The FSBO Guide Sell It Yourself
BILL NORDBROCK
Chapter 1 WHY DO IT YOURSELF I wrote this guide for people who want to sell their home without hiring a Realtor to help them. These are commonly known as For Sale By Owner (FSBO) homes, and they make up about 9% of the market. Most FSBO sellers do it themselves to save money. It is customary for the seller to pay all of the Realtor fees in a transaction, and they can be significant. For example, if a home sells for $200,000, the seller might pay $12,000 in Realtor commissions. You can sell your home yourself. If you do it well, you can save some money. If you do it right, you will have a smooth transaction and you will look forward to the next one. Selling your home is a big deal so do not take it lightly. It is worth spending the time and money to do it right. The ultimate goal is to sell your home for the highest net price and to avoid litigation now 1
and in the future. If you need to invest a little money to make that happen, it is money well spent. Before we proceed, you need to understand that every state has different laws regarding seller requirements when selling a home. Many of these requirements have to do with mandatory seller disclosures that must be delivered to the buyer. Many of these disclosures are time sensitive and can have major consequences to the seller if they are not done correctly. These consequences survive the closing and come back to haunt you years later. In some cases the buyer can force you to “make them whole� and purchase your home back from them up to three years after the transaction has closed. TIP: Before you list your home as a FSBO, review your State Laws and be sure you understand them. If you have any questions, consult a real estate attorney for advice. This is money well spent, and it may keep you out of expensive litigation.
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Chapter 2 TOP TIPS FOR FSBO SELLERS Once you have decided to sell your home without the help of a Realtor, here are some tips that may help you maximize the net proceeds from the sale, and enjoy a smooth transaction. Find The Right Buyer: There are hundreds of prospective buyers for your home. Only one of them is the right buyer who will pay the most for your home, and provide a really smooth transaction. Your job is to find that buyer. The more qualified buyers you can motivate to walk through your home, the better your chance of finding the right buyer will be. Marketing Is SUPER Important: The more qualified buyers who physically see your home the better. If you do a great job marketing, you will sell your home for tens of thousands of dollars more than if you do not. If you do a good job marketing, you will sell it faster too! Most FSBO’s do not do a good job marketing their home. As a result, they only reach a small percentage of the potential buyers. If you reach less buyers, you will sell your home for less and it will take longer to sell!. Historically FSBO’s sell for about 15% less than 3
homes marketed by a Realtor. Poor marketing efforts are the primary reason for this. Before you list your home as a FSBO, make a firm commitment to market your home properly to reach as many buyers as possible. This means you will need to invest some time and money, but it will be well spent. If you are not willing to make this commitment, you should hire a good listing agent and pay them to sell it. They will sell it for a much higher price, which will more than pay for their fees. Do not become a FSBO statistic and sell your home for 15% less than what a good Realtor could get for it. If you are going to do it, do it right. Your marketing efforts will have the single biggest impact on your net bottom line. Do not take shortcuts here, and be willing to invest some money. See Chapter 3 for more information on this. Net Proceeds Is What Counts: The net bottom line is what matters. To maximize your net proceeds you must do morÊ than just market and reach all the buyers, sell for the highest price, and avoid having to pay any Realtor fees. It is common for the buyer to ask the seller to pay for their closing costs, which could easily be in excess of $5,000. A couple of weeks later, they often ask the seller to perform thousands of dollars in repairs to the home. As a FSBO, it is important that you negotiate, or at least discuss this up front, before you sign the offer. This is when you have the most leverage with the buyer, before your home is off the market. This is especially true in a strong seller's market, when there is a shortage of homes on the market. Most Buyers Have a Realtor: Approximately 90% of all buyers have a Realtor. It is customary for the seller to pay the buyer’s Realtor commission. The commission you are saving by selling your home as a FSBO, is the fee your Realtor would charge you. You should still expect to pay the buyers agent fee, which is often about 3% of the sales price. There are specific marketing strategies you can use to find a buyer who does not have a Realtor. The Kandoo Real Estate Team has developed these strategies and they work. Other Realtors do not use them. This gives us a competitive advantage and saves our listing clients thousands of dollars. We do not want to print them here, because we may educate our competition. If you are a FSBO seller, we will gladly share our strategies directly with you 4
verbally, just ask. Use The Right Contract: If the buyer of your home has a Realtor, the contract you will be using is probably a good one. It has been tested and adapted to provide protections and clarity for both the buyer and the seller. If the buyer of your home does not have a Realtor, DO NOT USE the escrow instructions provided by the Title Company as your purchase contract. These are escrow instructions only and do not contain many important protections both the buyer and the seller need. When FSBO’s use the Title Company escrow instructions as their purchase contract, it is probably the single biggest mistake they can possibly make. Spend a little money and buy a good template online that provides the same protections as the contracts Realtors use. This is money well spent. If you insist on using the Title Company closing instructions as a purchase contract, at a MINIMUM have a really good real estate attorney review it before you sign. Read Everything: Make sure you understand exactly what you are signing, and ask plenty of questions. It is important you understand every aspect of the transaction. This is especially true if the buyer is represented by a Realtor and you are not. Pricing Your Home: This is one of the most important decisions you will make, especially if yours is a custom, or semi-custom home. Usually you ask a few Realtors to give you an idea of what the list price might be. The difference between simple amenities like views, appliances, a pool, countertops, cabinets, flooring, school district and property zoning can easily be 20% of the sales price. Realtor’s are not trained, nor are they licensed to make any of these adjustments. All they will do is look at historical sales data for similar sized homes in the area and give you an estimate. Because these sales occurred in the past, they will not reflect recent appreciation in the neighborhood either. Do yourself a favor, hire a professional appraiser who is licensed and trained to make all of these adjustments, and more. Pricing Strategies: The actual price you select can make a big difference. Assume Sally Sellers’ home appraised for $500,000. She 5
might want to list it at $515,000 to allow room for negotiations. She might also consider a list price of $499,000 because it is more inviting to buyers. If she selects either of these price strategies, she will miss reaching a large segment of potential buyers. They will never see her listing. There is only one list price that will reach the maximum number of buyers. Here is why. One of the primary search function buyers use to find homes is the “list price”. Buyers set their price range with a high and a low number. There will be one group of buyers for Sally’s home who have set the range of value between $400K - $500K. Another group of buyers will have their range set to $500K-600K. If Sally selects the list price of $500K, she will reach both sets of the buyers. This is the only price that will reach both sets. Remember, if buyers do not see your home, it will probably cost you money. Remove Unexpected Surprises: If your home is more than five years old, get a free roof inspection and a free termite inspection before you list your home. You should also consider paying for a home inspection too. These will identify problem areas and prevent unexpected major issues that might cause problems after you are under contract. If these reports are clean, they will make the buyer feel more comfortable about the quality of the home, and allow them the confidence to submit a higher offer.
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Chapter 3 FINAL THOUGHTS Marketing Your Home: We are working on a step-by-step marketing plan you can use. It is not completed yet, but we will be happy to share verbally what we recommend and you can take notes. Here are a few of the important points to remember. If you want to attract a buyer who does not have a Realtor, you will have to do that before you list your home on the MLS. These include mailing postcards to the neighborhood, putting up a “coming soon” for sale sign, social media advertising and more. Once you have exhausted those efforts and are ready to pay a Realtor to bring you a buyer, you must list your home on the MLS. This is where the vast majority of buyers will be reached. You can list your home on the MLS without hiring a listing agent. “Flat Fee Listing Agents” will list your home on the MLS for as little at a few hundred dollars. Google “flat fee listing agent to find them. Your “A” Game: If the buyer has a Realtor and you do not, be prepared. You are probably at a disadvantage, especially when it comes to state laws and requirements of the seller. Many of these requirements have deadlines which, if not met, can expose you to attorneys fees and damages. The buyer’s Realtor will know all of these deadlines. If you miss one, they may use that to negotiate more favorable terms for their client.
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Preventing Theft: Some burglars target FSBO’s because they can easily schedule a “showing” to scope out valuables in your entire house. They can see if you have cameras or an alarm system. Based on conversations with you they know when you can and cannot be there to show the home, which tells them the best times to break in and steal your stuff. These will probably be “unrepresented buyers” who do not have a Realtor. Sometimes they actually claim to be a Realtor previewing the house for a client. After showing your home to anyone, double check every door and window in the house to be sure they did not unlock it when you were not looking for easy access later. Keep valuables hidden and out of sight if you can. Protect Yourself: Some bad people intend to harm others and FSBO’s are an easy target for them. These include rapists and murders, so take some steps to protect yourself. Do not show your home to a buyer or Realtor whom you have not verified is legitimate. At a minimum know their name and phone number, and verify it is accurate. Show our home with a partner if possible. Make sure someone else knows when and to whom you are showing the house to. Allow the prospective buyer to enter rooms in front of you, so they cannot attack you from behind. Do not schedule showings at odd hours like early in the morning or after dark.
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