For Sale by Owner
by Gary Foreman
Dear Dollar Stretcher,
I have a question about selling my house. Am I better off using a real estate agent or is it possible to do this on my own. The house is worth less than $25,000.
Ken asks a good question. And it's one that most of us ask when it's time to sell our home. Do we really need to hire a professional? To avoid hate mail, let's begin by agreeing that some real estate salespeople are better than others. In this article we're considering the typical, hard-working professional trying to do a good job. We recognize that each sale is different, too. Some are easy because the property is desirable. Others are tougher.
We also need to define some terms. Brokers are licensed by the state. Agents work for brokers. All real estate brokers or agents are not "Realtors". The word "realtor" is a registered trademark. Agents who use it are members of the National Association of Realtors. Members are expected to maintain a code of ethics which should provide the customer with a comfort level.
Next, let's look at what needs to happen for Ken to sell his home. There are a lot of steps involved. But they all fit into a few categories: pricing your home, marketing it, negotiating the sale and transferring the title.
Determining the best price for your home and making sure that you get your money are the most important steps. But they're also the easiest to get help with. A real estate agent will help you price your home properly. But an independent appraiser can also be hired to estimate your home's value. The internet has also made it easier to find information about home prices. Many counties list all real estate transactions. It's not uncommon to find selling price, square footage, number and size of rooms, property taxes and other interesting information. You'll also find neighborhood homes for sale listed. So choosing an asking price is much easier than it once was.
After you've found a buyer and negotiated a price you'll need to transfer the title. It's critical to make sure that you get your money and that you're no longer liable for the property. This is an area where a real estate professional should have plenty of experience. And that's certainly helpful. They'll also know who to call to 'move things along' prior to closing. But, again, with a little help you can do pretty much the same thing yourself. The sales contract is a fairly complicated document. You'll need a lawyer to review it. Their rates will vary depending on where you live. The actual closing will be handled by a title company or lawyer. You can plan on making some calls to expedite everyone.
Now we get into an area that's much harder to evaluate. Marketing and negotiating the sale. It can take a lot of time and it's also harder to hire someone to help you. Whatever decision you make will close some doors. Most broker's will want an exclusive. That means that they get their commission even if you find the buyer. Some agents are willing to offer to handle a portion of your sale for a set fee. Generally, if you decide to market it yourself, brokers and agents will not bring you prospective buyers.
A real estate professional does have advantages. They can help you see your property the way a potential buyer would. A broker will also be able to list your home in the Multiple Listing Service (MLS). The MLS acts as a listing of homes that are offered for sale through brokers. The agent will help you by screening calls and prequalifying potential buyers. They'll show the home, handle negotiating a sales contract and all the other details that have to happen prior to closing. Although the commission is negotiable, in many parts of the country the typical rate is 6% of the actual selling price.
Another option for Ken is to go the "For Sale by Owner" (FSBO) route. That means that he would have to perform the same tasks that an agent would perform. Often selling a home requires newspaper ads, fliers, mailers, open houses and other strategies. If Ken looks, he'll find FSBO kits on the web. Most provide a variety of information and sales aids to help you through the process. Many are available for less than $100.
You'll need to be able to take calls and show your home to prospects. Presenting your home isn't that difficult. After all, you know it best. Unfortunately, some people will make appointments and fail to show up. Not so bad if you're already home. But a real bummer if you took the morning off specifically to show your home. Some sellers prefer to control the process. It's easier to gauge buyers intentions by talking directly with them. One potential problem is knowing whether a buyer is financially qualified to obtain a mortgage.
Should Ken go it alone? Depends on how much time and talent he can bring to the sales and marketing tasks. It does take quite a bit of effort to sell most homes. He shouldn't underestimate that or the time he'll need to devote to it. But, on the other hand, if Ken has the time and talent he can try to sell it himself. If he's unsuccessful he can always list it with an agent later. Here's hoping that Ken has a smooth sale of that home.
Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money and CreditCards.com. Gary shares his philosophy of money here. You can follow Gary on Twitter or visit Gary Foreman on Google+. Gary is also available for audio, video or print interviews. For more info see his media page.
Take the Next Step:
- If you haven't looked for a lower mortgage rate in the past year you could be wasting money each month. Use our simple tool that compares different lenders to see what your monthly mortgage payment could be. It's private, only takes a minute and could show you how to save thousands!
More Money-Saving Tips for Your Home
- Should I use a HELOC for home remodeling and repairs?
- Find the best mortgage rates in your area
- 3 ways to use a mortgage calculator
- Mortgage calculator: Calculate your payment and more
- Home equity calculator: HELOC vs. line of credit
- How much can additional payments save me on my mortgage?
- Who offers the most home insurance discounts?