Have you noticed when you are on an airplane, the stranger sitting next to you will often reveal secrets he probably wouldn't tell his closest friends?
For example, a few weeks ago I was on four-hour flight from Chicago to San Francisco. I would name the airline, but the minimal service doesn't deserve praise. After the usual "what business are you in" pleasantries with my seatmate, when the young man sitting next to me learned I write about real estate, he had to tell me how he and his wife sold their house "for sale by owner" without a real estate agent.
He said his wife read several "how to sell your home without a broker" books so they felt reasonably confident. They even paid a local realty broker $985 to list their home in the local MLS (multiple listing service) so they would get exposure to buyer's agents.
My new friend proudly told me as part of the MLS service, their listing was automatically posted on the Internet at www.realtor.com. Because more than 50 percent of today's home buyers begin their quest on the Internet, he reported the Internet produced several interested buyers who phoned.
In addition, my seatmate and his wife paid to list their home at www.forsalebyowner.com, a Web site for do-it-yourself home sellers. Apparently, that didn't produce any results.
Every weekend for five weeks, my new friend continued, he ran expensive newspaper classified ads in the city newspaper and several local newspapers to advertise their Saturday and Sunday open houses.
One purchase offer eventually materialized. It was made by a buyer represented by a "buyer's agent" who insisted upon receiving a 3 percent sales commission (half of a typical home sales commission).
Then he told me after the sales contract was signed with a 3 percent commission, the buyer began a process of further price negotiation downward as the buyer demanded repair credits for alleged defects discovered by the buyer's professional home inspector.
Finally, I asked, "Would you sell without a listing agent again and how much sales commission did you save?" "Never again" was his immediate response. "I figure we saved less than $10,000 by selling without an agent," he said. "But it was a nightmare waiting to learn if the sale would close or if the buyer would keep negotiating more repair credits," my new friend added.
Then my seatmate revealed the key reason the home sale finally closed. "If it wasn't for the sharp buyer's agent who badly wanted his 3 percent sales commission, we would still be trying to sell our home," he revealed.
IF YOU WANT TO SELL YOUR HOME, DON'T MISS THE FALL SALES MARKET. Whether you want to sell your house or condo alone, without a listing agent, or you realize selling your major investment is not a do-it-yourself project and you need a professional agent, the fall season is a great time to sell a home. This is the second best time of year to sell a home (spring is the best time when the largest number of potential buyers are in the market).
But mortgage interest rates are still very affordable for home buyers. They realize interest rates might go up in the next few months and today is still a great time to buy a home. According to realty sales statistics, the home sales market is still almost as strong as it was a few months ago.
HOW TO DETERMINE IF YOU NEED A PROFESSIONAL HOME LISTING AGENT. I wish I had met my airline friend before he and his wife put their house on the market for sale. Although he thinks he saved about $10,000 sales commission, I'll bet he sold his home below market value because he didn't have a listing agent pricing the home correctly and looking out for his best interests.
Whether you are thinking of selling your home alone, or you realize you need professional help to market your home for top dollar, here are the questions to ask yourself:
1—HOW CAN I CORRECTLY SET THE ASKING PRICE FOR MY HOME? The easiest way to determine your home's market value is to invite at least three successful realty agents who sell homes in your vicinity to give you their listing presentations.
Even if you are thinking of selling "for sale by owner," the agents you interview won't mind. The reason is they know most "for sale by owner" sellers fail and, usually after 30 to 60 days, list with a professional agent, which is likely one of the agents interviewed.
Presuming your home is in tip-top condition to show to prospective listing agents, after each agent inspects your home, he or she will prepare a CMA (comparative market analysis). This form shows recent nearby sales (not asking) prices of homes like yours, the asking prices of current competitive listings, and even the asking prices of comparable neighborhood homes, which didn't sell.
Each agent you interview will then give you their opinion of the correct asking price and the probable actual sales price for your home. If you decide to list your home with one of the interviewed agents, before doing so be sure to phone their seller references to ask "Were you in any way unhappy with your listing agent and would you list a home with the same agent again?"
2—HOW CAN I EFFECTIVELY MARKET MY HOME ALONE? The next question to ask is how can you market your home without a professional agent. Of course, you will include placing newspaper classified ads, posting a "for sale by owner" lawn sign, and holding weekend open houses.
You might also want to pay to post your listing on one of the Internet "do it yourself" Web sites. Perhaps, like my airline seatmate, you might want to pay a local real estate broker to post your listing on the local MLS, which also gains access to the ultra-important www.realtor.com Web site where most home buyers today start their quest. Home sellers should bear in mind the MLS is the most effective sales tool.
3—HOW CAN I OBTAIN A LEGALLY-BINDING SALES CONTRACT AND COMPLY WITH HOME SALE THE DEFECT DISCLOSURE LAWS? If you are successful finding an interested buyer for your home, the next step is to obtain a legally-binding sales contract. If you are lucky, you know a real estate attorney who is on-call seven days a week and he or she will prepare a binding sales contract for you and the seller to sign before the seller changes their mind.
But that is highly unlikely. You might buy a printed sales form at a local stationery store. However, it probably doesn't contain all the important clauses in the forms used by professional agents.
In addition, are you up-to-date on the state-required disclosure laws, plus the other required disclosures such as for lead-based paint? Failure to provide proper defect disclosures can result in after-sale lawsuits.
4—CAN I HELP THE BUYER OBTAIN A MORTGAGE? Unless your buyer is Warren Buffett or Bill Gates, the buyer will probably need a mortgage. Can you help the buyer obtain a mortgage?
Will you be able to explain FHA, VA, PMI, and conventional adjustable or fixed-rate mortgages? Unless your buyer is already pre-approved in writing by an actual lender (not just pre-qualified by a mortgage broker), obtaining financing is a major home sale hurdle to overcome.
5—WHAT HOME SALE CONTRACT CONTINGENCY CLAUSES ARE NORMAL? Smart home buyers will insist on reasonable contingency clauses in the home sales contract, such as for a professional home inspection and mortgage financing.
If the buyer needs to sell his current home, he might insist on a contingency clause for the sale of his old residence. Are you willing to take your home off the market while the buyer tries to sell his home?
6—HOW WILL THE HOME SALE CLOSING DETAILS BE HANDLED? The final and most important home sale step is to get the sale successfully closed. This step is usually handled, depending on local custom, by an attorney, escrow, or title firm. The buyer's earnest money good faith deposit should be held by the same entity for the mutual protection of buyer and seller.
Who pays for the closing settlement costs? Which party customarily pays for the lender's and buyer's title insurance policies? Who pays the transfer taxes and recording fees? These are typical home sales closing expenses, which sellers should anticipate and provide for in the sales contract.
7—WILL THE BUYER EXPECT A PRICE REDUCTION IF NO REALTY SALES COMMISSION IS INVOLVED? Savvy home buyers understand when buying direct from a "for sale by owner" that the seller is saving the sales commission, typically 6 percent of the sales price. Buyers aren't dumb. They expect to share in that commission saving in the form of either a price reduction or seller credits at the closing.
Will you agree to discount the sales price if you don't have to pay a sales commission? This is an issue to anticipate in a do-it-yourself home sale.
CONCLUSION. Selling a home without a professional real estate agent is not easy. If it were, more than 80 percent of home sellers wouldn't hire professional agents to guide them through the maze. That's why, after 30 to 60 days of failure, most "for sale by owner" home sellers list their homes with a professional agents, usually one of the agents they interviewed when contemplating the sale of their most valuable asset.
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