How to Sell a House by Owner
Let’s be honest: When you’re selling the home you own, you want the highest price you can get. For most homeowners, this involves hiring a real estate agent to facilitate the marketing and closing of a home. However, for motivated sellers that want to take matters into their own hands,
Known in real estate terminology as a FSBO listing - short for “for sale by owner” - homeowners can tap into some serious savings and reduce potential headaches that plague most home sales.
Want to learn how to sell your home? Let’s take a look at everything you need to know about selling your home, including:
- The Pros and Cons of Selling a House by Owner
- Getting Your Home Ready for Sale
- How to Sell a FSBO
- Getting the Word Out
- Setting a Realistic Price
- Getting Your Home Ready for Sale
- Qualifying Buyers
- Negotiating the Deal
Pros and Cons of Selling a House by Owner
Savings on commission fees: Homeowners that sell their own home get to keep 100% of the closing costs. Hiring a real estate agent normally takes a percentage - known as a “commission” - which averages as high as 6% of your home’s value. For a $200,000 home, this can be $12,000 - a significant chunk, especially if you still owe a portion of your mortgage to the lender.
Better control of selling situation: Because there are no middlemen involved when selling the house, homeowners are able to approve or reject offers without pressure. Rather than relying on the marketing efforts of a realtor, like working on their schedule, you can choose to hold your own open houses, pick marketing methods, and more.
Significant time investment: Those who choose to sell their homes are responsible for every aspect of their home sale. This can drain your time, resources, and patience. Homeowners are responsible for everything, including preparing the home in a salable condition, determining a fair asking price, marketing the home effectively, responding to buyer inquiries, showing the home, and negotiating with a buyer.
Potential losses: Selling a house is a high-stakes business. If you misprice the home, you may potentially lose out on thousands of dollars without the expertise of a realtor.
According to stats from the National Association of Realtors (NAR) in 2020, the median sales price of a FSBO home sold for $217,900 compared to $295,000 for realtor-assisted home sale. That’s over $77,100 less than the median sales price of an agent-assisted home sale.
How to Sell a FSBO
Getting the Word Out
The first step is to announce to people that you’re selling your home. You can choose between multiple methods that typically fall into two categories: Out-of-home (OOH) ads and digital ads.
OOH ads are basically advertisements that occur in the “real world”. Anywhere that you can interact with people in-person, through signage, newspapers ads, mailers, and other methods are fair-game. You can simply talk to people that you know and/or meet about your intent to sell your home, which helps declare your intention and vet potential buyers.
Digital ads are designed for maximum exposure due to the near-ubiquity of the Internet. You can use MLS services, Craigslist ads, post in forums, use social media like Facebook groups - the list is endless. You can combine each of these methods to get more eyes on your property for a fast sale and a higher asking price.
Setting a Realistic Price
As you know, home values fluctuate based on market demand. Too many homes being sold leads to lower prices; too few, and you may have trouble finding a buyer. Similarly, if you price your home too high, you may turn off potential buyers. Too low, and you may attract unqualified buyers or those who may push to reduce the value even more if they think you’re desperate to sell (which may or may not be true).
To get a sense of how much your home is worth, look for recently sold homes that match your house. This includes square footage, amenities, location (ex. proximity to schools/services), modern design, and other factors. Online sources like Zillow are a good place to start, but bear in mind that Zillow’s prices are typically inflated for active listings - nor do they include concessions made during the negotiation price.
A better alternative is to look up prices related to your home on City-Data.com. City-Data enables you to use a map interface to look at the home values in your area or consult the forums for your city, where buyers and sellers can share their thoughts on issues that are directly relevant to your home sale.
Also, subtract any potential expenses that the homebuyer may need to make the home liveable or attract better buyers. For example, if your roof is leaking, it may be better to inform buyers of this beforehand. If you choose not to, you may sabotage the sale when a buyer backs out. After all, if you don’t tell them about the roof, they may begin to suspect that other problems exist - even ones that you’re not aware of.
If you’re unsure of what your home is really worth, it’s best to hire a professional real estate appraiser. For a modest fee of $300 to $400 for their services, you can gain insight into realistic closing prices, code violations that you may be unaware of (especially for homes built before those codes were instated), and even recommend you to motivated buyers.
Getting Your Home Ready to Sell
For FSBO, you’ll need to get the home in an excellent condition for listing photos and showings. The following are some words of advice to prep your home for sale:
Declutter: Begin to get rid of or store any unnecessary belongings that make the home seem to belong to you. You’ll want to neutralize it as a commodity, not as an extension of your life. This can be difficult for those that still live in their home, but this is a worthy sacrifice to expedite the sale.
Deep cleaning: Unless you’re thorough, it can pay to have a cleaning crew to provide a deep cleaning to your home. This can include anything from removing dust to repainting. However, a house that sparkles always commands a higher asking price than a “fixer-upper”.
Curb appeal: Your home’s exterior is just as important as the space inside. Because first impressions are everything, you’ll definitely want to draw attention to the home and leave no trace of anything off-putting. This includes everything from a fresh coat of paint, removing weeds, fresh mulch, removing extraneous property out of sight (like children’s toys), and more. One tip that realtors recommend is to add an eye-catching front door, particularly if it is painted red.
Take professional photographs: Capturing your home in vivid detail is essential for ads that you create. Use a DSLR camera and professional editing software (Adobe Photoshop) to accentuate your home’s features. Not everyone has the time, equipment, and skills to do this, so consider hiring a professional photographer. Professionals not only help capture your home’s attractive qualities, but they provide virtual tours, list the photos on your behalf, and even offer drone photography for dramatic effect.
Schedule an open house: Having strangers in your home may not be appealing to everyone, but it is a quick way to generate offers and speak with motivated buyers that are ready to sell to. You can answer questions in person and get competitive offers, which is typically absent from showing individual buyers around.
Once you’ve gotten offers, it’s time to separate those who can actually afford the home. Unless they are cash buyers (those who can transfer money directly into your bank for the full price of the home), you’ll want to ask the buyer for a mortgage preapproval letter. And if you’re unsure of whether this form is legitimate, sellers have the right to contact the lender.
Some of the factors you’ll need to consider when qualifying a buyer include:
- How much of a down payment they have
- How much their lender is giving them to facilitate the sale
- What loan program they’re using
- For conditional loans, you’ll need to learn about the types of conditions they must meet to secure approval
Failure to the aforementioned may leave you losing time for an illegitimate sale - or having to recontact other buyers that you may have rejected (and who may now reduce their asking price).
Negotiating the Deal
Once you’ve found a buyer, it’s time to negotiate a price. Typically, the asking price will be reduced unless the buyer has the funds and is strongly motivated. Otherwise, expect a reduction from the asking price.
Buyers typically will cite reasons for a reduced asking price, such as broken or unappeal property features. However, sellers can add concessions to the final contract, such as fixing the exterior or replacing the electrical system to make it ready for the buyer. This can be a cost-saving measure, especially if you have licensed family or friends that can do the work in accordance with codes.
Despite this, you’ll still want to hire a real estate attorney to finalize the sale. They can deal with any potential legal pitfalls, create a contract that’s approved by both parties, and address any difficulties. Having a 3rd-party also shows that you mean business and can encourage a smoother sale.