9 Things to Know Before Selling a Home For Sale by Owner
- How to Sell a House By Owner (FSBO)
- What are the Pros and Cons of Selling a Home For Sale By Owner
- What are the Cons of Selling a Home For Sale By Owner?
- How do I Sell my Home For Sale By Owner?
- What Paperwork do I Need to Sell my House For Sale By Owner?
- What Real Estate Contract do I Use When Selling For Sale By Owner?
How to Sell a House By Owner (FSBO)
Before selling your home for sale by owner, it's essential to understand the pros and cons, what's involved, and what to expect throughout the process. The question, should I sell my home for sale by owner or without a Realtor® is likely one asked by every home seller with the thought of trying to save money.
Do you save money, though, when you sell by owner? Let's find out:
We have over three hundred thousand people visiting our website each month looking at homes for sale in Raleigh and almost all of them want to work with a top local Realtor®. We would imagine it's the same in most real estate markets around the country as we have found the same to be true of homes for sale in Charlotte as well. Buyers want to work with the best local Realtors® to help them when buying a home because it is such a large financial purchase with so many different components involved. It's important to reverse engineer the sales process as a seller as you will want to understand who your target buyer is and that is likely someone working with a Realtor. This is buyers. Let's take a look at the seller's:
To understand the pros and cons of selling by owner, let's start with a quick story.
The founder of forsalebyowner.com used a Real Estate Agent to sell his home after trying to sell it himself and failing to do so - imagine that. When trying to sell it himself, he had it listed at a price far less than what a Realtor eventually sold it for and he ended up walking away with more money than he would have had he sold it himself. So he made more money when he sold with a Realtor and paid a 6% commission fee. Great Realtors are worth every penny.
For many sellers, selling a home for sale by owner (FSBO) is associated with the thought of saving money by not paying a commission. And while that may be enticing, there are many other costs and legal repercussions that are associated with selling a home that will be the full responsibility of the seller if a real estate agent is not involved. Not to mention the data shows it's far more likely a Realtor® will make you more money than you would by selling your home yourself.
We put this article together to help home sellers, and Realtors® understand the pros and cons of selling a home by owner and give them a helpful guide on where to get started when selling their home.
There are pros and cons to going the for-sale-by-owner route, but it is strongly advised to work with a trusted real estate agent throughout the process. After all, selling a home is a costly and important transaction, and it is imperative that the process is handled in a diligent, legal, and conscientious manner from start to finish.
One last story, and then we will dive in:
Three agents told one of my clients to list his home for $395,000 - Raleigh Realty advised we list it for $400,000. We listed for $400,000 and on day 1 we had an offer for $405,000 (we asked the client to remain patient as it was day one of the showings and we expect that number to be higher by the end of the weekend) ... forty-eight hours later we had an offer for $430,000. That is a $35,000 swing for my client, who asked if he could give us a bonus. He paid us our commission on the $435,000 sales price and walked away with around $422,000. That is $40,000 more in his pocket than he had listed the home.
So you still want to sell by owner? No worries, we get it. Let's continue with the pros and cons of selling by the owner, so you understand the total picture.
What are the Pros and Cons of Selling a Home For Sale By Owner
What are the Pros of Selling a Home for Sale by Owner?
No seller's commission (but don't forget about the buyer's commission!) - So in theory, you are saving around 3% (but are you losing as well?)
Most sellers who choose to go the for-sale-by-owner route are, of course, trying to save on commission. However, if you do decide to sell your home on your own, it is strongly advised that you pay a commission to a buyer’s agent. If you choose not to do so, you are significantly limiting your chances of finding a buyer. Why? Because agents will not know about your home or bring their buyers to a home that is not paying a commission (because, if the buyer isn't paying their commission, they won't get paid). Most sellers are willing to pay the buyer's agent's commission, so if you are unwilling to pay this, the agent will bring their buyers to other homes that cover commission costs. So, unless you are one of the rare buyers who manages to find a fully qualified buyer who is also willing to pay their agent's commission or isn't working with an agent at all, paying a buyer's commission will be challenging to avoid.
You manage the marketing, showings, open houses, and all other aspects of the sale.
To those who have bought and sold several houses in the past or have a real estate background, this may be another enticing aspect of going for sale by owner route. If you are selling your home for the first time and don't have a strong grasp of the real estate market, it is strongly advised that you save time, stress, and headache and hire a real estate agent. Although it may be enjoyable to manage all marketing and showings in the beginning, the longer your home sits on the market, the more expensive marketing/advertising costs will be, and the more time you will spend trying to secure a buyer.
What are the Cons of Selling a Home For Sale By Owner?
Sellers have limited networks.
Even if you are highly connected to your community, most real estate agents have extensive national or international networks through their brokerages. They typically attend networking and community events regularly and are highly knowledgeable about what buyers are looking for and how to find them. Having access to a network of buyers that large is something very few homeowners have.
Selling is a full-time job.
Selling a home is a lot of work. If you are working a full-time (or even part-time) job, have a family, or have any outside obligations, selling a home will consume a large bulk of your time. From listing the home, marketing it to buyers, managing showings and open houses, and negotiating a sale, there's a lot to stay on top of (not to mention the extensive legal paperwork). Couple that with trying to find a new home to buy (if that is your next step), packing your belongings, and managing a career – it's going to get very overwhelming, very fast. There are things Realtors know to look for that some sellers may not, such as does the buyer accompany their offer with a prequalification or preapproval letter?
Bargain shoppers target FSBOs. Similar to what Opendoor does.
Buyers who are looking for a deal typically go to the FSBOs first. Even if you think you did your research and priced your home appropriately, there is a strong chance that it is below the market. Because this happens frequently in the FSBO world, bargain shoppers may gravitate to your listing first. This can lead to a lot of wasted time on your part – answering their questions and attempting to talk them into coming up with an extremely low offer.
Pricing a home is challenging without the right tools.
Real estate agents typically have various research tools at their disposal that help them determine a list price that isn't too low – nor too high. Pricing your home too low can lead to losing significant funds – far more than you would have lost had you chosen to go with a realtor – and pricing your home too high may lead your home to sit on the market for an extended time, leading to eventual disinterest from buyers.
How do I Sell my Home For Sale By Owner?
Step 1:Pricing your home
The first – and most important – step when selling your home involves determining the correct list price. One of the biggest and most costly mistakes for sale by owners make is to overprice their homes. This step is critical because homes that are priced too high may sit on the market for months on end with no buyers and homes that are priced too low may lead you to lose money in the long run. Although there are real estate valuation sites available that can help provide an estimate of what your home may be worth, the only way to get an accurate list price is to spend extensive time doing a comparative analysis of other homes that have sold in your area. This process, which real estate agents call "running comps," involves finding homes that have closed in your area, looking at their size and sale price, and using that research to determine what your home should be listed for. If 4-bedroom homes in your area are selling for $500,000, you will probably want to list your 4-bedroom home in the $500,000 range as well.
However, finding information about homes that have closed can be more challenging than it sounds. Although there are tools online, these are typically estimates and do not always provide accurate numbers. Real estate agents have access to various comparative tools and have been trained on how to do this specialized research. You can also hire a licensed appraiser to provide a more accurate assessment of your home's worth, but this typically ranges in price from $300 to $500 (or more). Here's what you should know before the appraisal.
Step 2: Stage (and repair) your home for sale
Before selling your home, it is imperative to spend extensive time organizing and decluttering your home. Beyond that, you will also want to remove all personal items from your homes, such as family photos, children's toys, toiletries, and other unique products. Staging a home to appeal to a wide range of buyers is challenging, especially when it is your home that you have a strong attachment to. Real estate agents are in hundreds – if not thousands – of homes yearly and are trained to know how to stage a home to sell. Beyond that, they will also be able to provide an honest, unbiased opinion on what repairs should and shouldn't be completed, which could save you considerable money in the long run. It is not easy to get top dollar when selling a home in bad condition.
Step 3: Marketing your home, listing it on the MLS, and hosting open houses
Marketing your home will require some creativity, as sellers typically do not have access to the marketing materials and resources that real estate agents do. Real estate agents also usually have a marketing budget that they can use to advertise their homes to a wide range of buyers in various locations. When doing this on your own, market your home heavily on social media, word of mouth, street signs, flyers, and by holding open houses. If you are struggling to find available house attendees, it may be necessary to host an event to entice prospective buyers. This may be a themed open house that involves food, entertainment, etc. Events and marketing can be extremely costly, so you will want to do careful research before spending too much on these advertising ideas.
You will also pay for and manage photography, videos, and floorplans. Your home's photos are a critical component of the listing process – don't skimp on this! Failing to have your home professionally photographed could lead many buyers to overlook your property.
To get your home in front of as many buyers as possible, it is advised to list your property on the MLS (multiple listing service). Only licensed agents can list a home on the MLS, but many will do so for a flat fee in the state of North Carolina. In doing so, the home is still listed as ‘for sale by owner in the MLS, meaning you will not need to pay a commission to the agent who assists you in putting it in the MLS – just the flat fee. One of the most important things you can do as a seller is to understand who your buyer is, and in many cases, it will be a millennial homebuyer.
Step 4: Negotiate the sale
After receiving an offer from a buyer, you will be responsible for all negotiations. If the offer is too low, you will negotiate with the buyer on an acceptable price and will negotiate all contingencies. Contingencies are certain conditions buyers typically request the sellers meet for sale to go through. For example, buyers may make an offer on your home that is contingent on your house passing a home inspection. Contingent or pending in real estate can mean a number of different things. You can impose contingencies on the buyer as well. For example, you should insist on obtaining a document stating the buyers have been approved for a mortgage to be sure they have the funds to buy your home.
After all, negotiations are complete, and you have accepted the buyer's offer, you will need to hire an attorney to conduct the closing. This varies state by state – some states conduct the closing with a title agent whereas others, such as the state of North Carolina, require that a real estate attorney closes on the home. Real estate agents typically have close relationships with real estate attorneys and can put you in contact with someone they trust. However, if you are not working with a real estate agent, you will be responsible for finding an attorney on your own.
Leading up to the closing, check in with your buyer to ensure there aren’t any problems with their mortgage approval. If the buyers need to meet certain conditions and submit specific documentation to be approved for the loan, check in with them consistently to ensure there aren’t any problems at the closing table.
What Paperwork do I Need to Sell my House For Sale By Owner?
This will vary state to state, but in North Carolina, sellers will typically need the following paperwork when selling their home. Although a realtor will have these documents readily available and will prepare each of these for you if you are not working with a realtor, a real estate attorney may be able to assist in providing these items:
North Carolina Sales Contract
North Carolina Residential Property Disclosure Form
North Carolina Mineral and Oil Rights Form
North Carolina Occupancy Agreement
Lead-Based Paint Disclosure is required for homes built prior to 1978
What Real Estate Contract do I Use When Selling For Sale By Owner?
The real estate contract is typically referred to as the ‘Offer to Purchase and Contract’ or the 2-T form, though you have to be a licensed Realtor® to legally use this form. The contract must be signed by both the buyer and seller to be fully executed. A real estate attorney can draft a real estate contract for you if you are selling your house for sale without a Realtor in the state of North Carolina an expense you would not incur selling with a Realtor. Alternatively, if your buyer is working with a real estate agent, that agent can typically draw up the contract. A contract will usually include – among other details – the price for the home, down payment, items being sold with the home, a legal description of the property, closing date, deadline, and contingency clauses (when contingencies are applicable). Be careful what you write in your real estate listing description as there are many fair housing laws you'll need to watch out for!
A transaction can be negatively impacted if a real estate contract does not include all legal stipulations for both buyer and seller. For that reason, and many others included in this article, it is strongly advised to protect yourself from legal repercussions and hire a real estate agent. Real estate agents review hundreds of contracts per year and are well-equipped to ensure you are protected from significant legal ramifications.
How Do I Sell my Home by Owner for Cash?
If a buyer offers to buy your home “all-cash,” that means they are offering to buy your house outright without a mortgage. It is illegal in the United States to purchase a home using physical cash, so the funds are transferred electronically or with a cashier’s check to close on the home.
Here is how you would go about selling your home for sale by owner for cash:
Step 1: Sign contract
The first step is going under contract, which involves both you and the buyer signing a Purchase and Sale Agreement.
Step 2: Verify Buyer’s funds
It is important to ensure that the buyer actually has the funds available in their bank account. To do so, you can ask for an earnest money deposit, which is typically 1 – 2 percent of the sales price. From there, you can request bank or investment statements. The Realtor typically manages all of this on your behalf, but going the for sale by owner route means you will be responsible for verifying funds.
Step 3: Pass home inspection
Understandably, most buyers want to ensure your home doesn’t have any major internal problems. If the home inspection comes back with significant repairs, the buyer may threaten to walk away from the deal if you don’t pay to fix them. Again, a realtor may be able to negotiate out of this and either get the buyer to pay for the repairs or – at the very least – split the repair costs instead of making them solely your responsibility. However, when selling for sale by owner, these negotiations will be entirely on you – and you may lose an all-cash buyer if you are unable to pay for the repairs.
Step 4: Review and sign closing documentation
You will have to sign substantial paperwork – especially when it’s an all-cash deal. Some of the documents you may be required to sign include: Final closing instructions, HUD-1 settlement statement, certificate of title, a title deed, loan payoff statement, mechanics liens, bill of sale, statement of closing costs, a statement of information, and more. Although it’s a lot of paperwork, read everything before signing! You are not being represented by a realtor who can advise you as to what you are signing, so it is imperative that you know exactly what you are putting your signature on.
How to Negotiate a For Sale By Owner Home
If you are paying the buyer’s agent’s fee, you will negotiate with the buyer’s agent – not the buyer directly. If a buyer’s agent is not involved, you will negotiate with the buyer. This can always be difficult since there is no barrier to the negotiations. If you are negotiating a for sale by owner home you have to understand that emotions are going to be tied to the negotiations.
If the buyer submits an offer that is horrifyingly low, always counter. Even if you feel insulted, inform them on the price you want and see if they can increase their offer. If the buyer won’t budge, you can sweeten the deal by paying part of their closing costs.
Do different states have different laws when selling by owner?
Yes. Some states – such as North Carolina – require that an attorney be present during the closing, whereas other states allow a title agent to conduct the closing.
What are the best websites to sell my home by owner?
Common Questions For Sale by Owner Questions
Are there closing costs when you sell a home for sale by owner?
Yes, there are closing costs when you sell a house for sale by owner. Closing costs for buyers typically range between 2 – 4 percent of the home’s purchase price and are often less for sellers. In some situations, buyers and sellers share the cost of closing costs. In other situations, the buyer may be responsible for all closing costs or the seller may be fully responsible. This varies from transaction to transaction. As a seller, whether you list with an agent or on your own, you will typically be responsible for the following closing costs (this list does not include buyer’s closing costs): State, county, or municipal transfer taxes; attorney fees; miscellaneous fees (and more). You'll want to have a full understanding of the North Carolina Home Buying Process before diving into selling your home for sale by owner.
Can I Sell my House without a Realtor?
Yes, you can, but it can quickly turn into a full-time job. For instance: Do you know how to measure the square footage of your home? After you secure your buyer and go under contract do you know what happens next?
Selling a home isn’t easy and comes with major legal ramifications. If any step in the process is completed incorrectly, you could be at fault in a serious way. Beyond that, although you may not be paying a commission to a seller’s agent, there are many other fees you will be responsible for, including all marketing/advertising, the buyer’s commission (if you choose to go this route, which is strongly advised), attorney fees, MLS listing fees, and various others. Not to mention the hours of time you will spend handling the sale on your own – time that will take you away from your career, family, and the moving process itself.
Does Zillow charge to list for sale by owner?
No, Zillow does not charge homeowners to list their house for sale by owner on their platform. Owners can post photos, videos, and information about their home for free on Zillow.
Selling By Owner - Is it for you?
Not many people will sell their home by owner, in fact less try to sell by owner today than decades ago Once you experience what life is like as a Realtor you will understand more about how difficult the job is. There are so many moving parts and things you have to watch out for that you won't see coming if it's your first time selling a home.