How to Sell a Home “For Sale by Owner” (FSBO)
Selling Your Own Home as a FSBO
If you are one of the rare few who have the time and energy required to sell your own home, you will certainly want to do your homework before you begin trying to sell by owner. Figuring out how to sell a home for sale by owner is not an easy task. In fact national statistics show that over 80% of all homeowners end up listing with a real estate agent after attempting to sell as a FSBO. In other words most for sale by owners fail in their quest to sell without the assistance of a Realtor.
It is really not all that surprising given the fact a lot of things that go into selling a home – hence why real estate agents often work long hours and weekends. Even selling a single home can involve numerous hours of preparation and a lot of legwork to manage successfully.
This is an important consideration when planning on how to sell for sale by owner. You should be well prepared to invest a significant time and effort on your sale.
The biggest motivation for most homeowners trying to sell by owner is money. There are some sellers who unfortunately do not have the finances to pay a real estate commission which can amount to thousands of dollars. The commission in most places around the country can range anywhere from 4-7% of the homes sale price. Quite a bit of money if you are strapped for cash. For these folks going after that 20 percent who are successful selling their homes as a “for sale by owner” is worth it. There are also some FSBO’s that have had a bad experience with an agent and decide to see if they can do it themselves.
Given the fact that so many for sale by owner’s end up failing in their attempt to sell, I have decided to offer some tips on how you can go about selling a home for sale by owner. These are the things you really need to think about when going FSBO!
Prepare the Home For Sale
You want buyers to love your home. While the things you can do are not a guarantee that this will happen, you can certainly help the situation along. Take a hard look at your home for any major issues that you have the time and money to fix. These things need to be taken care of before you put the home on the market. Sometimes it is the little things you do before putting your home up for sale that can make all the difference in the world.
These issues can include things like pet damage, carpet stains, odors and damage to the yard. This is also the time to tackle any affordable improvements that may add value, including kitchen and bathroom remodels, new carpeting, replaced appliances, landscaping and anything else you can think of. Once the repairs and remodeling is finished, clean the house from top to bottom and keep it that way as much as possible while the home is up for sale.
There is no question that a large percentage of buyers today want a turnkey property. With the hustle and bustle that we all deal with in our lives the last thing many buyers want to think about is coming into a home and making a bunch of home improvements. The more you can minimize the buyers list of things to do the better off you will be.
Get Help Pricing Your Home
Not pricing a home properly is by far the number one reason why for sale by owners fail in their quest to sell on their own. In fact overpricing any home is the top reason it doesn’t sell. Often times a FSBO will not take the time to even consult with a Realtor. This is a mistake because most real estate agents who have been in the business for a while have the expertise to nail down accurate home values.
On many occasions a “for sale by owner” will use Zillow and their Zestimate pricing tool thinking this is a great way to help price their home.
Most homeowners don’t realize just how far off the mark the estimates of value from an online valuation service can be when determining true market value. If they have not met with a local real estate agent it is pretty easy to understand why a FSBO would make an assumption that their value could be close to the estimate. This is further exacerbated when the online value is close to what the seller wants for their home. It is validation that what I want for my home must be right.
Here is the kicker that most for sale by owners do not realize –I have seen online estimates of home value be off by over $100,000 either too high or too low. Yes that is not a misprint $100,000! While occasionally these services get in the ball park on value, the vast majority of time they do not. What you need to understand as a “for sale by owner” is that if you are accepting these estimates as the true value and a buyer is also, you could short changing yourself. My personal home, the Zestimate was $217,000, I listed it and sold it for $250,000 and it appraised higher still.
Another obstacle in pricing a home properly is personal attachment. It is far too easy for owners to see what they love about their house – including the memories and events that occurred there – and price the property higher than they should.
This happens more often when the owner is the one doing the selling because there is no second voice to speak reason. You need to examine both the comparable sales – what other similar houses in your area are selling for, as well as homes under contract.
Homes that you will be competing against is also important but not nearly as much as what’s sold. You never want to price your home on what the neighbor thinks their home is worth. A sold home is concrete data that tells us what a buyer is willing to pay for a similar home.
If you are not comfortable speaking to a real estate agent then have an appraiser come in and look over the home. Appraisers are just as qualified to give you an accurate picture of your home’s value.
Use this information to price your home according to what it is really worth and perhaps more importantly, what the market will bear. If similar homes in your area are selling for $200,000, pricing your home at $250,000 is likely going to prevent most buyers from even considering it.
Valuing a home one of the more difficult jobs of a real estate agent. They have to tell it like it is to homeowners in love with their properties, because it’s the only way the house will move.
Get a Home Inspection
While not all homeowners get what is referred to as a pre-sale home inspection, when you are selling for sale by owner it makes sense to do so. Keep in mind that one of the many roles of a real estate agent is to represent your best interests when selling a home. This includes negotiating what turns up at the home inspection. Many sales are either salvaged or lost due to the expertise in negotiating with the buyer and their agent after the home inspection. As a “for sale by owner” you are not afforded this luxury!
By having a professional come in and inspect your home prior to sale you will be able to remedy any issues that could stop a sale. You may be surprised by what the inspector tells you. There may be issues with certain parts of the home that you were unaware of. Don’t lose heart. Most of these things can be fixed, and the ones that can’t can often be compensated for in the sale price. Just don’t ignore the inspection results. Fix what needs fixing before trying to sell.
What you may not know it that tons of home sales fall apart at the home inspection. A disastrous home inspection is one of the biggest road blocks to selling a home. Getting all your problems squared away before you put your for sale by owner sign out at the curb will be vital.
List Your Homes Strong Points
Most every property has some quality that is worth emphasizing to buyers. This is another area where many real estate agents excel. They know how to look at a property and see its strong suites. Now it is time for you to do the same. Your school district, neighborhood, nearby stores or restaurants, open spaces, the new carpeting you put in – write down everything you can think of that would make someone want your home. You’ll want to know these things by heart when talking to prospective buyers.
One of the services that some of the better real estate agents will provide is found in their marketing materials. A great Realtor will spend money on their marketing, including brochures that say WOW! You can really tell when a real estate agent has put the time and effort into their print marketing.
Their photography is exceptional and really captures the essence of your home. Many agents also possess excellent writing skills and have very verbose descriptions that capture a buyer’s imagination.
The real estate agent that is head and shoulders above others will also employ creative real estate marketing displayed along with their brochures that really add value to what a buyer could be thinking about when purchasing a home.
Consider Your Timing
Every market is a little different but there are some things that are pretty consistent. People like to buy homes in warmer weather. If you are planning on selling in January, keep in mind that it might be more difficult to get people looking at your house if you are in a colder weather climate.
The best time to sell a home is typically in the spring. If you looked at a calendar most sales nationally occur in the months of April, May and June, although in Arizona our season is a bit longer. Our peak season is September through April. If timing is not an issue you may want to think about putting your home up for sale just as the season hits especially if inventory is low.
Also, you will always be at the mercy of the current market. If your neighborhood is filled with foreclosure sales you should expect it to affect your sale as well.
Get the Word Out
Marketing a home is about more than putting a sign up in the yard. You need to advertise the sale in multiple places and most importantly, let everyone know you are selling. You are not a real estate agent, so you do not have an established network of contacts to spread the news. This means you will need to talk to any groups you are a part of, put it up on social media and mention it any way you can think of. You never know where the buyer will come from.
The biggest advantage that a Realtor has in selling homes is what is referred to as the multiple listing service or MLS for short. When a real estate agent lists a home for sale the whole world knows about it and I am not kidding! The internet has changed real estate sales. With over 90 percent of all buyers finding their home online this is a tremendous value added service that a Realtor provides.
While the multiple listing service is the starting point for the passing on real estate data it is where it ends up that really matters. A for sale by owner is not afforded the luxury of seeing their home in the most visible online real estate portals such as Realtor.com, RE/MAX.com and many others.
Show the Home
One of the most challenging aspects of selling as a “for sale by owner” home is meeting the scheduling demands of a buyer. Again this is another value added service that a Realtor provides. When the calls start coming in, you will need to set aside time to show the home to as many prospects as possible.
What I have heard from numerous buyers over the years is how difficult it can be at times to actually schedule a showing and see a “for sale by owner” property. If you are a FSBO every showing you miss is a lost opportunity. You need to make sure you can be around to accommodate a buyers schedule NOT yours!
The fact that the home should be clean has already been stated, but it is worth saying again. Make the home appealing. Set a good atmosphere that keeps people relaxed and happy while they are in the home. These good feelings can make a difference. Also, avoid any negative talk. Don’t lie about the home’s flaws, but don’t focus on them. Misrepresenting your home to a buyer is the last thing you want to do or you could end up in court getting sued.
Financing and Closing
Another role that a real estate agent plays in the home sale process when representing a seller is to make sure the buyer is qualified to buy the home. One of the requirements of most every real estate agent will be to receive a pre-approval letter from a buyer accompanying their offer. The pre-approval is there to give a seller piece of mind that the buyer will get financing.
Not all buyers will be prepared and have done what they need to in preparing to buy a home. In the case of a “for sale by owner” home you need to take on this responsibility yourself. As such you need to make dam sure the buyer can afford to buy your home. This is especially true if you have already gone out and bought another property.
One tip is to make sure that the buyer is pre-approved for a mortgage. There is a fairly decent chance that you are presented with a pre-qualification letter instead. This is not worth the paper it is written on in determining whether the buyer will get the loan. The difference between a pre-approval and prequalification is huge. This cannot be emphasized enough.
If the buyer comes unprepared without a pre-approval letter in hand it would be beneficial for you to have a mortgage broker in place that you can refer them to.
Thoughts on Why “For Sale by Owners” Fail
Besides the obvious reasons like the wrong price, lack of marketing and difficulty in showings mentioned above there is also another reason why you see some for sale by owners not ending up being successful. It boils down to the fact that the buyer knows you are saving a ton of dough not paying a real estate agent and they want to share in part of your commission savings.
Quite a few of the potential buyers who will view for sale by owner homes are bargain hunters. The buyer’s perspective goes something like this – since the seller is not paying a real estate commission they should be able to offer less for the home. Lots of sellers end up getting low ball offers. Buyers will often take 5-6% right off the top regardless of whether the home is priced where it should be or not. I have seen many Arizona for sale by owner’s learn this the hard way.
Ironically the owners of two of the most prominent real estate for sale by owner sites used real estate agents to sell their own personal homes. Forsalebyowner.com creator Colby Sambrotto paid a 6 percent commission to sell his Condo in New York and Buyowner.com founder Al Bennati recently listed his Florida home for sale with a real estate agent.
One big takeaway from this is that these sites don’t do diddly squat for selling homes compared to what the resources a Realtor can offer. Even these for sale by owner company executives understand that.
Additional Home Selling Resources;
While selling a home for sale by owner is not easy it can be done. If you follow the above advice there is a fairly decent chance you will have home sale success and be sitting at a closing table with a smile on your face. Best of luck and of course if you find you need the services of a top notch Realtor I would welcome the opportunity to interview for my services.