You want to save money on commissions

People who’ve gone through a FSBO often do so to avoid having to pay real estate agent commissions. As we discuss in Chapter 1, the lion’s share of the expenses related to selling your house are typically real estate agent commissions, which can gobble a large portion of your house’s equity (that is, the difference between the market value of your house and outstanding mortgages). In most areas of the country, a 5 to 6 percent real estate brokerage commission is common. Thus, on a $250,000 house, the commission typically sets you back $12,500 to $15,000.

You may already have a ready, willing, and able buyer

If you spread the word that you’re planning to sell your house, you may turn up someone who’s financially able to buy and willing to pay you the amount that you feel your house is worth. Good for you. Why pay a full commission if you’ve already found a buyer? As we note in Chapter 8, you’re in a good position to either negotiate a reduced commission with a real estate broker or hire an attorney to help you complete your transaction.

Whether you’re contemplating selling your house with an agent or doing a FSBO, tell as many prospective buyers as possible that you’re interested in selling. Although most people don’t find a buyer for their house simply by getting the word out through their own network of friends and contacts, you won’t know whether you’ll be one of the fortunate few who successfully sell their houses this way unless you try.

Before you start getting the word out, take these tips to heart:

• Follow our advice in Chapter 1 to make sure that selling your house is the correct course of action for you.
• Read Chapter 10 to discover how to determine the fair market value of your property.
• Follow the tips in Chapter 9 to ensure that your house looks its absolute best.
• Hire a good real estate lawyer to review your house sale contract and other documents.

You may know the house and neighborhood well

You may know more about the strengths of your house and neighborhood than local real estate agents, especially if you’ve lived in an area for many years. You may be able to speak from personal experience about how child-friendly the neighborhood is and how terrific the local schools are. You can praise the virtues of nearby shopping, transportation, and entertainment. You can gush about your wonderful neighbors. And you can point with pride to all the improvements you’ve made to your house over the years.

Be careful in praising your house and neighborhood. As Chapter 12 explains, even the most interested prospective buyer can get turned off if you’re overbearing or sound like a used car salesman. And, as we discuss in Chapter 8, what you say about your property may cause you legal problems down the road. If you’re going to sell without a real estate agent, be sure to have a good real estate lawyer on your team to assist you with mandatory property transfer disclosures and to provide advice about what you should avoid saying about your house.

Here's an actual example of legal problems caused by statements made (in this case by the real estate agent) to a prospective buyer. She was showing the back yard to a buyer and waived her arm expansively, stating, “This will all be yours.” Turns out the back fence was located 6 feet into the neighbor’s yard. Since “all they saw” during the showing was not theirs, they sued the agent for the lost 6 feet.

You may be more motivated than an agent

Your house and the money you have tied up in it are important to you. Some real estate agents, despite having dollar signs in their eyes in anticipation of the commissions they’ll earn if they sell your house, may be less than eager to invest sufficient time in promoting and showing your property.

If you decide to use an agent to help you with your sale, as we discuss in Chapter 7, exercise great care in choosing the right agent. Avoid overextended agents who juggle too many listings and clients to give your house sale the attention it deserves.

You like challenges

Some people don’t select the easier path. For example, instead of working for a corporation, you may be the type who starts your own business. Many small business owners say that the desire for a potentially higher income wasn’t the primary reason they started their own business. Some small business owners pursue this career path as a means of self-expression, to make a contribution to a particular field, or for the pleasure of working with and satisfying customers.

For the same reasons, some people try to sell their houses by themselves. Although most FSBO sellers are eager to save commission dollars, a few do it for the challenge or because they want to apply skills they possess to selling their own house.

You want to be in control

Some folks just don’t like giving up control. If you’re the type of person who wants to be in charge, you may be unwilling to relinquish control to an agent.

If you sell your house yourself, you can decide when and where to place ads for your house and exactly what features to emphasize. You may want to say when it is and isn’t okay to have strangers (interested buyers and their agents) strolling through your house. Perhaps you want to ensure that your cat or the family dog isn’t let out of the house by an agent who fails to notice your special showing instructions. Whatever the reason, for better or worse, you’re the boss with a FSBO.

Your house may sell itself

If the local real estate market is strong and good houses get multiple offers as soon as the For Sale sign goes up, you may feel that selling your wonderful house will be a snap. All things considered, FSBOs usually are more successful in a sellers’ market than a buyers’ market.

You may not know how to price property

Grossly overpriced property isn’t going to sell. Buyers and agents who know property values will, in fact, avoid it like the plague. In the end, you may not get as much for your house as you could have by pricing it realistically to begin with.

If you underprice your house, you may sell it below its market value — shortchanging yourself thousands of dollars — perhaps even tens of thousands. Say good-bye to the commission you “saved.” Chapter 10 deals with using a comparable market analysis (CMA) to determine your house’s fair market value. Chapter 11 is filled with tips about how to fine-tune your asking price.

You may not know how to prepare your house for sale

Your familiarity with your house can be a liability if it blinds you to your house’s flaws. You may like your house’s clutter and quirks, but their dubious charms may turn off prospective buyers. One important benefit that a good agent brings to the table is a fresh pair of eyes and a desire to whip your house into get-it-sold shape. Chapter 9 spells out, in detail, what you should — and shouldn’t — do to your property prior to putting your house on the market.

You may not know how to market your property

Did you know that a humble, low-tech For Sale sign and a classified ad (in local papers and online) are two of the most potent forms of advertising available to people who sell their houses without using an agent? Do you know how to use the Internet to market your house? Unless you have a background in real estate or marketing, you probably have some research to do. And, by undertaking a FSBO, you miss out on two powerful promotional tools only available to agents: the Multiple Listing Service (MLS) and brokers’ tours of newly listed properties.

If you’re undertaking a FSBO, be sure to read Chapter 12, which details the best advertising and marketing techniques to get the word out about your house. Chapter 8 delves into how, if you’re selling without an agent, you can gain access to the MLS and brokers’ open house tours on a fee basis from discount brokers. Scrutinize Chapter 13 to see what role the Internet can play in selling your house.

You may not know how to separate real buyers from fakes

Serious buyers make good offers. Bogus buyers waste your time and money. In the worst of all possible scenarios, you may unintentionally allow someone with criminal intentions into your house. Chapter 14 points out the three qualities that all good offers have in common. You can also find a section in Chapter 14 to help you distinguish real buyers from time-wasting fake ones.

You may not have enough experience as a negotiator

If you know you’re a weak negotiator, you have to be especially careful about selling your house without an agent. Not knowing smart negotiating tactics can cost you big bucks. Even if you are a good negotiator, your financial and emotional involvement in the sale may cause you to lose your cool when bargaining with a buyer, or you may undermine the deal by appearing greedy. Chapter 14 is brimming with techniques and tips for negotiating your price and terms of sale. Secure the services of a good real estate lawyer who, in addition to keeping you out of legal hot water, can also act as your negotiating agent.

You may get yourself into legal trouble

Selling your house yourself to save on real estate brokerage commissions is a hollow victory if the buyers sue you after close of escrow. Perhaps you didn’t give them the mandatory federal, state, and local property disclosures about problems such as lead-based paints or work you did on the property without a building permit.

House selling is a team sport. Chapter 7 describes players you may need on your team, one of whom is a real estate lawyer who can help you put together a proper disclosure statement and sales contract if you’re selling your house yourself. Also, be sure to read the section about property disclosures in Chapter 8.

Trying to save money by avoiding legal fees is a false economy. If you’re not using an agent, you need to have a lawyer review the sales contract before you sign it. If that’s not possible, at least put a clause in the contract to say your acceptance is subject to review and approval of the contract by an attorney of your choice within five business days after you sign it.

Don’t discriminate! Disqualifying prospective buyers on the basis of race, color, religion, sex, age, familial status, national origin, pregnancy, citizenship, disability status, veteran status, or genetic information is illegal under federal law. Your state may have additional categories. Discrimination can get you into a heap of legal trouble and can cost you big bucks. If in doubt, check with the Equal Housing Opportunity agency in your area.

You may not know how to close the sale

You won’t save on commissions if your deal falls apart in escrow. As a FSBO seller, you have to make arrangements that a good listing agent normally handles. Do you, for example, know how to open an escrow; get, read, and interpret a preliminary title report; order property inspections; handle contingency removals; and order a payoff demand for your mortgage? Chapter 15 guides you through the blocking and tackling necessary to complete your house sale after you have a signed purchase contract in hand.

Educate yourself

The things you don’t know generally are what get you into trouble. This book is crammed with tips and advice to help you sell your house for top dollar and steer clear of problems, whether you do a FSBO or use an agent. Unread, this book won’t do you a darn bit of good — unless you’re looking for a yellow paperweight.

We strongly urge you to read this entire book if you’re going to sell your house yourself. Then again, if you decide to hire an agent, you may still want to read this entire book! Why? Because you can manage the transaction better and feel much more comfortable if you’re knowledgeable about what’s going on.

Even if you’re certain about selling your house sans agent, interview several good agents (using the criteria we outline in Chapter 7). Interviewing agents may reaffirm that you can handle the sale yourself, or the interviewing process may convince you that you’re better off hiring the best agent you contacted. You’ll probably pick up some helpful advice and information you can implement if you do decide to sell yourself. And, if your FSBO isn’t successful, you can always hire the best candidate after you’ve given FSBOing a shot. Either way, interviewing agents is well worth your time.

Ensure that other team members are especially strong

Without a real estate broker or agent on your team, making sure that your other players are the best they can be is all the more critical. Be especially careful to hire an excellent real estate lawyer. Chapter 7 details criteria you can use to select the members of your team.

Cooperate with agents

Because the vast majority of buyers work with agents, be sure to mention in your classified ads and listing statement that you “will cooperate with agents.” This statement tells local agents that you’re willing to pay them a commission if they procure the buyer who ultimately purchases your house. While some agents are comfortable selling FSBOs, you should consider that many agents currently working with buyers prefer to sell listed properties where they are guaranteed a commission by the listing broker.

Financially qualify prospective buyers

When someone makes an offer on your house, don’t take your property off the market until you’re sure the buyer is going to be able to swing the deal financially. Few buyers are wealthy enough to pay all cash for your house. Most folks need to qualify for a mortgage.

Ideally, the buyers are preapproved for a loan with a conventional lender. As opposed to merely being prequalified — a quick financial once-over — preapproval means they’ve gone through a rigorous financial examination. If, however, the buyers are just starting to shop for a mortgage, inquire about their occupations, incomes, recurring debt, and the source of their down payment for the purchase. When the buyers apply for a mortgage, get their permission to contact the lender to find out the likelihood of loan approval. (Even though you probably aren’t going to be financing their purchase of your house, check out Chapter 4 to see what smart lenders look for on a mortgage application.)

Watch out for buyers who make their offer to purchase your house subject to the sale of their own house first. As we note in Chapter 14, this tactic, if handled improperly, can tie up your property and scare away other prospective buyers who are ready, willing, and able to buy immediately.