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Sell Your Own Home? Take the FSBO Challenge and Find Out

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The Real Estate market is changing. Prices have peaked, and the next several years are not likely to bring the appreciation that homeowners have become accustomed to. If you are thinking of selling, should you go it alone, without a real estate professional and those high fees?? Perhaps you are considering becoming a FSBO, or For Sale By Owner in real estate lingo.

Real estate commissions are negotiable and average around 5 - 7 percent nationally. When the market softens, commissions tend to go up as agents work harder and longer to get the job done. If you sell directly to a buyer, you should be able to net more and increase your bottom line. Why would you want to pay the high commissions and reduce your net proceeds?

How Hard Could It Be?
You advertise an open house. Interested buyers show up and if your home appeals to them, they will want to make an offer. If you like what they offer, you can accept the offer and hope for a smooth closing at your desired price. Your check at closing will reflect the commission savings.

Sounds simple. It can and occasionally does work like this. Only time will tell if your sale will go forward without a hitch. Is it worth a try?  Read on to see how high you score on the FSBO Test, and learn more ideas to increase your chances of success.

You will probably hear lots of negative comments about selling your home yourself. Friends may have hair raising experiences. Real estate sales agents will try to talk you out of it. The truth is that selling your home yourself is a lot of work, and not everyone is cut out for it. Most  FSBOs eventually do list with a real estate professional after trying on their own. It all depends on market conditions, your own marketing skill, real estate experience, time available, and a lot of luck.

Advantages of a Direct Sale
Selling your own home will not be an easy task. Most people do not have the time and skills to do as good a job as even a rookie Realtor. It may seem like a simple 1-2-3 sort of project, sort of like installing your own home improvements. Unless you have successfully done it a dozen times, it's more like taking on a major remodel job yourself when you have trouble putting up curtain rods!  But if you won't be happy unless you try it yourself, are not in a hurry, and have lots of time to list it later with a professional, you could give it a try. Just keep your favorite agent's phone number handy in case you need to go that route!

The FSBO Test - True or False
Take this test to see if you have what it takes to sell your own home:

  1. I am in no hurry and have plenty of time and a flexible schedule to devote to the planning, preparation, and showing of my home whenever it is convenient to a buyer.
  2. I'm OK with letting strangers into my home for Open Houses and showings will stay out of their way. I won't take it personally if they criticize my home.
  3. I have experience in marketing to apply to my home sale through the internet, newspaper, color flyers, photos, and more. - and a budget to spend on these items.
  4. I understand the current real estate market and the homes in my neighborhood so I can price my home competitively.
  5. I will comfortably negotiate with buyers on price, without becoming emotionally involved. I know where I can compromise to achieve my goal.
  6. I am an attorney or am willing to hire one to help me understand a buyer's offer contract (the Hawaii offer to purchase is typically about  12-18 pages of fine print). I am prepared to make counter offers and amendments as needed.
  7. I know how to comply with the latest Federal and State requirements. This includes seller's disclosures, toxic substances (asbestos, lead, mold, etc.), building permits, and subdivision documents. I know what I can and can't say regarding "Megan's Law"  and Fair Housing laws..
  8. I am prepared to arrange for a survey, termite inspection, and I am ready to deal with other professionals involved in the sale such as home inspectors, appraisers, and escrow officers.
  9. I am comfortable going through the steps needed to qualify a buyer for the mortgage (if applicable), or how to verify the buyer's cash funds if no mortgage is required.
  10. I'm convinced that after I go through all of these steps, my "bottom line" will be greater than if I just paid a Realtor to handle the sale.

Score Yourself:

# of YES answers Your Chances of Becoming a Successful FSBO
1 - 3 Stick to garage sales. You couldn't sell popcorn at the theater much less your own home!
4 - 6 If you like gambling in Vegas, you could take a chance. Your odds are about the same.
7 - 8 You have some of the skills needed. Keep your favorite Realtor's number handy just in case.
9 - 10 Go For It, and Good Luck!

Flunked the test?
The National Association of Realtors says that nationwide, almost 90% of sellers use an agent. In Hawaii, thanks to complex laws, and elaborate and lengthy forms, the percentage is probably higher. Here is more information to consider.

It costs you nothing to talk to a real estate professional about selling your home before you decide what path to take. Remember that even if you decide to list your home, your Realtor only gets paid if and when they close the deal for you, so you are risking nothing. And if you think that hiring a professional is too expensive, consider what is at stake with selling your most valuable possession.

Passed with flying colors??
Do Your Homework
Price is everything when it comes to selling. Consider hiring an independent appraiser to get an objective idea of your home's value. You may be able to find out about neighborhood sales activity at the tax assessors office, or through various internet sites. Remember that the price range in your neighborhood is usually a good indication. You can check out current home sale trends from the Honolulu Board of Realtors public web site at Latest Oahu Housing Statistics and prices nationwide at www.remax.com.

Cooperate with Realtors
If you expect a truly direct sale to a buyer, think again. Even if you do not want to be represented by a Realtor, most buyers are. It normally costs them nothing to get full service from a professional from start to finish. This includes selecting and viewing homes, negotiating an offer, and all the steps toward closing.   You will increase your market by a factor of 10 if you cooperate with the buyer's brokers in your area. In return, they will expect you to pay "courtesy to brokers'. This means you are willing to pay the buyer's side of the real estate commissions, which might typically be between 2.5% and 3.5% of the selling price.

Yes, this cuts into the savings you are hoping to achieve. Real estate sales are not simple transactions like buying a refrigerator or even a car. Most buyers are not prepared or experienced enough to do their own contract negotiations. They don't have the time or expertise to find the properties, locate a home inspector, get their mortgage, and they feel uncomfortable working directly with you, the owner.

Discount Brokers
Some companies advertise reduced fees for what they claim is identical service. Others offer reduced fees for limited service. In theory, you can pick what you need professional help with, and what you can handle on your own. Negotiating your best offer is one of the most important things you pay a Realtor to do for you. You want them to have an incentive to do the job right. Would you go for a discount attorney - or doctor - to represent you in court, or perform surgery?  The personal and financial stakes are high.

Full service for a discounted fee is sort of like saying that you can find the same service at Wal-Mart and at Neiman Marcus because they both sell towels. Try phoning discount brokerage offices for information, or stop by the office, and compare the service you get from a full service broker and you will probably see what I mean.

Paperwork!
Real estate is a heavily regulated industry. Hawaii State law requires that sellers disclose in writing any problems with their property to prospective buyers. A special form exists for this purpose. The disclosure includes problems with any of the home's main systems such as roofs, foundations, plumbing and electrical systems, drainage and flooding and even noise problems. If you remodeled or put in an addition without building permits, you will have to make this known. Better yet, get the permits first. In any case, be prepared to answer all questions honestly and in writing. Locate all your home ownership and maintenance records before you advertise.

Set the Stage
Don't even consider selling until you put your home in top selling condition - unless you are willing to give a big discount on the price. Go out and look at model homes in new home neighborhoods to get an idea of what is proven to add to a home's appeal and price. Paint, carpet, fresh kitchens and baths, and uncluttered surfaces will give you a big advantage. Don't go overboard, as some improvements won't give you return on your dollar spent.  Also, keep in mind that your taste may differ from the buyers', so always keep things neutral.

Marketing your Home
When you go it alone, your property won't be in the Multiple Listing System (MLS). Make your home easy to find. You might need a yard sign, an internet listing, and advertisements in newspapers and magazines. You will have to pay these costs which are otherwise paid for by the listing Realtor. Federal and state laws also regulate how you can advertise so you will need to know the rules to avoid hefty penalties.

You may want to have an Open House, or advertise "by appointment only". It's a good idea to keep your home in "showing condition" for last-minute requests to view it.  If you have a flexible schedule for showings at different times of the day it will really help. Buyers are impulsive and may want to see and buy a home at almost any time of day or night. You will want to ask a few questions to be sure buyers aren't just casing your home to victimize you later, of course.

You should remain in the background when you are showing your home to buyers. If you "oversell", you may create suspicion and alienate buyers. In fact, showing your home personally to buyers is one of the best ways to put yourself at a disadvantage in any future negotiations, and savvy buyers and Realtors will take advantage of this fact.

Negotiating Your Price
Negotiating is one of the real challenges. How do you get what you want and still keep the buyer on the hook?  Knowledge of your home's features compared with other sold homes in the neighborhood is essential. Keep in mind that you are going to be biased, so don't take negotiations personally.
Homes sell at "market value", which is determined by the buyer in the open market. No home is sold for more than a buyer is willing to pay for it, even if it seems "worth" more to you. A seller's emotional response is understandable, but has nothing to do with the reality of the marketplace. Supply and demand will determine your home's final price level in spite of your feelings and wishes, which may be either higher or lower than you expect. Your marketing efforts and how well you stage and show the property will effect the perception of value.

The Details
You should be prepared to follow up on all of the details of your home sale to keep everything on track. This includes such concerns as buyer financing - are they qualified and will they be able to get the loan?  How can you verify that they have the down payment they need? Will they hire a home inspector, and how should you respond if the inspection reveals problems with your home?  Are you obligated to correct them or should you sell "as-is?" Who should pay for the termite inspection, and what if termites are found - can you keep the sale together if you pay for needed treatment?

The list goes on and on. Real estate transactions are complex financial deals with many layers of obligations, problems, and solutions. Many sales fall through because of unexpected complications or unrealistic expectations on either side. Be sure you are familiar with the laws and practices in your community so that you aren't swimming upstream in your efforts. For example, in some communities, it is common for sellers to contribute to a buyers closing costs, and in others, it is practically unheard of. If problems arise, you will want to try to work out a solution which could require a compromise on your part.

If you decide to try the FSBO route, make a plan, go step-by-step & and give it your all. If you run into trouble, I can be reached at stephanieg@remax.net. Good Luck!


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Comments

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HawaiiRealEstate — Monday, September 22, 2008
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Selling a home yourself can be more than the average consumer could or should attempt. Good article, thanks.



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