times more potential buyers than you can on your own.
Also, keep in mind that no matter how much effort, marketing dollars and time you put into selling your home on your own… that this is still a part-time gig for you.
The agent, on the other hand, presumably will work full-time at selling your home. It stands to reason that the full-time agent probably has a better chance than you do.
The million-dollar question for most sellers now comes down to the money situation. “How do I get a real estate agent to work with me… without paying him/her a full commission?”
The answer is quite simple… you ask. Everything in a real estate transaction is negotiable.
Most people think that when they list with an agent, that they must pay a full real estate commission. That’s not necessarily the case, one of the easiest ways to get a real estate agent to work for you without paying a full commission is to simply ask.
Now, if you’re considering working with a real estate agent… there are a few key points, on the next page, to remember so that you can save time and money by picking the right one.
Here are few questions you probably should ask every real estate that you interview to list your home.
All these questions will help you determine which real estate agent is right for you.
The best rule of thumb is to continue to ask questions until you are comfortable with the situation and remember everything in the real estate transaction is negotiable.
If you follow the steps given you in this manual, the odds are in your favor that you won’t have to pay any commission at all. If however, you do end up listing your home… make sure you put at least two agents through the above question and answer process to determine, which is the best for you and your situation.
Selling your home should be a fun, enjoyable, and profitable experience. Avoiding the mistakes that are laid out in this booklet will give you the best chance to keep more of your hard-earned money in your pocket.
The greatest compliment that you can give to me is that I helped you with one of the biggest financial decisions of your life. Hopefully you will sell your home on your own and save thousands… but even if you have to use a real estate agent like me – you now know that everything is negotiable and this can save you money too!
I want to thank you for taking the time to read this booklet – I wish you the best of luck in your home selling process!
Please call me with any comments or questions you may have
Coldwell Banker Park Shore
Jim Freeman is a Realtor, a Real Estate Expert and has helped over 427 families buy or sell a home in his 19+ year career. Prior to obtaining his broker’s license he has developed, built, managed, financed and owned all types of commercial/investment properties. He prides himself on creating relationships with his clients versus “just making a deal.” He’s a certified instructor to real estate professionals and home buyers and is excited about helping you get your home sold!
Contact him at [email protected]
or call 360-329-2190