So, it’s a seller’s market and you know there are many buyers out there lining up to find their new home. In the back of your mind, you might ask yourself, “why do I need to pay a real estate agent all those commissions” leading to, “why don’t I just sell it myself and save all the money I’d normally pay to a listing agent?” If those thoughts sound familiar and you are thinking of selling your home by owner, you may want to hit the pause button and consider the realities of selling by owner and most importantly whether you will actually save money and come out financially ahead after the dust settles. The fact of the matter is that selling by owner is more time consuming, more complex, and more costly than one might believe or expect.
When selling by owner, you’ll be navigating on your own without a real estate professional. Much like listing a home the traditional way, you’ll need to do everything from walking the home from the potential buyer’s perspective to determine what needs updating or decluttering to evaluating the actual potential market value of your home to get your pricing strategy right. Without a real estate professional, who would be knowledgeable on potential “watch outs” or “turn-offs”, this can be a challenge for a seller as it truly requires an objective eye. In respect to pricing strategy, you’ll need to gather information to make reasonable comparisons that consider the differences between your home and other homes that have recently sold in your area in order to determine your listing price.
All of this can be a challenge as homeowners are more emotionally tied to the home which makes it tough to put themselves in the buyer’s shoes while also looking at market comparisons with an objective, informed viewpoint like an agent would provide. There are other pitfalls and watchouts along the way you’ll want to consider before selling on your own. Read on and we’ll give insight into these so you can make the most informed decision.
Preparing Your Home for Sale
Covering the Basics: As we mentioned before, you should walk through and inspect your entire house from a buyer’s perspective. Ask yourself: if YOU were buying your home, what would you want to see? A great step is to ask a friend or two to provide an unbiased opinion. Once you have an idea of what might be on the list of “to do’s,” you’ll need to develop a plan to get the work completed. Some of these may include light switches, outlets, or fixtures that don’t work properly which will likely require an electrician. Perhaps there’s a leaky drain or faucet or inoperable disposal which may require a plumber. These are items that are likely to come up when the potential buyer hires a third party to inspect the home prior to purchase.
It’s always a good idea to take care of the obvious issues before the inspector arrives, if you don’t this allows more negotiation power to the buyer. We’ll talk more about the inspection phase later. Also, everything looks better with a fresh coat of paint. If you can, consider repainting the interior of your home (simple, neutral paint colors are always going to be your best bet).
Don’t forget about curb appeal! First impressions go a long way as a potential buyer drives up and walks up to the home. Make sure your lawn is mowed and even consider doing some minor landscaping to spruce the place up. Simply adding new mulch and trimming outdoor plants and shrubs can go a long way. Look at the front entryway – perhaps the entry door needs some paint or stain or simply some lubricant on the hinges to avoid squeaks. Sweep any sticks, leaves, or dust off your stoop. You should also consider cleaning the outside and inside of the windows, particularly the entry doors and storm doors where fingerprints are often quite evident.
Beyond the Basics: There are many homes that have more evident eyesores which are hurting the homes potential value and appeal to potential buyers. This is particularly true for homes under $400,000 that are often considered starter homes for young couple and families. These younger buyers represent a large portion of house demand in this market as they are often seeking to find their first home, especially with rates being historically low. Often, they are stretching their dollars and budget to purchase their first home leaving little cash for upgrades after the purchase.
What that means as a seller is that if your home has dated appliances or counters in the kitchen, dirty or worn carpet or flooring, original or dated fixtures in the bathroom, you may want to consider making an investment to upgrade these obvious buyer “red flags” before you put the home on the market. To entice buyers, you can choose to go beyond just having the home clean with basic repairs taken care of. You can update the look by updating strategically.
While a full remodel can cost tens of thousands of dollars, new appliances and countertops in the kitchen could be done for as little as $5,000. A bathroom could get a minor remodel with a basic yet new toilet, vanity, sink, mirror, and lighting fixtures for as little as $2,500. The shag carpet in the living room can be replaced very inexpensively with a visit to your local home center which will offer a variety of styles as well as installation options. Overall, while it takes some cash, time and the selection of the right finishes and styles, these more minor upgrades can really increase the appeal of the home and attract buyers rather than becoming a roadblock.
Time to Declutter, Clean and Take Some Great Pictures
Just as though you were listing your home with a real estate agent, once the basic repairs and updates are done, it’s time to clean and declutter. This requires a lot of work, but the good news is that cleaning can be hired out if you desire. As for de-cluttering, this process is a great opportunity to clear out items you no longer need or value. Consider donating items to a charitable organization like Salvation Army, Goodwill or Vietnam Veterans of America (VVA) to name a few. Try recycling items to minimize the impact to the environment and reduce the size of the trash dumpster you may need.
Once the home is cleaned and decluttered, it may be a good idea to have that friend walk through the home again to get an outside perspective before photos are taken. Also, we’ve all heard that it is recommended that any personal family pictures be removed from view as this helps potential buyers to envision themselves more easily in the home.
You are now ready for prime time! Pictures are critical to attracting buyers so invest in hiring a local real estate photography service to take them. As they say, “a picture tells a thousand words” and when selling a home, it may be 10,000 words! Investing in photos by using professional real estate photography with proper angles, lighting and retouching will enhance the appeal of the home as potential buyers are scouring listings online. As great as your new smartphone camera may be for everyday pictures, it just won’t compare to professional images.
In addition, you may also consider including floorplans, if available, showing the homes layout and/or creating virtual tour videos that will promote higher engagement with your listing as many professional listings provide these.
Time to List and Show
Effective marketing of your home is what will initially attract buyers. This is really where a home seller going at it on their own without a real estate agent can struggle. You’ve done all the work to get to this point but if nobody knows about your home you are looking to sell, you can’t expect to attract potential buyers to come see it. All your marketing efforts should be geared towards getting as much traffic to your home as you can because this is what drives up the price.
While you can post your home on social media to leverage your personal network as well as other tactics, ground zero of home listings is the Multiple Listing Service aka MLS. Listing on the MLS gives your home maximum visibility, however, only licensed Realtors® and other realty professionals that are members of your local MLS Multiple Listing Service can list a home here. This means you’ll need to find a local real estate professional who will do what is often referred to as a “limited listing service” for a fee. Basically, they are licensed Realtors® in your local MLS community who can list your home on the MLS site, but they are not providing all the other advice and services a full-service real estate agent would provide if they were listing your home. You provide the pictures, the specifics on the home and the listing price and they will create the online listing for others to see for a fee which is usually $300-$500.
Wait, I’m Not Actually Saving the 6% Commission?
So, you are so close to having your listing go live and when you are providing the information for the listing to the limited listing service, you get this question: “are open to “buyer agents” and “will you pay buyer agent commissions?” This one simple question is what causes a home seller to reconsider using a listing agent. If you answer no, this means any agent with a buyer looking for a home will not collect any commission for bringing the buyer to your home, thus it is highly unlikely a buyer agent would tell their buying clients about your home. If you answer “yes,” buyer agents will be happy to consider your home to show their clients as they will be compensated. In short, if you do not agree to paying buyer commissions, you will greatly reduce your traffic of buyers.
Let’s break this down. Many homeowners believe they will save about 6% in real estate commissions when in most instances this isn’t the case. Many home sellers don’t understand that the listing agent representing the seller gets a little more than half of the 6% commission while the buyer’s agent representing the buying party typically gets anywhere from 2.3% to 2.7% depending on where they are located. What that means for the for sale by owner home seller is that while their modest home might contract for a selling price of $400,000, instead of saving the typical 6% or $24,000 in agent commissions, the seller will pay the buyer agent $10,000 (2.5% of selling price). This results in just $14,000 in savings, not $24,000. At this point, many of those considering selling by owner turn back and find a listing agent.
Pitfalls and Complexities of Selling by Owner
Once the home is listed on MLS, if you are selling by owner, you will be expected to coordinate showings to potential buyers. Typically, this involves having the house clean and ready to show and during the showings the homeowner leaves the property for the buyers to walk through at the pre-designated time. Assuming an offer follows the showings, selling by owner means you will be directly negotiating with the buying party or their agent.
If you reach a negotiated price, a contract will need to be drawn up, reviewed, and signed with all the proper details. This can be fraught with many pitfalls and complexities for a seller without the help of a real estate professional whether that be offer contingencies or selling terms and timing. Buyers even in a seller’s market will likely get a third-party inspector as part of the contingency terms and use any issues or problems found by them to further negotiate. In fact, if an inspector identifies an issue with the house considered to be a “Material Fact,” and the contract falls through, the issue is then required to be reported by the seller in the disclosure statement for other potential buyers to see.
All these dynamics can be very confusing and can result in unnecessary financial or other risk for those homeowners considering selling by owner without the help of a real estate professional.
We’ve mentioned that real estate agents are knowledgeable about the market and will lend their expertise and service throughout the process to get the maximum selling price for your home. This includes providing pre-listing advice, marketing the home, coordinating showings and open houses, and most importantly negotiating contracts. While they do charge commission for their services, they can be a great option for those who are willing to do all the prep work to get the house ready for listing and willing to deal with open houses and showings.
You Have Another Option – Homestead Road
At Homestead Road, we buy homes in any condition, as-is. You’ll save all the time and money associated with cleaning, repairs, and updates. In addition, there are no showings or open houses. We use a streamlined and transparent process where you’ll be working personally with one of our home sales advisors who live in and know your local community. Best of all, we put your needs first and work on your timeline.
