Some Things To Consider Before Selling By Owner
Today I had a very interesting conversation with a lovely lady who was hoping to move to our area from another state. She was had fallen in love with Clayton, and was really excited about the prospect of getting a new home there. She was amazed that there were such great options in health care, education and lifestyle here. Easy proximity to great universities like NC State in Raleigh and UNC in Chapel Hill was a huge draw and of course the overall robust economy in the Triangle and in the growing Johnston County market is very appealing to her.
She was anxious to get here as fast as possible, so I asked her about what she was doing to sell her current house.
She informed me that she was planning on selling her house by herself to save half, or all, of the sales commission. That seemed like a good idea until I probed some more and learned that:
- She had only sold only one other home and that was 10 years ago
- She hadn't considered how she was going to market other than putting a sign in the yard
- She didn't feel comfortable with negotiation,
- She didn't know how to qualify any buyers,
- She hadn't thought about the fact that strangers would be in her home
- She wasn't sure what the true value of her house was,
- She didn't know what disclosures were needed,
- She hadn't seen a real estate sales contract and
- She didn't how sales are handled in her area.
She was feeling good about saving some commission though.
I have a colleague who sells houses in her town, and I sent her to him so she could at least get educated about what she was going to do. If she's going to move to Clayton, she needs to sell that house, not just play around in the market.
I know this sounds like a crazy situation, and it is rare to see, but I do ocassionally talk to people who think that the information they see on the internet is all they need to sell the house themselves. Every time I hear it, I feel scared for the sellers. Sure, house selling looks easy, but if you make a mistake it will surely cost you time and money. You really need to know what you're doing or you need to hire a good Realtor who can get you covered. There's a reason it is not a very common move. It's similar to going into court without a lawyer and hoping that all will go well for you. If it does, that's awesome, but it's more likely that you're out of our element, and may cause some pain to your pocketbook, and frustration to your life.
Frequently, when people sell their homes by themselves they come up with a house value that is too high or too low. (If the number is based on Zillow estimates it will surely be faulty.) If it's too high their home will go stale quickly. If it's too low, it will get snatched up quickly, but the sellers will lose out on profit.
I'm confident that this lady will spend days chasing strangers who say that they want to buy, but they have lousy credit scores, or worse yet, they have mortgage companies that are useless.
When it's time to write an offer, she needs guidance, so she will probably be happy when a buyer shows up with an agent because at least someone will know what they're doing. Unfortunately, she's going to pay half the commission and that agent will be able to direct the process. A buyer's agent will be representing the buyer, and that agent's job is to get the best price for the buyer, so deep discounts will most likely be in this seller's future. Again, profit lost.
I constantly preach that you should always get your own agent, and not use the agent who is listing the house because that agent's job is to get the best price for the seller.
The same holds true when you're a seller and you're talking to a buyer's agent. That agent isn't there to help you. They want to make sure the house appraises, doesn't have repair issues, and gets to closing quickly and without hassle. A great price will make all those other items easier for the buyer and their agent.
Good Realtors sell hundreds of homes, and we know how to negotiate, how to price homes, how to stage them, how to advertise to get the best offers, and even how to make sure the contract sticks. We know how to avoid getting taken because we have the knowledge and the know-how to get it done right.
Here's some information from the National Association on Realtors regarding the history of home selling in their last review in 2012.
- The share of home sellers who sold their home without the assistance of a real estate agent was 10 percent. Forty percent of those sellers knew the buyer prior to home purchase.
- The primary reason that sellers choose to sell their home without the assistance of a real estate agent to a buyer they did not know was that they did not want to pay a fee or commission (37 percent).
- More than one-third of FSBO sellers took no action to market their home, and 59 percent did not offer any incentives to attract buyers.
- The typical FSBO home sold for $150,000 compared to $215,000 among agent-assisted home sales.
Again, this 2012 national survey of home sales showed that the average house price for an agent assisted sale was $215k, while for sale by owners had an average home sale price of $150K. Just to be clear though, the for sale by owner properties sold faster than homes that were represented by an agent. Makes sense that they would, doesn't it? The majority were selling to people they knew and offering a discount, or the buyers realized they were getting a deal, and jumped quickly to snatch it up before someone else grabbed it. If you're a buyer, you'll know that the for sale by owner properties are trying to save money on commission, so you'll factor that discount onto your side of the deal. It's just human nature.
Before you decide to try this for sale by owner option yourself, call a good Realtor who has a history of selling homes in the Triangle (I know a great one). Ask for their input, and use that information to design your own game plan.
If it doesn't work out, call that same agent, and get your house listed with them. Whatever you do, stay educated, and don't be penny wise, and pound foolish. You could save a few dollars on commission and lose a pile of dollars in profit.