How to Sell Your House or Condo for Top Dollar With or Without a Real Estate Agent
A special report from Real Estate Expert Bob Bruss
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Spring is the peak sales season for houses and condominiums. Traditionally, in most communities home sellers begin listing their houses and condos for sale in February, March, and April to catch the largest number of prospective buyers as they come out of their winter hibernation. Of course, in winter resort areas such as Florida, Arizona, and the winter ski areas, the peak home sales season starts earlier, often right after New Year’s Day.
But the 2006 home sales season started out differently, even in the cold Midwest states where few serious home buyers begin their quest until after the snow melts. In many communities, the number of homes listed for sale with local multiple listing services (MLS) and on the Internet at www.Realtor.com skyrocketed in January far above normal for this usually slow home sales season of the year.
Why? Nobody knows for sure. Perhaps home sellers want to get a head start on the spring sales season. Or maybe they wanted to put their homes on the market during the traditional slow early months of the year when there is often a shortage of listings.
But the fact is the number of houses and condos listed for sale is far higher than a year ago (when there was a shortage of listings in many areas, thus causing a “seller’s market” with more qualified buyers than homes available for sale). Instead of the three-month supply of homes available for sale in early 2005, today there is a six-month supply of new and resale homes available, thus creating a “buyer’s market” in most communities.
HOW TO TELL IF YOU ARE IN A BUYER’S, SELLER’S OR NEUTRAL HOME SALES MARKET. For the last five years, home sales have set a robust, record-breaking sales volume and price-increase pace nationwide. The median U.S. home sale price increased about 10% during the last 12 months. During the last 10 years, most homes have doubled in market value. Of course, not all communities participated – especially where there is little or no job growth.
The definition of a home “buyer’s market” is there are more homes for sale in the community than there are qualified home buyers. Of course, the opposite definition of a “seller’s market” is there are fewer homes listed for sale than there are qualified active home buyers in the local market.
There are two key ways to tell if your local residential sales pace is a “seller’s market” or a “buyer’s market.” The first method is to look at the number of houses and condominiums listed for sale and their average number of days on the market for sale. As a general rule, if the average number of days on the local market is 60 days or less, that is a “seller’s market,” meaning home sellers can feel confident their house or condo will sell within 60 days if its asking price is realistic, based on recent sales prices of comparable nearby homes.
However, if the local average number of days on the market is 60 to 90 days for realistically-priced homes, it is a “neutral” market with a relatively equal number of homes listed for sale and qualified home buyers actively searching for a home to purchase. When the average number of days on the market exceeds 90 days, that is considered a home buyer’s market where buyers can negotiate hard and sellers can’t be too demanding as to the sales price and terms.
In a buyer’s market, home sellers should be thrilled when they receive any written purchase offer, even a low-ball offer less than the asking price and below recent sales prices of comparable nearby homes. Smart home sellers, especially in a buyer’s market, always make a written counteroffer to every written purchase offer because that keeps the negotiations and possibility of a home sale open.
The second method to tell if your local home sales market is a buyer’s or seller’s market is to look at the number of months’ supply of homes for sale at the current sales pace. This is simply a matter of dividing the number of homes sold during the last 30 days into the number of homes listed for sale. If the result is a home supply of six months or longer, that definitely means it is a local buyer’s market with an oversupply of homes available for sale. Generally, this number will not include brand new homes because they usually are not included in the local MLS sales statistics.
However, if the home supply is three months or lower, that means it is a local “seller’s market” where home sellers can hold firm on their asking prices and terms with reasonable confidence a realistically-priced house or condo will sell within 90 days, usually much less.
When you put your home on the market for sale, it is important to know these numbers: (1) the average number of days on the market for homes in your price range, and (2) the local available home supply, stated in months. If you discover you are in a local buyer’s market, then it is especially important to get your home into tip-top physical condition and to price it correctly if you want to get it sold quickly.
Another indicator of a buyer’s market is when the local newspaper advertising by home builders and real estate agents increases, indicating these advertisers must spend more promotion dollars to sell their new and resale houses. A year ago, by comparison, most real estate newspaper advertising volume was much lower than today because mortgage interest rates where then abnormally low and virtually any house or condo available for sale sold without much promotion within 60 days or less, often with multiple offers from many buyers.
TO MAXIMIZE YOUR SALES PRICE AND MINIMIZE HOME SALES TIME, GET YOUR RESIDENCE READY FOR SALE. Recently, I attended and spoke at the California Real Estate Educators’ Conference in San Diego. This is a meeting of college real estate instructors. Many are full-time sales agents, mortgage brokers, and appraisers who also teach one or two real estate courses at their local community colleges. They are usually very “in touch” with their local home sales markets.
As I talked with these college real estate instructors between sessions and at the meals, I learned (1) most of California is now definitely in a “buyer’s market” and (2) fixer-upper houses and condos needing repairs are becoming more difficult to sell than just a few months ago (even at substantially discounted prices).
From what I hear around the nation, most local home sales markets seem also to be “buyer’s markets,” probably due to the recent rise in home mortgage interest rates and the increased home sales inventory. Now it is more important than ever to follow these key steps:
1 – To earn “top dollar” for your house or condo, get it into near “model home” condition. Most home buyers want to buy a residence where all they have to do is turn the key in the front door and move in. Very few home buyers enjoy the hard work of looking at dozens of homes before buying one, and then having to spend considerable time and money fixing up their home purchase.
If you want to receive the best possible sales price, there is just no substitute for painting (inside and outside), cleaning, and repairing before putting your home on the market for sale. Yes, there are a few bargain hunters (like me!) who will buy fixer-upper houses (mostly investors rather than owner-occupants), but they expect a highly-discounted price in return for buying a less than ideal home. Spending a few thousand dollars on cosmetic home fix-up usually pays off both in a higher sales price and a faster sale.
2 – Don’t do extensive renovation shortly before sale.Most home renovation work, such as kitchen and bathroom remodeling, is not profitable for the home seller. To illustrate, if you spend $20,000 fixing up your kitchen with new cabinets, flooring, and appliances, you will be lucky to add $20,000 in market value to your home. Typically, you will be fortunate to add 50% to 75% of your cost to an increased sales price.
Let your buyer do their own remodeling. As a long-time investor in rental houses, I’ve seen many bad remodeling and room addition jobs. Selling your home is stressful enough without adding the extra pressure of remodeling just before putting your home on the market for sale. Instead, just clean, paint and repair. Lots of prospective home buyers prefer the charm of older homes to a recently remodeled residence which doesn’t meet their standards.
The most profitable improvements to get your home into near model home condition include painting (the most profitable improvement of all), cleaning, repairing, new light fixtures, new wall-to-wall carpets (if needed), or kitchen and bathroom floor refinishing or replacement.
Another profitable “improvement” is to have your home professionally “staged” to show its best after you have painted, cleaned, and repaired. Most communities now have professional “stagers” who will make your home look its best (for a fee, of course!), often by moving out your “tired” worn-out or old-fashioned furniture and bringing in rented furniture to “de-clutter” and make the house or condo look more spacious.
An excellent new book on this topic is Home Staging by Barb Schwarz (John Wiley and Sons, Hoboken, NJ, 2006, $19.95, 205 pages) available in stock or by special order at local bookstores, public libraries, and www.amazon.com. Schwarz’ website is www.StagedHomes.com where you can find resources and local home “stagers.”
3 – Get rid of unused “junk” you don’t want to move by having a garage sale, or phone the Goodwill or Salvation Army to haul it away. A major part of getting your house or condo ready for sale is to clean out the closets and either sell or give away the clothes, furniture and other “junk” you don’t want to keep and move to your next home.
Having half-empty closets will not only make you feel better, but your home will look larger to prospective buyers. As a general rule, if you haven’t worn your clothes for 12 months, it’s time to sell or give them away!
Don’t forget the garage also needs a complete clean-out to make it look bigger and more spacious. If the garage is unfinished, you might want to have it Sheetrocked and painted white. When the garage floor is stained and unattractive, consider painting it with garage floor gray or red paint to make it sparkle.
4 – Be aware of the pros and cons of an “as is” home sale. If the suggestions above seem overwhelming and too much work, but you really don’t care if your home sells for top dollar, then consider an “as is” home sale. An “as is” real estate sale means the seller will not pay for any repairs – but the home seller must still disclose all known defects to the prospective buyer (to avoid future lawsuits for undisclosed defects which the buyer discovers after the sale closes).
The old days of “caveat emptor” (let the buyer beware) are long gone for home sales. In fact, the new rule seems to be “seller beware of thy buyer and the buyer’s lawyer!” Incidentally, if you are a home buyer who discovers a defect which the seller “forgot” to disclose before your purchase, before you think about suing the seller for damages, consider that perhaps the seller didn’t know about the defect either. If you have difficulty proving the seller knew about an undisclosed defect, ask the neighbors! They often can tell you if the seller said anything about the defect, or if the neighbors knew about it.
EXAMPLE: Several months ago, in my syndicated newspaper “Real Estate Mailbag” column we had a very sad letter from a family who bought a house where the seller failed to disclose the sewer line from the house to the street was broken. Shortly after the family moved in, the sewer backed up and flooded their basement. It cost them about $4,750 to repair the pipe and clean up their damaged basement. Even the world’s best professional home inspector (and the real estate agent) probably wouldn’t have detected that problem unless there was evidence in the basement of prior sewer backups. However, the new homeowners checked with the neighbors who reported the Roto-Rooter man was a frequent visitor to the home! Unfortunately, the seller moved out-of-state and was virtually impossible for the buyer to sue for damages.
As a home seller, if you know of a defect in your home but you don’t want to pay to have it repaired, to prevent a future lawsuit be sure to disclose that defect in writing to the prospective buyer before purchase. Most states now have written home defect disclosure requirements so be sure to reveal all defects to prevent future legal problems.
5 – Have customary inspections completed before putting your home on the market for sale. In each community there are customary inspections which are either required or optional for home sales. The smartest home sellers have these customary inspections completed before putting their home on the market. The reason is then the seller won’t be surprised by any unexpected repair costs.
If the repairs cost more than the seller can afford, unless the repair is mandatory by law, then the seller can just disclose the defect and let the buyer consider it when making the purchase offer. By having the professional inspection reports easily available for serious buyers, my experience has been most buyers will accept my inspector’s report, thus saving time and expense.
To illustrate, where I live it is customary for home buyers to insist on a professional home inspection and a professional termite (pest control) inspection. In addition, the town where my home is located now requires a “sewer lateral” inspection to be sure the sewer pipe from the house to the city sewer isn’t leaking and that there is a “back-flow valve” to prevent sewer backups into the house.
Depending on the community, other customary inspections might include (a) radon, (b) energy efficiency, and (c) building code compliance. If the home was built before 1978, federal law requires the seller to provide the buyer with (a) a lead-based paint disclosure form (if there were any past lead-based paint inspections, the seller must disclose them) giving the buyer the right to have the home inspected within 10 days at the buyer’s expense, and (b) a lead-based paint disclosure booklet.
THE BEST WAY TO DETERMINE YOUR HOME’S MARKET VALUE. After your home is all cleaned, repaired, and painted, it’s time to take a critical look to determine its likely market value selling price based on current conditions.
Please be aware most homes are valued based on recent sales prices (within the last three to six months) of comparable nearby homes. This is called the “comparative market value” approach used by professional appraisers. Commercial and income properties are often valued based on their net income and/or replacement cost. But these two methods are usually not applicable to single-family houses and condominiums.
Three key methods to “guesstimate” your home’s market value.Until your home sells to a willing buyer and the sale is closed, nobody knows for sure how much your home is really worth. But there are three methods which will help guesstimate your home’s fair market value until you actually close the sale:
1 – Internet market value estimates. Don’t laugh! In the last few years, computerized Internet market value estimates for houses and condominiums have become remarkably accurate. My first experience with an Internet appraisal was three years ago when I obtained a home equity credit line secured by my part-time vacation home condo. I estimated it was worth $125,000 at the time. But Wells Fargo Bank used a computerized appraisal to determine the market value was $150,000 so they approved a $100,000 credit line without a formal appraisal.
Today, homeowners can obtain free Internet market value estimates from several sources. The newest is at www.Zillow.com. This advertiser-driven website seems quite accurate, based on several properties I entered where I am familiar with their market values.
However, Zillow doesn’t yet cover the entire nation so don’t be disappointed if your home isn’t included. At present, Zillow claims to value 60 million residences. What I found especially amazing is Zillow includes, in most situations, an aerial photo of the property and even the lot boundary lines! In another situation, where I entered a condominium, along with the value estimate Zillow included a map showing the precise location.
Other free Internet residential market value estimate websites include www.HouseValues.com, www.OurHomesPrice.com, www.HomeGain.com, www.Domania.com, and www.PriceaHomeOnline.com. However, these websites often require you to allow a local real estate agent to contact you about selling your home.
But a $40 paid website offering a comprehensive CMA (comparative market analysis) is www.USHomeValue.com. These websites should be considered just a starting point for estimating your home’s market value. The websites don’t evaluate the condition of your residence, or if you have added recent improvements which might increase its market value.
2 – Hire a professional appraiser. Especially if you are thinking about selling your home alone without a professional real estate agent, having a professional appraisal made could be money well spent. Depending on the size, location, and uniqueness of your home, the cost should be in the $300 to $750 range. Be sure the licensed appraiser is experienced appraising in your community and is not from a distant area. A good source is to ask your local bank or other mortgage lender for two or three names of recommended local residential appraisers.
3 – Interview at least three successful local realty agents who sell homes in your vicinity. Even if you plan to sell your house or condo “for sale by owner” (FSBO), known as a “fizzbo sale,” please interview three or more local realty agents before you decide.
They won’t mind, even if you let the agent know you are thinking of becoming a FSBO. The reason is agents know most FSBOs, within 30 to 60 days, give up and list their homes for sale with a professional agent, usually one of the agents they already interviewed.
The primary reasons to interview three agents are you will (a) learn what is involved with a home sale in today’s market, especially all the disclosures required by state and local law, plus the forms used by realty agents in your community, and (b) receive each agent’s CMA (comparative market analysis) form. The CMA includes at least three recent sales prices of comparable nearby homes, the asking prices of similar neighborhood homes (your competition), and even asking prices of recently expired nearby listings (which were probably overpriced).
Some agents even advertise for FSBOs, such as “Thinking of selling your home without a professional realty agent? I’ll help you sell without a listing by giving you a FREE evaluation of your home’s market value.”
The reason it is so critical to interview at least three successful local realty agents is to compare their CMAs. Watch out for any agent who estimates a high market value for your home, without justification shown on that agent’s CMA. This is called “buying the listing” by estimating a high sales price. Later, when the overpriced home doesn’t sell, the agent will suggest a price reduction. However, by then you will have lost the initial sales momentum which occurs when a home listing first hits the local market.
Or, if an agent thinks you won’t be interviewing other realty agents, he or she might talk you into a low listing price, hoping to make a fast easy sale by creating a “buyer frenzy” with an ultra-low asking price. Only by interviewing three (or more) agents can you compare their CMA justifications for recommending an asking price.
ARE YOU CAPABLE OF SELLING YOUR HOME ALONE WITHOUT A PROFESSIONAL REAL ESTATE AGENT? You probably can do it! But ask yourself why would you want to sell without a professional listing agent? The answer most likely is “To save the sales commission.”
However, when your buyer realizes there is no sales commission involved, most FSBO buyers expect to receive all or at least part of that sales commission savings in the form of a discounted sales price off the full market value. Unless your local home sales market is a very strong “seller’s market,” you probably will have to reduce your price to accommodate such a buyer.
If you decide to sell FSBO, consider yourself very fortunate if a buyer comes along who is represented by a “buyer’s agent,” as the majority of home buyers are today. That buyer’s agent will do most of the work which will normally be performed by a listing agent, such as arranging the professional inspections and shepherding the sale through the financing and closing process. In return, that buyer’s agent (and the buyer) will usually insist you pay 50% of a normal sales commission, typically 3% of the gross sales price.
As a FSBO, if you save only 3% of a typical 6% sales commission, is it worth all the work of being a do-it-yourself home seller? The key reason I highly recommend you interview at least three successful local realty agents who sell homes in your vicinity is to learn all the work that is involved in a typical home sale. Only then can you decide if you are capable and if you really want to sell your home alone.
IMPORTANT QUESTIONS TO ASK EACH REALTY AGENT YOU INTERVIEW – BEFORE YOU DECIDE TO SELL YOUR HOME ALONE. Each interview should take about one hour. These will be the most profitable three hours you ever spend! The reason is you will be selling a major asset – your home – and you don’t want to make a costly mistake, especially in the current home sales market.
Don’t leave money on the table by selling too cheap! Try to keep your emotions out of the event. After all, this is a business transaction to get your home sold. Don’t let a high-pressure “numbers agent” (who lists many homes for sale, but only sells a modest percentage of those properties) get you to sign a listing until you have interviewed at least three agents and thought about the pros and cons of each agent. Here are the most important questions to ask each agent – write the questions and answers down so you don’t forget. Of course, feel free to add more questions you might want answered.
1 – What are the names, addresses, and phone numbers of the sellers of your 10 most recent home listings? Be sure each agent includes on their list the expired listings which didn’t sell – every agent has at least a few which didn’t sell. Ask the agent why those listings didn’t sell.
Sometimes, the reason was beyond the agent’s control; other times it was the agent’s fault. Perhaps the home was overpriced and the seller wouldn’t reduce the asking price. Or maybe the house was in very bad condition. Perhaps the seller was uncooperative and the listing agent wisely didn’t renew the listing when it expired.
Before listing with a realty agent, be sure to phone several of their recent sellers to ask “Were you in any way unhappy with your listing agent and would you list another home with the same agent?”
2 – If I list my home for sale with you, what price will you get for it in today’s market? Before answering this question, each agent should prepare their written CMA to justify their answer. Some agents will want to come back for a second appointment when they can bring their CMA computer printout, usually including color photos of the “comps” used to justify their recommended asking and probable sales price. That’s fine. But many “tech savvy” agents can now prepare your CMA on their laptop computers while you brew a cup of coffee. But don’t hold it against an agent if the CMA isn’t presented on their first visit.
3 – What is your minimum listing term? Listen very carefully to the answer from each agent. The best answer is 90 days! However, if an agent answers 180 days, your reply should be “Why will it take you so long to sell my home?”
The answer will probably be “Well, the average number of days on the market for a home in this area is 120 days (or whatever).” But your reply should be “I don’t want just an average agent! I want an outstanding agent who has confidence in their ability to get my home sold fast for top dollar.”
However, some of the best agents hold firm to a 180-day exclusive listing term. If you decide to list with such an agent, after checking their personal references of recent previous sellers, an acceptable alternative is a 180-day listing with an unconditional cancellation clause after 90 days – just in case you list with a bad agent. Be sure the 90-day cancellation clause is in the written listing contract. If it’s not in writing, it’s not binding.
4 – How long have you been selling homes in this area? Do you sell real estate full-time? What professional courses and designations have you completed? When you ask these questions, some agents will evade answering, knowing you are a well-educated home seller.
There are a few successful part-time agents, but not many. If you are going to be paying a full real estate sales commission, you deserve a full-time agent! Only if a part-time agent comes very highly recommended by a recent home seller should you even consider hiring a part-time agent.
Would you go to a part-time dentist, part-time lawyer, or part-time surgeon? I hope not! Also, don’t be fooled by the agent’s brokerage firm name, especially if it is a highly-advertised franchise name such as Coldwell Banker, RE/MAX, Century 21, or Prudential. You are hiring an individual agent – NOT the famous name on the door! Often, the local non-franchise brokerage firms are more effective than the big nationwide franchisees.
5 – How many listings do you have now? What are their addresses? Do you have an office assistant? What percentage of your listings sold last year? What day of the week do you take off and who covers for you when you are gone? Are you planning any vacations during the next three months? You get the idea! Watch out for “numbers agents” who take lots of listings, have several assistants, who are rarely available to answer your calls or to handle buyers, who rely on other agents to find buyers for your home through the MLS, and who can be downright impersonal.
If the agent you are considering has more than 15 to 20 listings, he or she can’t possibly do a good job alone servicing all those listings. However, when two agents work as a “team” they can usually do a good job with 30 to 40 listings if they have a capable office assistant to handle the 1,001 details of each transaction (especially between the sales contract acceptance and the closing day). An assistant can usually do a better job than the listing agent on time consuming important work such as arranging the inspections and appraisal as well as being sure the buyer’s mortgage financing is arranged and ready to fund without last minute problems.
6 – What is your written marketing plan for my home? During the listing presentation, each agent should present a written marketing plan for your home. If the agent fails to do so, be sure to ask. The least-successful agents will offer vague verbal thoughts such as advertising, open houses, and the MLS (the agent’s most powerful marketing method).
But the best agents will offer a specific plan geared to your home’s price range and your wishes (perhaps you don’t want any weekend open houses). Incidentally, be wary of any agent who says, “Open houses are a waste of time. They don’t sell houses.” That may be a signal of a lazy agent who wants to take weekends off (Saturdays and Sundays are the busiest home sales days of the week and should be taken off by realty agents only for important family events).
At a minimum, the best agent written marketing plans will include (a) broker open house tour with food for the agents to attract a crowd of other agents, (b) Internet promotion on both the agent’s personal website and at www.Realtor.com, (c) weekend open house at least once a month, (d) newspaper ads at least once a week, (e) brochures (ask to see samples of the agent’s past brochures for other homes like yours), and (f) ads in the local “Home and Land” magazines. If justified by a sales price over $1 million, ads in upscale prestige publications should be expected.
How to handle the sales commission issue. Most listing agents will attempt to get a full 6% sales commission. That means the listing agent’s brokerage office gets 3% and the buyer’s agent selling brokerage gets the other 3%. Those commissions are then usually split further, with the brokerages each getting 1.5% and the listing and selling agents each getting 1.5%.
However, these “splits” vary widely depending on how successful the agent is negotiating a larger percentage split with his or her brokerage manager. If your house or condo sells in the $100,000 to $500,000 range, most brokerages try to hold firm to a 6% sales commission. But you should be aware the average real estate sales commission, as reported by Real Trends in 2005, is now down to 5.1% nationally. Yes, sales commissions are negotiable, especially for homes priced above $500,000.
The major drawback of negotiating a low sales commission. Many agents will agree to lower their sales commissions to 5%, 4%, or even lower. There are some “flat fee” discount brokerages which charge $1,200, $2,000 or another low amount. But be sure you understand which customary services are included or not.
Also, watch out for extra charges, such as a $495 surprise “transaction fee” which some brokerages attempt to charge sellers and buyers at the closing (in addition to the normal closing settlement fees). Such extra add-on fees are known as unnecessary “junk fees” which smart home sellers (and buyers) refuse to pay because they are 100% pure profit to the brokerage firm (not to the sales agent). If such a fee is not in the listing contract, the home seller should not pay it. Nor should buyers pay such a fee unless they agreed to do so in their sales contract.
But the big drawback of negotiating a low listing sales commission is the buyer’s agent has little or no incentive to show your home to prospective buyers instead of showing a similar home offering a full 3% sales commission to the buyer’s selling agent. If your home is shown in the local MLS with only a 2% or 2.5% commission to the buyer’s agent, he or she would much prefer to show their buyer another home offering a full 3% sales commission split to the buyer’s agent.
For this reason, if you negotiate a reduced sales commission with your listing agent, be sure the listing contract specifies how much sales commission the buyer’s agent will receive. If this percentage is below 3%, don’t expect other local agents to enthusiastically show your home to their buyers. Also, be certain your listing will be shown in the local MLS and on the national www.Realtor.com Internet website where 70% of today’s home buyers begin their quest.
QUESTIONS TO ASK YOURSELF BEFORE DECIDING IF YOU SHOULD LIST YOUR HOME FOR SALE WITH A PROFESSIONAL AGENT. After you have interviewed at least three successful local realty agents, compared their written CMAs, and had all your questions about your major home sales transaction answered, it’s time to decide if you really need a professional realty agent to get your home sold. Here are the key questions to ask yourself:
Can I write and pay for newspaper advertising to get prospective buyers to phone and come to my weekend open houses? Where will I get a professional “for sale by owner” lawn sign (lawn signs are vital to sales success!)? Who will answer the phone at all hours of the day and night? Will callers leave a voicemail message (many will not and you will lose those prospects)? Can I take time off work to show my home during weekdays to an anxious buyer who can’t wait until the weekend? Who will be present at the Saturday and/or Sunday open houses (for your safety, be sure there are at least two adults present)? How will I handle prospects who knock on my front door (even though the lawn sign clearly says “by appointment only”)? How will I screen phone callers who respond to my expensive newspaper ads? Can I determine if a caller or visitor is a serious buyer, a bargain hunter, a time waster, a snoopy neighbor, or perhaps a future burglar?
DO I HAVE ALL THE REQUIRED DISCLOSURES AND OTHER LEGAL FORMS FOR MY STATE AND CITY, AND CAN I PREPARE A LEGALLY-BINDING SALES CONTRACT? Finding a serious, interested buyer is just the first step to a successful home sale. Providing the legal disclosure forms and creating a binding written contract are the next steps.
Is my experienced real estate attorney readily available on short notice to answer legal questions and prepare the sales contract and required disclosure forms? How will I negotiate with a buyer who wants to offer less than my full asking price? Am I a patient negotiator when it is my home which is the negotiation topic? How will I handle the situation when a buyer asks for a 6% price reduction since I won’t be paying a sales commission? More details are in my special report “How to Become a Super-Successful Real Estate Negotiator.”
Suppose a buyer wants to include contract contingencies (and they will!) for (a) obtaining a mortgage, (b) appraisal of the house, (c) a professional inspection, and/or (d) sale of the buyer’s current residence? How much of a good faith deposit should I insist upon receiving from the buyer? Who will hold that deposit pending removal of the sale contingencies (most smart buyers refuse to let the home seller hold the deposit which should be at least 1% of the offered sales price to show the buyer is serious)?
HOW WILL I HANDLE REAL ESTATE AGENTS WHO HAVE PROSPECTIVE BUYERS FOR MY HOME? As FSBO home sellers quickly learn, most of the phone calls they receive are not from eager buyers responding to their advertising or lawn sign. By far, most of the phone calls will be from realty agents anxious to “help” the FSBO seller by listing the home for sale. Many of these realty agents will say they have a prospective buyer for the house, but they need a listing before they can show it to their buyer.
As a FSBO, your response should be “We are cooperating with realty agents and will pay you a 3% sales commission for a successful sale.” But don’t be tricked into signing any type of listing form, other than a “Commission Agreement for Sale to Named Buyer” which some brokerages use. The only time you should become obligated to pay the 3% selling commission to the buyer’s agent is when you accept their buyer’s written purchase offer and the sale closes successfully.
CAN I HELP ARRANGE A MORTGAGE FOR A SERIOUS BUYER WHO IS NOT ALREADY PRE-APPROVED IN WRITING BY A MORTGAGE LENDER FOR A HOME LOAN? Today’s smartest home buyers first shop for a mortgage and get pre-approved (not just “pre-qualified” which means nothing) in writing by an actual mortgage lender.
Most experienced real estate agents won’t even waste their valuable time showing homes to prospective home buyers who are not already pre-approved in writing by a lender. However, as a FSBO, you must think how you will handle a purchase offer from a serious buyer who is not already pre-approved in writing by a mortgage lender. To handle this strong possibility, be sure to contact several nearby mortgage lenders who offer a variety of home loans and who can provide quick approvals. Be sure the lender offers FHA, VA, PMI (private mortgage insurance), and “option mortgages” to satisfy virtually every possible buyer requirement.
WHERE SHOULD THE SALES CLOSING TAKE PLACE? What are the local procedures for closing home sales? Can it be done at my real estate attorney’s office? At a bank? At a title company? Perhaps at an escrow firm? Who will arrange the title insurance? Should the buyer or seller pay for the title insurance? If you decide to be a FSBO, you will need these answers for a successful home sale. The answers will vary by community so there are no standard nationwide answers.
WHERE CAN I ADVERTISE MY “FOR SALE BY OWNER” HOME ON THE INTERNET? Without access to the local MLS, and the www.Realtor.com nationwide website, where can I advertise my FSBO on the Internet? Several FSBO websites to check out include www.fisbo.com, www.fizbo.com, www.fsbo.com, www.gofsbo.com, www.homebytes.com, www.iown.com, www.open-house-online.com, www.owners.com and www.ziprealty.com.
SHOULD I HIRE A LOCAL “FEE FOR SERVICES” REAL ESTATE AGENT? Some real estate agents offer less than full service real estate sales and charge fees on the basis of services rendered.
To illustrate, a few realty agents will put your FSBO listing into the local MLS for a flat fee, such as $1,000, but all buyers and realty agents are told in that listing to phone you directly. As a result, many local MLS members won’t show such listings which don’t include a full sales commission to the buyer’s agent. Nationwide franchises offering fee for services include Help-U-Sell and Assist2Sell offices.
A SHORT WORD ABOUT TAX-FREE PRINCIPAL RESIDENCE SALES. Most home sellers know about the major tax savings benefits of Internal Revenue Code 121. If you have owned and occupied your principal residence an “aggregate” 24 of the 60 months before its sale, you are entitled to up to $250,000 tax-free sales profits (up to $500,000 for a qualified married couple filing a joint tax return in the year of principal residence sale). Full details are in my special report “Everything Homeowners Need to Know About the New $250,000/$500,000 Home Sale Tax Exemption Rule.”
CONCLUSION. If you want to earn the maximum sales price from your home sale, it takes work to get your residence into tip-top condition and then properly market it, either through a successful real estate listing agent or by yourself as a “for sale by owner” FSBO.
The key steps to success include (a) getting the residence into “model home” first class condition by making cosmetic improvements such as painting, cleaning, and repairing, (b) having all the customary professional inspections made and taking care of necessary repairs before exposing the home to the market place, and (c) either marketing the home yourself or hiring the best professional real estate listing agent in your area.
More information is available in these books, available in stock or by special order at local bookstores, public libraries, and www.Amazon.com: House Selling for Dummies by Eric Tyson and Ray Brown; How to Sell Your Home Without a Broker by Bill Carey, Chantal Howell Carey, and Suzanne Kiffman; and Sell Your Home Without a Broker by Joseph P. DiBlasi, Esq.
ENTIRE CONTENTS COPYRIGHT 2006 BY ROBERT J. BRUSS
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