If you’re used to doing it yourself with projects around the house, you might be tempted to DIY when you’re selling your home, too, and not hire a residential real estate agent. Is that smart?
Sellers who skip the listing agent and offer their home as a “for sale by owner” — or FSBO (pronounced FIZZ-bo, just like the “Modern Family” clown) — have the potential to save thousands of dollars in agent’s fees.
But FSBO sellers should be prepared to do a lot of legwork to manage the sales process, with no guarantee of a final sale. Remember the process of finding a home you could afford and getting a mortgage? Selling a home on your own can be far trickier.
Here are five questions experts say homeowners should ask themselves before selling a home on their own.
- Do I know the value of my home in today’s market?
- Am I ready to work with a buyer’s agent?
- Will I take charge of sales and marketing responsibilities?
- Can I bear criticism of my home?
- Am I willing to screen potential buyers?
1. Do I know the value of my home today?
A common mistake FSBO sellers make is to price their home too high, leaving the property to languish on the market.
“When a home sits for a long while, buyers start to wonder what is wrong with it,” says Piper Nichole, author of “The For Sale By Owner Handbook. “The best option is to come out of the gate priced right.”
To market a home competitively, sellers should research the final sale prices of similar properties in their community.
Real estate websites typically offer local sales trend information, selling prices for comparable homes (“comps”) in the community, and the average length of time on the market.
It may even be worthwhile to purchase an appraisal from a certified licensed appraiser, says mortgage broker Dale Robyn Siegel, author of “The New Rules for Mortgages.” That can eliminate the risk of a pricing surprise when a buyer applies for a home loan.
Even when sellers think they’ve arrived at a fair home value, potential buyers may still try to negotiate the price downward.
2. Can I work with a buyer’s agent?
In a typical real estate transaction, the listing agent represents the seller. But the buyer may choose an agent to represent his or her interests, too.
When a real estate deal is made, the seller usually pays both agents a commission based on the sale price of the house. That commission is negotiable, but it has traditionally been about 6 percent of the purchase price, says Nichole. The buyer’s agent and seller’s agent generally split the commission in half.
A FSBO seller can’t control whether a potential buyer wants to use a buyer’s agent. If the buyer does go that route, a homeowner should consider offering that agent the typical commission — about 3 percent of the sale price.
A seller who decides not to offer to pay the commission will probably shrink their pool of potential purchasers, because buyer’s agents would not have an incentive to show their clients the seller’s home.
3. Can I handle sales and marketing duties?
Some FSBO sellers underestimate the amount of effort it takes to market their house. You need to keep the home clean, clutter-free and “show ready” at all times.
Other important steps include:
- Taking good photos of the property and writing effective sales descriptions.
- Buying and installing a “for sale” yard sign with promotional fliers that include contact information.
- Listing the property on several classified advertising and real estate websites.
You’ll also want the home placed in the Multiple Listing Service, or MLS, a real estate brokers’ database of properties for sale.
FSBO sellers can’t submit to an MLS, but some companies have brokers who will list a seller’s home in the MLS for a flat fee, typically a few hundred dollars.
In addition to marketing their own property, FSBO sellers often need to find and hire people to help them complete the sale. These professionals include real estate attorneys (to review contracts and offer advice), appraisers and contractors (to make any necessary home repairs).
4. Can I bear criticism of my home?
The emotional aspect of selling a home is often overlooked, but it’s an important part of the selling process. Owners will probably hear a lot about their home’s shortcomings from buyers trying to negotiate a lower price.
Or worse, they may not receive any interest in their home, especially if the price is too high.
You have a better chance of being a successful seller if you don’t take negative feedback personally. It can be easier to sell a home as a FSBO if you don’t have an emotional attachment to it and can take a more objective view of its value.
5. Am I willing to screen potential buyers?
If you’re going to be a FSBO seller, you must be willing to screen your own buyers.
“You don’t want to take your house off the market to negotiate with someone who was never qualified for the home in the first place,” Siegel says.
Before you sign a contract with a buyer, make sure the purchaser will be able to come up with the money.
“It’s harder to get a mortgage these days because the bar is higher,” notes Siegel. “Applicants need better credit, higher salaries and a bigger money reserve.”
Before accepting an offer, ask for a current mortgage preapproval letter from a reputable lender. The letter should show that the buyer spoke to the lender and has been preapproved for the purchase price of the home.