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“For Sale By Owner”

The good and the bad

SELLING or BUYING?without a real estate agent is a practice that has become increasingly popular in recent years, primarily due to the ability to the internet and the rising cost of commissions. ?Discount brokers, like?Redfin, Houzeo, and?Zillow?have capitalized on this trend. ?Sellers like selling on their own because they will save thousands of dollars in Realtor commissions. ?If it doesn’t work as planned, they can always go back to listing with a real estate agent. ?That is not such a bad thing. ?Traditional real estate commissions are expensive because they are not based on the marketability of the house, but are a percentage of the sale price, which is often tens of thousands of dollars. ?In spite of that, the vast majority of sales still go through a real estate broker, and there are valid reasons for that. ?The primary reason is that a really good real estate agent can get you top dollar for your home, which could more than make up for the cost of commissions. ?(Read our page on Choosing a Real Estate Agent.)

Sellers wanting to sell “by owner” must be prepared to do everything the real estate agent would normally do in the real estate transaction. Although selling a house may look easy, on closer examination it requires marketing tools, techniques, salesmanship and a lot of time and patience. The following is intended to help you decide if FSBO (pronounced “fizz-bo”) is right for you.

Consult an experienced lawyer. Before you decide one way or another, or decide to advertise or tell anyone that you are selling your house, consult with an experienced real estate attorney. ?You should have one on your side if you list with a Realtor, but should not even consider moving forward with a FSBO (buyer or seller) without legal representation. ?This is our forte. ?We can give you important insights as to what will be needed and how to proceed on your adventure. For example, a seller selling FSBO is required to provide the same disclosures regarding the condition of the property and follow the same fair housing laws as a professional realtor. ?A real estate attorney will ensure that you meet these requirements, as well prepare the contract for you. We will also guide you every step of the way to a successful closing, prepare your closing documents, and provide guidance in choosing the right title insurance company. Handling these details properly is critical to a smooth closing, and the attorney’s fee is going to be only a small fraction of what a broker’s commission would be. ?We can almost always quote you a flat fee, and it will not be anything close to 6% of the selling price.

Set a fair price. This is the single most important factor that sells a house quickly, or not at all. ?Know your real estate market. Check comparable properties on the market or recently sold. You can visit the websites of local realtors, or the National Association of Realtors at www.realtor.com. You should interview one or more local realtor’s free market analysis before deciding to go the For Sale By Owner route. They may convince you to ?list with them, and will usually give you a free, “no-obligation” market analysis for your home. Make sure it is someone you trust and respect. This may also be the person you will work with if your FSBO experience does not work out.

Develop a simple marketing plan.? Purchase a professional, attractive sign for your front lawn. ?There are dozens of sign making companies on-line. ?Include your telephone number in numbers large and clear enough to read from the street. Display your e-mail address. Place an ad in the local newspapers. Post flyers on public bulletin boards. Possibly create a website.
Prepare a brochure including selling features of the house. Include color photos, if possible. The brochure should include the features most realtors include on their listings such as school districts, taxes, assessments, room sizes and amenities that will be transferred with the property. These brochures may be handed out at open houses, or attached to your “For sale” sign using a mailbox type device created for this purpose.

Use the internet. There are several companies that charge a minimal fee to help you with the marketing of your home in FSBO transactions. ? Some of the more popular ones are?Redfin, Houzeo, Zillow, Trulia, to name a few. ?Please note that I am not making a recommendation here. ?In fact, I would avoid them. ?This is not the way to save money. ??(Read our page on Choosing a Real Estate Agent.)

Be prepared to deal with buyer’s Realtors.? If you are a seller, I encourage you to be open to dealing with a buyer’s agent. ?You have nothing to lose and everything to gain. ?However, if a realtor offers to show your house, or a buyer is accompanied with a realtor, be prepared to sign a limited listing agreement, for this one-time buyer. ?In Southern New Jersey, the buyer’s realtor usually receives half the real estate fee on a typical MLS listing, which amounts to 3%. ?I think it’s worth it. ?You may be able to more for your home, which will help make up for the commission.

Important factors to consider when deciding to sell By Owner:

  • Comfort level: Will you feel comfortable dealing with the legal documents required? Will you be able to deal with the public on the phone and in person? Will you be able to detach your personal feelings about your home in order to negotiate with the buyer?
  • Time: Proper marketing such as signage, brochures and/or flyers take time to create and distribute. Phone calls must be answered in a timely manner. Showings to buyers and appointments with inspectors and appraisers are time-consuming and usually take place during regular day-time work hours.
  • Visibility: Are you able to post a “for sale” sign? Many condominium and townhouse associations forbid it. Is your street likely to have enough traffic? If not, is it near a busy intersection where you can place a sign? Is there another house for sale on your street so that potential buyers for that house will also see your sign?
  • The Multiple Listing Service (MLS) that realtors use is the single most effective marketing tool for selling real estate.

Until recently, you had to list with a realtor to take advantage of the MLS. Recently, however, there are services that will list your house on the MLS for a flat fee. If you take advantage of this service, you will be required to pay the buyer’s agent’s commission, usually about 3%. If this is the route you choose to take maybe you should consider just listing with a broker in the first place.

Buying or selling a home is the single largest financial transaction you will enter into in your lifetime–proceed with caution and be armed with good advice and legal representation from professionals. ?The experienced professionals at Woodend Law can assist you with services such as preparing a fair and professional contract that will protect your interests consistent with the South Jersey traditional practice. ?It will be the best money you ever spent. ?Call now at (609) 654-5489.