Selling Your Home Solo
It's not a go-go market for house sellers any more; times have changed. The Early Show financial advisor Ray Martin knows how you can improve your chances of making a profit on your home. Here's his report:
In many areas, home values are down, mortgage rates are up, and the supply of homes being listed for sale is hitting the highest levels seen in years.
If that wasn't enough, there's the commission you'll have to fork over to a real estate broker who appears to do nothing more than put your home on the Multiple Listing Service and when another agent sells your home, the listing agent collects half of the commission.
As home values continue to soften from high levels, home sellers will need to make every penny they can.
The cost of a broker's commission, which traditionally has been six percent of the selling price, is increasingly being challenged. And with home prices falling, there is less equity left over to pay that commission.
For these reasons, For Sale By Owner - pronounced "fizbo" - is one option that seems to be gaining the attention of more home sellers.Click Here to visit CBSNews.com's real estate section
It can be a good strategy when your home is in a hot location, at a price that is affordable to a lot of potential buyers, or where a home like yours is in short supply.
There are conflicting numbers on how many homeowners are selling their homes themselves, and some of the information reported is interesting. The National Association of Realtors, or NAR (not exactly an unbiased source), reported in a 2006 study that 13 percent of sellers conducted a transaction without the assistance of a real estate professional in 2005. According to REAL Trends, in 2006, 20 percent of sellers sold their homes themselves.
Know What The Buyers Are Doing
It's important to keep current with the trends and what works to sell a house. The National Association of Realtors Profile of Home Buyers and Sellers can be of some help to home sellers.
Many buyers go online to search for a home. According to the report, the use of the Internet to search for a home to buy has risen dramatically over the past few years, and now more than 77 percent of buyers reported using the Internet in their search.
According to the NAR report, here's how buyers learned about the home they ended up buying:
- 36 percent: Buyer's real estate agent
- 24 percent: Internet search
- 15 percent: Yard signs
This means it is vital to get your home listed on the Internet and to draw the attention of a large number of real estate agents in your local area.
There are many services where you can get your house listed on your local area Multiple Listing Service.
But while every home seller should try to save on commissions, being your own real estate broker is not for everyone. There are some potential pitfalls.
Set The Right Price
After getting a listing on the MLS, this continues to be the single most important factor in successfully selling a house. The housing market is constantly changing and you really need to have a good feel for it if you want to sell your home.
Not only is a home the biggest purchase most people make, it's also the biggest asset people have to sell; setting at the wrong price can cost you plenty. You don't want to leave money on the table by setting a price that's too low, and you don't want to scare buyers away by asking too much.
When setting the listing price for your house, use round numbers, in increments of $5,000. According to Kerwin Holloway, a broker at Reece & Nichols, buyers who use the Internet typically will search in increments of $5,000. So a listing at a price of $250,000 will turn up in more searches than a listing at $249,900.
Get The Word Out
Putting a "For Sale" sign on your lawn is probably not going to sell your house. To know why, just think like a buyer. Most buyers don't have time to drive around neighborhoods, searching for signs.
The majority will begin their search either on the Internet or by asking a realtor to search for them. When a home is "listed" with a broker, they place your homes information in the area's Multiple Listing Service (or MLS), which alerts all real estate agents in the area that your home is for sale.
The MLS also makes it easy for other realtors to search for a home by location and price range. If yours fits their search criteria, they will show it to potential buyers.
Prepare Your Home For Sale
Selling a home is one of the most emotional transactions you'll ever make, and that can make it difficult to judge your home with any objectivity. It can be a good idea to bring in someone impartial to take a look at it, to make sure it's in good condition, and to advise you on how to make it look attractive to potential buyers.
Many people don't know this, but you can still have a realtor come over and give your home a once-over, even if you are planning to sell it yourself. Many realtors are OK with that because they figure they can check in with you at a later date to see if you've changed your mind.
They can give you pointers on sprucing up, or "staging," your home for buyers. That might involve getting rid of clutter, adding a fresh coat of paint or making repairs.
I'm not trying to steer people away from selling their homes themselves. But you should be aware of the pitfalls and if you think you can tackle them, then give it a try.
Remember, you can try the FSBO route for a set amount of time, and if you're not successful, you can turn to a broker. Some sellers even report that they listed their home with a local real estate broker without any success only to re-list it successfully using FSBO.
If nothing else, use the knowledge that you "could" be your own broker to negotiate a lower commission with a broker. That storied six percent is a result of tradition, not law; nowhere does it say that you have to pay real estate brokers a six-percent commission.
FSBO Options
There's no question that there are a lot of services targeted to sellers looking to go FSBO. If you are looking for an alternative to a traditional six percent real estate agent, some of the popular options are:
Flat-Fee Brokers — These are companies such as Help-U-Sell and Assist-2-Sell. Both companies are franchises that offer to connect you with the offices of local licensed real estate agents that subscribe to their low-cost realtor business model.
You agree to show your home yourself, and they perform all other duties of a traditional broker, such as advertising, marketing, help with contracts and even arranging inspections. You pay them one flat fee that varies, based on home's value, location, etc. If you pay them a little more, the realtors from these companies will show your house, too. They can also list you home on the local MLS, but if they do, and another brokers brings you a buyer; you'll have to pay that broker his commission of 2.5 to 3 percent.
For Sale By Owner — Other companies such as FSBO.com and ForSaleByOwner.com offer home sellers a variety of marketing options at different price points. You can choose to have your home listed on the companies' web sites; you can pay more and have yard signs and color brochures designed for your home, pay even more and have a virtual tour included in your home's listing.
Each company is different and offers different listing packages, which can include listing your house on the local MLS - the same place a real estate agent would list your home. Again, there's a catch: if a buyer is brought to your home by an agent who saw the listing on MLS, you do have to pay that broker's half of the traditional commission, which is two to three percent.
Negotiate Brokers Commission — There is no law stating that you have to pay a six-percent commission. As a matter of fact, commissions now average a bit over five percent, according to a survey by Real Trends publishers.
If your home is an above-average priced home in a market where homes like yours are in short supply, you should have a serious conversation about a reduced commission with any prospective broker.
If you list your house with a real estate broker, he or she will charge you a five- to six-percentage point commission when your house sells, even if all the broker does is list your home.
But if you list your house on the MLS using one of the services above and a real estate agent brings you a buyer, you will only pay the commission charged by the buyer's agent, which is typically half the amount charged by a listing real estate broker. Use this point and your knowledge of how your house compares to others on the local market to drive your negotiation for a lower commission.