FSBO
(pronounced “fiz-bo”)
For Sale By Owner
A Practical Guide to Selling Your Own Home
FSBO, v, (fiz-bo) real estate industry term for an attempt by a property owner to market and sell property without the assistance of a professional real-estate agent.
Introduction
So, you’ve decided to sell your property “By Owner”. I know a lot of people do it for a number of reasons:
- Saving money
- Avoiding the “hassle” of listing with a Broker
- Maintaining “control” of the situation
I’ve even done it myself!
I’d be lying if I didn’t admit that part of the reason I’m supplying the information in this booklet is to hopefully develop a relationship that will lead toward helping you sell your property – however, the main point I’m trying to accomplish is to give you some advice and hopefully a couple of pointers, that will help you in the process.
If you pick up just one good idea, reading this booklet may well be worth your while!
I truly wish you success in selling your property yourself. If you have questions, I’d be glad to answer them for you if I can.
Gary Gay, GRI
Executive Broker
Crye-Leike Bentonville Crossroads
Getting Started
Obviously, you’ve already decided to sell your property. Hopefully, there are a few things you’ve done before-hand to get prepared:
· Ensure you have good Title
- There are no liens or encumbrances on your property
· Determine what goes with the property and what doesn’t
· Locate your Termite and Title policies (you’ll need these later)
· One of the most important steps is to determine the offering price (more on this later)
· Maximize the value of the property (have it prepared to sell)
· Determine if/how you will cooperate with Realtors®
· Be prepared to disclose pertinent facts about the property
· Determine your marketing strategy
It’s important at this point to also “detach” yourself from the property. View your property as a “product,” not the home or land you’ve held onto for years. Just because you have an emotional attachment to the property doesn’t add value to a potential buyer! |
Good First Impressions
Making a good first impression is critical when selling property. Since potential buyers will be directed to you in several ways, you have no way of knowing if that first impression is going to be formed by their “first sight” of the property, from a flyer you may have produced, or perhaps an advertisement you placed. Everything you do to get your property ready to go on the market and to promote your property for sale could become a “first impression” for a potential buyer.
“Stage” your property. “Staging” is a real estate term for the process of getting your property ready for sale. It includes making repairs you make, any “sprucing up” (painting, landscaping, removing clutter, etc.)
Pricing
How much should you ask for your property? The market value is not determined by how much you paid for it, how much you’ve spent fixing it up, or how much you need to purchase your next property. The market value is how much a buyer will pay. Usually the best indicator of market value is determined by looking a prices received for similar property sold recently. Overpricing is the most common reason FSBO’s don’t sell. The conventional wisdom, “start high and take offers” usually discourages offers. For a FSBO seller, finding accurate data upon which to base your listing price can be difficult. Realtors® have access to market data that individuals typically can’t get. It would be my pleasure to prepare a Comparative Market Analysis report for you, without obligation, so you can be sure that your property is competitively priced when the right buyer comes along.
Pricing Pyramid
OVERPRICING
12% or more over market value. No showings, no offers
TOP OF RANGE PRICING
6-12% over market value. Limited showings, no offers
AGGRESSIVE PRICING
4-6% over market value. Lots of showings, no offers
MARKET VALUE
Asking price is 2-3% over market value. Multiple serious buyers will emerge
UNDERPRICING
Below market value pricing.
Investors will buy to rent or flip
Don’t forget. Buyers are aware you’re selling FSBO. They’re going to assume you’ve priced your property with the thought of pocketing what it would have sold with a Realtors® assistance. Be prepared for them to make lower offers than they normally would!
Disclosure
The days of “let the buyer beware” transactions have long since passed in selling real estate. Whether you are selling your property thru and agent or by FSBO, you must disclose to potential buyers any defects you are aware of in the property or in the title. Sellers who do not disclose known defects risk lawsuits that could cost them much more than it would have cost to correct the defect in the first place. To protect yourself from such suits, you should either repair defects before selling or disclose them in writing to the buyer. Be sure to get the buyer’s signature on the disclosure. Realtors® have special “Owner Property Disclosure” forms for this purpose, but you could simply include your disclosure in the contract or on a separate piece of paper that both parties sign and date.
Inspections
If the buyer needs to borrow money to purchase your property, it’s very likely it will be inspected by an appraiser. In addition, if you’re selling a home, the buyer may want to perform a detailed inspection to be sure that the plumbing, electrical, heat and air, appliances and structure are all in good shape. There are a number of home inspectors in the area who are licensed by the state, but some buyers choose to do their own inspections. If a professional inspector is used, buyers usually pay for the inspection but ask the seller to pay for any repairs that are revealed by the inspection. The inspections (typically) do not occur until after an offer has been made and accepted, so how do you know how much you might be out for repairs? You can limit the amount of money you may have to pay for repairs right in the sales agreement before you accept the offer. I frequently see sellers agree to repairs up to $500 or $1,000. If you agree to such a limit, any repairs needed over that amount become topics for further negotiation. If the buyer and seller can’t agree on payment for repairs, the deal could fall apart. Such negotiations can become touchy when buyer and seller negotiate directly.
Depending on the property, other inspections may be requested by the buyer or required by their lender. These could include:
· Lead-based paint. Homes built prior to 1978 may contain lead-based paint. Under federal law, buyers have certain rights to conduct a special inspection for the presence of lead-based paint, and, if any is found, to reconsider or renegotiate their offer. If lead-based paint might be an issue in your home, please call me for a free copy of the pamphlet “Protect Your Family From Lead in Your Home” published by the EPA.
· Termite inspection. Most buyers of a home will ask the seller to provide a 1-year termite protection contract on the house. If your house is presently under a termite contract, you may be able to simply transfer ownership to the buyer.
· Mold inspection. Mold is becoming a big issue for homeowners. Some forms of mold are very dangerous. If your home is older, if there is a basement or crawl space that seems damp, if there are signs of leaking through the ceilings or walls, or if evidence of mold is present, your buyer might ask for a mold inspection.
· Septic inspection. Lenders sometimes require separate inspections of septic systems, especially on older homes or where the appraiser sees signs of damage to the drain field. Also, some older septic systems are made of metal and could be nearing the end of their lifespan. A septic inspection will reveal any issues.
· Well inspection. Lenders may require a water quality test when water is provided from a well.
· EFIS Inspection. Commonly referred to by the brand name “Dryvit,” Exterior Insulation and Finish Systems (EFIS) is a synthetic form of stucco. Properly installed, this is a wonderful maintenance-free product. Improper installation has lead to a class-action lawsuit against manufacturers, and many employers who transfer managers around the country discourage their managers from purchasing homes with EFIS. If your home has EFIS, offering it for sale with an already completed inspection and perhaps an EFIS warranty could improve its marketability.
When You Get an Offer
There are many things to consider when you get an offer in addition to the price.
· Is the buyer qualified? Have they presented any evidence that shows the financial capability to purchase? Ask before your sign. If they are paying cash, where is the money now? If they are borrowing money, ask if they’ve been to a lender and if they have a loan qualification letter from the lender.
· Do they have to sell before they can buy? A “contingent offer” will most likely include a section that allows the buyer to back out of the purchase of your property if they don’t sell by a certain date. Contingencies can be difficult to deal with – if you need help understanding a contingent offer, or wording a contingency, consult an attorney – it’s money well spent!
· When does the buyer need to take possession? It usually takes about a month to close a sale. Is the buyer asking for more time than that? If so, they may need the extra time to sell their own property to come up with the needed funds.
· Are you being asked to pay for a survey? A home warranty? A termite or other inspection? Possibly, you could be asked to pay some or all of their closing costs. Different loans may have additional costs that a buyer may ask you to pay. A buyer asking for you to pay some of these things isn’t necessarily a bad thing, but you need to understand how, if agreed to, this could effect the net from the sale of your property.
Seller’s Net Sheet
Item | $$$ |
Credits: | |
Selling Price | |
Personal Property | |
Title Insurance Re-issue Credit | |
Pre-paid Taxes | |
Pre-paid POA Dues | |
Other Credits | |
Total Credits | |
| |
Closing Costs: | |
Commissions | |
Buyer’s Underwriting Cost | |
Settlement Fee | |
Document Preparation | |
Title Insurance | |
Attorney’s Fees | |
State Tax Stamps | |
Recording Fees | |
Survey | |
Pest Inspection | |
Prior Year Unpaid Taxes | |
Current Year Pro-rated Taxes | |
Home Warranty | |
Repair Limit | |
Other Seller Paid Buyer Costs | |
Other Costs | |
Total Closing Costs | |
| |
Loan Payoff | |
Other Reductions in Proceeds | |
| |
Seller’s Net | |
Elements of a sale
The job of selling property is not only about putting out a sign and showing the property. Selling property is a multi-step process that may include any or all of the following. I hope this list will help you!
· Preparing your property for sale
· Competitive pricing
· Designing advertising and marketing
· Get Seller’s E&O liability insurance
· Have a blank contract ready
· Answering inquiry calls
· Scheduling “Open House” dates
· Following up with “lookers”
· Qualifying potential buyers
· Calculating closing costs
· Holding earnest money
· Scheduling appraisals
· Responding to inspection list
· Scheduling required repairs
· Scheduling closing
· Reviewing HUD-1 Statement
· Disconnecting Utilities
· Gathering market data
· Purchasing and placing signs
· Advertising placement
· Design and launch website
· Have blank counter-offer ready
· Showing property to prospects
· Promoting “Open House” dates
· Tracking advertising effectiveness
· Negotiating sales contracts
· Preparing counter-offers
· Scheduling home inspections
· Scheduling termite inspections
· Arranging for a survey
· Arranging for Title Transfer
· Determine loan payoff