Chapter 4
To For-Sale-By-Owner ... or Not
In This Chapter
◆ The tasks and challenges of the FSBO seller
◆ How to price your own home
◆ How to describe your home and its best features
◆ How to reach buyers on your own
◆ How to show your own home
◆ Professional guidance
We understand the desire to avoid paying a commission when selling your home. Who wouldn’t want to save money? When considering a private sale or a For-Sale-by-Owner (FSBO), the questions to ask are, “Are you sure that you will actually save money?” and “Will you reach the maximum number of buyers?”
Selling a home as a FSBO (pronounced FIZ-bo) is a difficult thing to do. If it were easy, everybody would do it. It’s a venture that requires tremendous energy, loads of time, research, know-how, and patience. We guide you through the process. We also are honest about the fact that we think it’s a safer bet, financially, to use a licensed Realtor. We believe that, even when you factor in a commission, a good Realtor should net you more money on the sale than if you sell it yourself. The reason is that the single greatest challenge for a FSBO seller is reaching the entire buyer pool.
It is not possible, at this point in time, for a seller to reach the same number and caliber of buyers that Realtors can. What this means is that, while you may have gotten your home sold on your own, you will never know for sure how much higher the sale price would have been had you exposed it to the highest number and most qualified buyers available.
In this chapter, we educate you about the process of selling your home by yourself and share tricks of the trade that help you to do the best job possible.
What Is a FSBO?
A FSBO is when a homeowner markets and sells his own home without the assistance of a licensed Realtor, usually in order to avoid paying a commission. He assumes all responsibilities himself, including pricing, marketing and advertising, staging, showings, open houses, negotiating, execution of contracts and other documentation, a final walk-through, and the closing process.
It’s important to note that when you sell your home yourself, a buyer who is represented by a Realtor may want to see your home. You should make a decision early on in the process about whether or not to cooperate with a buyer’s Realtor and pay a portion of the commission. Our opinion is that you should go ahead and pay a commission to a buyer’s Realtor because, by not cooperating, you may never get that buyer to knock on your door.
Pricing Your Own Home
Pricing is the most important part of marketing any home. This is one of the main challenges facing you. You will not have access to some of the tools that a licensed Realtor will have. Nevertheless, it is still possible for you to come up with a reasonable list price without this kind of access.
In Chapter 5, we talk about using a CMA, or competitive market analysis, as the most common method of pricing a home. CMAs are made up of three types of comparables (or “comps” for short). No one single type is more important than another, and all three should be evaluated together to get a complete picture of the market and where your home should be positioned within it.
def·i·ni·tion
Usually performed by a licensed Realtor, a competitive market analysis (CMA) is a study of three kinds of “comparables” or “similar homes” in the area. They include homes that are currently on the market, homes that have recently sold, and homes that have just gone under contract.
Where to Get Information About Comps
Active comps are relatively easy to find because most of them are listed on online Multiple Listing Services (MLS’s) (or real estate websites) accessible to everyone. They provide most of the information that you will need to compare value. One challenge is that, while some websites and online MLS’s, such as www.realtor.com, provide the address of the properties, most of them still do not.
One way to find an address is to visit the websites of local real estate agencies. When you find homes that appear to be comparable to yours, you can call the agency and ask them to provide you with the addresses. Most of them will share that information over the phone.
“Under contract” comps are extremely difficult for nonprofessionals to access. Unless you have a relationship with the seller (or buyer) of a particular home, or if you hear a rumor about how much it went under contract for, it’s next to impossible to learn the sale price. The sale price is a very valuable piece of information because it reflects the immediate pulse of the market.
On the other hand, comps of homes that have recently sold (or closed) can be found relatively easily through your local hall of records. Many local newspapers publish sale prices regularly as well.
There are also websites that provide all the prices for which homes have sold in your area. Among them are www.zillow.com, www.realestate.msn.com, and www.realestate.yahoo.com
Using the Internet to Help You Price Your Home
Some websites may have a function by which you can price your home. They ask the user to complete an online valuation form—where you enter a few facts about your home and it spits out a suggested value.
Seller Alert
Pricing your home through a website is something that we do not advise. The idea that a computer model or software program can assign value to a home (or even a recommended list price) is absurd. Perhaps at some point in the future, the practice of real estate will change and allow computers to price homes. But that day is not yet here, as there are hundreds of factors (many of them subjective) to consider when coming up with a strategic list price.
Hiring an Appraiser to Help You Price Your Home
We speak throughout this book about the fact that it is impossible for a seller to establish value; it is the buyer who establishes value when he tells you what he is willing to pay.
While appraisals are typically done for banks and insurance companies when they are lending money or insuring a property, some sellers choose to have one performed in anticipation of selling the home and trying to come up with a reasonable list price.
Our issue with professional appraisals is that they only estimate value and sometimes rely heavily on sold comps that provide information that is too old to use exclusively. As we said earlier, there are three types of comps. To price your home properly, you must evaluate all three. However, it can be advantageous if you hire an appraiser who is very familiar with the neighborhood and who has done several recent appraisals in the area. We cover appraisals in more depth in Chapter 5.
Seller Alert
Be very careful about using your municipal tax-assessed value to price your home; they almost never reflect real value on the open market. For more information on tax-assessed value and appraised value, see Chapter 5.
Showing Your Own Home
Conducting showings of your home takes a lot of your time. If you’re not sure how to conduct them properly, they can be awkward and actually counterproductive to your goal. They pose somewhat of a security risk, as well. And they can grate on your nerves after your home has been on the market for a few weeks or months.
We have devoted Chapter 8 to this subject, but that chapter is about conducting showings when your home is listed with a Realtor. In this chapter, however, we talk about how to handle them when you are going it alone.
Appointments and Preinformation
When someone calls you on the telephone to set up an appointment to see your home, ask him for the following contact information. If he is unwilling to give it to you, then do not show him the property. Nothing is more important than your safety, and any legitimate buyer should not have a problem giving you contact information:
◆ Name and home address
◆ E-mail address
◆ Telephone numbers (home, business, and cell)
Schedule the appointment for at least 24 hours from the time of the call in order to give yourself a chance to prepare for the showing and to verify his contact information. You might want to check the phonebook to see if the address matches the phone number. You can also call the person’s place of business and confirm with the receptionist or operator that he is an employee.
Seller Alert
Try to keep your home in “showing” condition at all times. Not all buyers can wait 24 hours to set up an appointment. You may get last-minute calls from legitimate buyers who may be in your area for only one day, particularly if you live in a metropolitan locale or resort area. Some of these shoppers actually do buy.
Security
When a buyer has made an appointment and is about to come through your home without a licensed Realtor, ask a friend or family member to be in the home with you. If possible, don’t show the property alone. In this day and age, you cannot be too careful.
If that is not possible, notify a neighbor that you will be showing the home and ask him to stay nearby until the buyer has left. When showing the basement or attic, let the buyer go up or down the stairs in front of you. In fact, try to remain on the stairs while the basement and attic are being viewed.
Other security tips include leaving the front and/or back doors ajar during the showing, hiding or putting away small valuables that can be easily picked up and pocketed, and carrying a cell phone or cordless phone in your hand while showing.
Seller Alert
We don’t recommend ever letting potential buyers who knock on your door into your home. You have no idea who they are or where they came from. Speak to them at the door and politely ask if they will please call back on the telephone to schedule an appointment. This practice will also relieve you of being in the position of showing your home at awkward times, like when the baby is sleeping or when you are in the middle of a meal.
Any qualified buyer who is truly interested in your property will respect you, use good etiquette, and make an appropriate appointment that is convenient for you.
When a Realtor Knocks on Your Door
Sometimes a Realtor will knock on your door to ask if you will allow her to show the home to a buyer, but she will expect you to pay her a commission in exchange. As we discussed earlier in this chapter, you will have already made a decision as to whether or not you will cooperate with buyer’s Realtors.
Assuming that you will cooperate, how do you handle the unexpected drop-in? Most Realtors will acknowledge that they are catching you off guard. However, they may only have noticed your lawn sign as they were driving by with their buyer already in the car. Perhaps the buyer is in town for just one day. It is still your prerogative to turn them away, but buyers who are working with Realtors are almost always qualified and ready to purchase. You may want to accommodate them.
We discuss how and why to negotiate with Realtors representing buyers later in this chapter.
Follow-Through with Buyers
After a buyer has come through your home but has not made an offer, it’s always helpful to get feedback. Call the buyer and ask if he wouldn’t mind sharing with you the reasons why he did not buy your home. Tell him that you are not trying to apply pressure, but rather, that you’re just trying to educate yourself about how your home is being perceived in the marketplace.
How to Describe Your Home and Its Features
Writing a word description is one of the hardest parts of marketing a home properly. It’s difficult and confusing to know what to include. It’s not necessarily about using flowery words or simply cramming in as much information as possible. There is more nuance to it than that.
The confusion lies in understanding the goal of the words. Too many people think the purpose is to share every possible facet of the home that can fit in the allotted space on the listing or in the advertisement. But the true goal is to entice the buyer into making an appointment to see it. You may ask, “Won’t more information entice them further?” Not necessarily.
When you disclose too much about a property, it creates more opportunities for the buyer to find something about the home that doesn’t meet his needs. Offering room dimensions in a listing is one example. The buyer may tell himself that he must have a living room that is of a certain size. If, on the listing, you provide dimensions that are smaller than what he wanted, then he may not bother to make an appointment.
Trick of the Trade
Study the home descriptions on real estate websites and MLS’s to educate yourself about the style, form, and content in professional listings.
What he missed out on by not coming into your home was that the size of the room turned out to be unimportant. He might have overlooked the dimensions because he was attracted to the enormous kitchen instead.
Give the reader facts, but choose them carefully when you’re putting them in writing.
The Big Three: Size, Condition, and Location
In describing size, buyers want to know how many bedrooms and baths your home has. There is no way to embellish those facts. If the overall square footage of your home is low, yet you have a nice floor plan, then you may want to focus on the layout. A sample sentence is, “The sunny and open main floor has wonderful circular flow for entertaining.” When referring to size, avoid words like “charming” and “adorable,” as they are often euphemisms for “small.”
The way you talk about condition is important. Major upgrades should always be mentioned in a listing description. If you have a new kitchen or baths, then you should describe them as “updated” and perhaps even “state of the art,” depending on how advanced the materials and appliances are. If your home is not renovated or updated, yet it is clean and well cared for, use words like “impeccably maintained” to describe the overall condition.
And, hopefully, you’ll be able to say why the location is a good one. Is it near a park? Is it walking distance to a village with shops and restaurants? An important factor is your proximity to transportation, particularly if homeowners in the area commute to a nearby city for work.
The Architecture
Go out of your way to mention structural features such as high ceilings, original hardwood floors, built-in bookcases, leaded glass windows, crown, base, raised panel and dentil moldings, skylights, fireplaces, a breezeway between the kitchen and garage, covered or screened-in porches, decorative staircases, sunken living rooms, vaulted ceilings, bedrooms with private baths, kitchens large enough to dine in, and so on.
The Amenities
If you have a major amenity such as a pool, tennis court, outdoor hot tub, water treatments like a fountain or pond, playground, potting shed, oversized garage, or wine cellar, they’re worth alerting buyers to in advance.
Where to Find Buyers
The goal of any seller is to get top dollar for the property. The only way to truly ensure getting top dollar is to expose the property to the entire buyer pool and then see what the market will bear. The following sections describe places where a FSBO seller can reach buyers and expose the property to as many of them as possible.
Online Multiple Listing Services
You can—and should—post your home with as many online MLS’s as possible. Some of them are free and others require a fee. For a larger fee, they may even provide you with real estate forms and contracts to download and use in your process of selling.
What’s important to note is that the MLS’s available to you are not the same as the MLS’s used by licensed Realtors. There are hundreds of Realtor MLS’s across the nation (they cover regions) that only professionals have access to. They are complete listings of just about every single home on the market in that area.
MLS’s available to the public are not complete. Buyers who are browsing public MLS’s may not find your listing, although the more public MLS’s on which you list your home, the greater chance you have of being found. For a resource list of public MLS’s, see Appendix B.
Reach Out to Buyers’ Real Estate Agents
Contacting Realtors may be one of the most powerful ways to reach buyers, but it will involve paying a partial or reduced commission. Buyers browse online for months when they are beginning their search. But when they are ready to actually buy, they choose and begin working with a Realtor. And why wouldn’t they? It’s free. In most states, the seller pays the commission, not the buyer.
There are some exceptions to this rule, as some buyers like to remain free agents, often approaching sellers directly. Still, they are in the vast minority. The most qualified and sought-after buyers are represented by Realtors. They have been screened, they have been preapproved for a loan, they understand value, and they have been educated about the market by a professional. They are, in a word, serious.
Trick of the Trade
You can reach out to local Realtors by calling them directly or circulating a flyer to their offices stating that your home is for sale and that you will pay a commission to an agent who brings you a buyer. Some Realtors will be responsive to you, not necessarily because they have a buyer for your home, but because they hope to ultimately represent you if you cannot sell your home yourself.
Canvass Neighbors
Canvassing neighborhoods works well sometimes in condominium and co-op complexes, where a next-door neighbor might want to purchase your unit and expand the square footage of her unit, or may have a relative or friend who has been interested in moving into the area. Go to the neighbors first. It cannot hurt to expand your message to the entire building or even the neighborhood. You never know!
Hold Public Open Houses
Public open houses have a questionable impact on selling your home, which we discuss in Chapter 9. But because a FSBO is at a disadvantage exposure-wise, and while individual private showings can be inconvenient and tiresome, a public open house is not a bad idea.
To maximize its power, advertise it in advance on regional websites, newspapers, and alongside open houses advertised by professional Realtors. You can also post flyers in your local supermarket, train and bus stations, YMCA, and churches, and advertise in local newsletters.
Trick of the Trade
On the day of the open house, post signs at the nearest major intersection. Attach balloons to the signs to catch the attention of drivers.
Put a Sign on the Property
A sign on a property casts the narrowest net in trying to reach buyers—but it cannot hurt, either. Perhaps you’ll get lucky and that one ready-to-go buyer who happens to drive past your home will call to set up a showing.
The biggest mistake that FSBO sellers make with signs is that the phone number is not large enough or dark enough to see. Use a big fat black marker with permanent ink and make the telephone number large!
Seller Alert
Certain areas have local ordinances regarding the posting of signs on your property such as contractor’s signs, political affiliation signs, and For-Sale-By-Owner signs. The ordinance may have a limit to the number of signs posted at one time as well as a rule about the minimum number of feet from the street where the sign can be staked. Check with your local authorities.
Professional Guidance on Managing a Deal
Real estate transactions are complicated. They involve so many different areas, from finance to law. When you are dealing with lenders and legal documents, it can be overwhelming. If you are neither a lawyer nor a banker and are not represented by a licensed Realtor, you should seek professional guidance. Mistakes made in a transaction run the gamut from delays of time that cause closing date problems to miscalculations that cost you money.
Because you are navigating this process alone, we strongly recommend that you consider hiring an attorney who specializes in real estate. There are many reasons:
◆ They represent your interests exclusively.
◆ They have information regarding new rules and laws pertaining to the transfer of ownership of real estate.
◆ There are many types of law that may come into play when you sell your home. Depending on your personal situation, they may include property law, estate law, matrimonial law, tax law, environmental law, lending laws, and civil law. If your attorney is not an expert in all of these areas, he can identify the issue and get you the proper advice and counsel.
◆ They are usually familiar with the area and the local ordinances, safety codes, tax codes, contractors, and departments of government.
An attorney will protect you and possibly even save you enough money to offset her fees. Some attorneys charge a flat fee, others an hourly fee, and still others charge a percentage of the sale price. Ask about the charges up front so that there are no surprises.
The Least You Need to Know
◆ A For-Sale-By-Owner seller assumes all responsibilities himself, including pricing, marketing and advertising, staging, showings, open houses, negotiating, execution of contracts and other documentation, final walk-through, and closing.
◆ A FSBO does not necessarily save you money by not paying a commission.
◆ There are three types of comparables to compare your home to: active or currently on the market, under contract or not yet closed, and sold or already closed transactions. Evaluate the sale prices of all three types—never just one.
◆ Using a private appraisal, the tax assessed value, or a website to price your home is not the best approach.
◆ When showing your own home to a stranger, security is the most important consideration. Do not show your home to a doorknocker unless she is with a Realtor.
◆ The two best strategies for a FSBO to reach buyers is to list the home with several online Multiple Listing Services and to reach out and cooperate with buyers’ Realtors in the area—even if it means paying a small commission.
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