Real Estate Private Sale
Selling a piece of real estate is often a complex and cumbersome process, more so when you are selling your home. Apart from the emotional aspect, you would like to get the maximum benefit from it. Since a home is a costly investment the returns should be beneficial to the owner. Enlisting the service of a real estate agent would entail a substantial expense , one which many can ill-afford. Real estate agent commissions can be upto 5%-7% of the total sales price of a home.
Though real estate agents are licensed and trained professionals and in most cases provide excellent service, but 5%-7% of the total sales price is a lot if money.
If your home is priced at say $400,000 a 5% commission for an agent would translate to $20,000. It is unnecessary to give your hard-earned home equity to a real estate agent, when you can save this money by selling your home in a private sale.
For Sale By Owner (FSBO) : is an option increasingly exercised by private home owners by which a property is offered for sale directly by the owner without the assistance of a real estate broker. This term is now used to describe the entire process of buying, selling and marketing a real estate property minus a broker.
Many private owners choose to sell their homes via FSBO without paying commission to a real estate agent. The saving thus generated are enough to meet a major expense in your life. In the U.S. 12%-18% of home sales are via FSBO (source: Real Estate Journal)
Some private sellers willing to pay a reduced fee do contact a broker to list their property in the local Multiple Listing Service (MLS) for a flat fee.
The FSBO method is not as difficult as you may think. Despite what real estate agents say selling a home can be achieved by prior planning, hardwork and acquiring the basic skills of this business.
Some benefits of the FSBO method:
1) Saves money: FSBO makes sense financially as no money is paid as commission. It makes good sense to a private seller, as 5% -7% of the total price is a lot of money.
2) Sell effectively: Since you are the owner you can effectively market your home to a buyer, as you alone know its advantages and positive features. You are the one capable of giving detailed information about changes you have made, repairs done and ofcourse the extras the home has to offer.
3) Sell faster: Since you do not have to factor in a commission in the sales price of your home, you can offer your home at its market rate leading to a faster sale.
4) Increased negotiating power: As a owner negotiating a fair price for your home is your prerogative and a one-to-one transaction (without a broker in the middle) with the buyer is always beneficial to both.
Learning some simple selling techniques, acquiring some legal knowledge and you are well on your way to sell your home without the aid of a real estate agent.
Some Guidelines For FSBO:
1) Evaluating Your Home or setting the stage for a sale: Everyone is impressed with clean surroundings and buyers are no exception. Clean your home thoroughly, remove the clutter, store away miscellaneous furniture and lock up your valuables. Do minor repairs of squeaking steps, dripping faucets, broken tiles. Trim the trees, potted plants and mow the lawn. If possible repaint faded rooms, repair the roof and electrical connections (if faulty). The cost of these renovations can be factored into the final price of the house. Clean and aesthetically appealing surroundings enhance your home and favorably influence a buyer. When the stage is finally set to show your home to a buyer, ask a sibling or a friend to visit your house as a prospective buyer. Their views and suggestions will give you a buyer’s perspective and know what to expect when the actual buyers come.
2) Fixing A Fair Price: Never go overboard while fixing the price of your house. Your home is invaluable but do fix a fair market price. Overpricing reduces a buyer’s interest. Usually the price should be 5-8% above the market price, so that it gives enough room for negotiating. Also calculate the cost per square feet of your property by comparing the price per sq. ft. of an identical property. If your house has additional features the price will slightly increase.
Another selling technique that is extremely important is to establish the price just under a whole number such as $459,000 rather than $460,000. Many potential buyers will instinctively feel they are getting a better deal. An important fact to remember is that all buyers have a fair idea of the property’s worth.
3) Hire A Real Estate Lawyer: Whether you engage in a private sale or enlist the services of a real estate agent it is a wise decision to hire a real estate lawyer to handle the entire transaction. A lawyer is an additional expense but it is better to have a legal professional look after your interests throughout the sales process.
A real estate lawyer evaluates complicated sales offers, mortgages and leases. He acts as an escrow agent to hold and transfer monies and helps you acquire title insurance.
4) Marketing Your Property: Your house needs exposure in the real estate market. For a private sale a black and orange yard sign is the best and most favorable option. Be sure to include your contact number on the sign. Once the sign is in place explore other marketing options such as:
Word of mouth; tell your friends, neighbors, at the office and even the local grocery store that your house is up for sale.
Advertise in the real estate classified column of the local newspaper. Utilize local print advertising such as color flyers and distribute in as many places as possible. The last and best option is the Internet. It is a known fact that 79% of homebuyers use the net as an information source. List your property on a FSBO site and sit back to await results.
5) Negotiating A Potential Deal: If you receive an offer for your home either directly or through an agent immediately notify your lawyer. There is a short period of time(72 hrs) called the Irrevocability Period during which a seller can cancel or amend an offer. If the offer is suitable to you the lawyer then handles the entire sales process.
6) Home Inspection: a home inspection ordered by a home seller can help identify the problem areas in the house. It also provides credibility to the buyer.
7) Buyer Appraisal: It is common for the lender to order an appraisal of the property prior to lending money to the buyer to ensure that they are not paying more than the property’s worth. They also hire a surveyor to check the boundary limits as per the property plans.
8) Closing The Deal: On closing date the buyer is allowed to inspect the property to ensure that all repairs that were agreed upon have been performed. If a problem arises then all monies are held in escrow till the dispute is solved. Usually closing will occur 30-45 days from the date the sales contract was signed. Your lawyer handles all the details on your behalf ensuring that all the money is collected, loans are paid, deeds transferred and take out insurance to make sure there are no issues with the title. The lawyer then writes a check for funds you are due from the transaction minus the expenses within 1-2-business days after closing.
Private sale is a financially better option for individual home/property owners. It gives you a greater hold and leverage over the selling process and ensures that you save a substantial amount that otherwise would have been paid as commission.