Sell Your Own House: Is ‘For Sale By Owner’ For You?
Let’s say the houses in your neighborhood are selling for $600,000. And let’s say the real estate commissions you’ve been quoted in your area are 6%. That’s $36,000 you are going to be paying in commission.
The thought creeps into your mind…for $36,000, I can definitely sell my own house. After all, how hard can it be?!
Well, it all depends on how much time, money, and effort you’re willing to devote to it (in addition to that needed to research forms, laws, processing, vendors, timelines, etc). Let’s take a look at a partial checklist of what exactly you’re getting yourself into:
- Obtain your housing info: mortgage pay-off amount, outstanding tax bills, liens, a copy of title, etc.
- Ensure you have upfront funding to cover the costs of marketing, staging, paying vendors, etc. as many costs require payment at the time of service, not at close (one huge benefit to having a reputable real estate agent is many costs are covered by the agent as part of their job)
- Analyze your local market for comparable house sales within the past 6 months, taking into account differences in properties and adjusting accordingly to determine current market value range
- Assess local market conditions, average days on market, effective marketing methods, expected seasonal fluctuations
- Decide on budgets for signage, advertising, open houses, handling property showings, staging, digital photography, presentation and if you will be posting to the MLS and/or offering compensation to the buyer’s agent, if they have one
- Develop a showing schedule, how you will handle last minute inquiries or inquiries during your work hours, develop a safety plan for showings, and advertise for open houses (directional signs, online postings, contact local forums to pitch your house to local buyer’s agents)
- Hire home and termite inspection to address all defects prior to listing to reduce likelihood of future contract falling through on those contingencies
- Be prepared for negotiations — try to maintain a neutral standpoint and not allow your emotional attachment to the home to cloud your reason and judgment
- Locate escrow and title companies to handle those aspects; educate yourself as to what you should provide
- Create a timeline with contingency dates, organize a folder with all forms required (this will end up being approx. 1-1/2 inches thick in my experience), make sure to mark which dates each form is due and follow-up to ensure they are fully completed on time
- Contact the bank, agent, and vendors the buyer has selected in their contract for confirmation of funds, confirmation of receipts of forms, copies of signed forms, and to arrange for services required to execute the purchase contract
- Follow up on the appraisal date with the buyer’s lender, be present at the appraisal and fill out all required disclosures at this time to present to the buyer for signature
- Hire a real estate attorney to ensure you are following law, verify all forms and ensure all portions of the contract have been properly completed and signed
- Determine your closing costs and how you will pay them
There are a lot of other steps in selling a house, especially if you receive multiple or counter offers, but this checklist gives you a best case scenario idea of what to expect when listing your house for sale by owner.
One last hitch, let’s say you decided to offer a commission to any buyer’s agent who brings in an actual buyer. After all, most buyers enjoy having an agent, it is free, protects their interests and reduces stress. Since sellers typically pay for the buyer’s agent’s commission (which is commonly half of the total commission), you’re now only saving $18,000 from what you would’ve paid out in commission to have agents take care of everything from the beginning.
Essentially, in this example, you are looking to save at most 3% of your sales price for all your hard work in selling your own home. This 3% will have to cover all the expenses you paid for marketing, all those days you spend sitting in open houses, all those flyers you have created, copied, and distributed. If your home is selling for $100,000…it means you will complete months of work on the above checklist (and beyond) for at best case scenario saving about $3,000.
The outcome? For a lucky few, they will succeed in the sale and pocket the well-earned would’ve-been seller’s agent commission (in this example, approximately 3% of the sales price). However, some estimates show up to 90% of houses originally listed by an owner end up hiring an agent, often after many frustrating months trying to sell the house on their own. Unfortunately, the owner’s time, money, and effort was all in vain without compensation. They will start over at square one, handing the keys over to a real estate agent, with a new appreciation for the profession.
via Simple Selling Steps: Start to Finish Timeline.