Selling Without an Agent? Some of the Difficulties you May Face and an Alternative to FSBO
Difficulties in Selling without an Agent or “FSBO”
There are many things that can go wrong in a real estate transaction. If you don’t have representation, such as a real estate agent, then you may hit some speed bumps on your mission to sell on your own. But, if you’re adamant about not selling through an agent, and you want to sell on your own (otherwise known as FSBO), then here are some cautions to be mindful of.
Pricing the home right. It would be in your best interest to hire an appraiser to look at your property before you assess the value yourself. If you’re not familiar with the real estate industry, it can be very easy to make a mistake in the listing price. And unfortunately, it’s one of the biggest mistakes you can make. If you have friends or colleagues who know a real estate agent, it wouldn’t hurt to ask them to comp your property for you. But, keep in mind that your friends will be more biased than a licensed agent may be and might tell you your home is worth more than it actually is. An appraiser’s assessment is a good foundation to begin creating your list price. Then, take a look at the comparable homes in your neighborhood that have sold recently (preferably in the last six months, or less). If there are homes with similar upgrades, similar sizes, and conditions, then it may be fairly easy to create a base asking price. But, if your property is unique and there aren’t many homes to compare it to, you may find it difficult to justify or come up with a price (and if it’s not obvious to you what the price should be, it won’t be for prospective buyers, either).
Take your emotions out of the sale. When it comes to the listing price, the buyer showings, and the terms of the sale…it’s hard not to let your emotions get involved when you have to represent yourself and your home. Without a real estate agent, you are responsible for every bit of communication between different prospective buyers, title companies, escrow, and more. This means scheduling showing times, coordinating open houses, and eventually negotiating the terms of the contract. Most people can’t help but be attached or emotional when it comes to the sale of their home, which can result in additional stress or frustration when things don’t go as planned. Plus, it’s hard for someone who loves their home to see what’s wrong with it.
Prequalifying buyers. One pickle you don’t want to find yourself in is to have a buyer that you’ve committed to, only to find out later on that they don’t even qualify for your house. This can mean a huge waste of time and energy for you. But, there is one thing you can do to avoid this situation. You can ask for a letter from their bank stating how much they’re approved for, but keep in mind there are differences between a commitment and initial approval. This vetting may help you weed out non-serious buyers who may not be able to execute in the long run. In order to further protect yourself from flaky buyers, be sure to request a decent earnest money deposit as well (at least 1%), as this will further eliminate those who are not ready to commit.
Documents. If we’re being completely honest- real estate transactions can be a headache. A lot of that comes from the stacks of paperwork involved in the transaction.
- Residential Sales Contract- A signed contract is legally binding, and is the most important piece of paperwork in a real estate transaction. The sales contract includes the sale date, purchase price, dates for inspections, and any conditions in which the sale can be canceled, as well as any other terms.
- Offer and Counteroffer Forms- Counteroffer and offer forms can be used in support of the sales contract. In order to ensure there is clarity and no opportunities for misunderstanding, these forms can be useful. But, ensure that all conditions of the sale listed in these offer forms are also included in the sales contract.
- Residential Property Disclosure- As the seller, you must disclose all problems with the property to future buyers. This disclosure needs to include defects that are mechanical or structural in nature. An incomplete or dishonest disclosure can lead to lawsuits or canceled sales.
- Lead-Based Paint Addendum- If your home was built before 1978, then you will need to provide a lead-based paint addendum. Under normal circumstances, a buyer usually has about 10 days in order to have a lead-based paint inspection done. At the least, if your home was built after 1978, you need to provide a formal flier on the issue.
- Third-Party Financing Addendum- A third-party financing addendum is required when a buyer is needing additional financing via a mortgage. The document states that cancellation of the sale may take place if the buyer does not obtain financing in time. In addition, this document also protects the buyer from being able to get their earnest money deposit back in the event that their application is denied.
- Title Documents- Contact a local title company right away in order to facilitate a transaction. While title companies will handle the disbursement of documents involved, they will also coordinate the sale closing and ultimate transfer of funds. Title companies can help with many of the documents listed here.
- HOA- If you live in a condo community or any community that has an HOA, you will need to provide buyers with additional documentation. First, you will need to provide an addendum covering the mandatory membership of the homeowner’s association, and second, you’ll also need a resale certificate.
And unfortunately, this is just scratching the surface. If you want to do this right, there are many other documents that will help you in getting your house sold. Future buyers may ask for a survey that shows the boundaries of the property, plans, and permits for any additions made to the house, latest bills (property taxes and utility), proof of homeowner’s insurance, and floor plans or blueprints if available. The process is a complicated one for many reasons, but mostly because this is the largest transaction that many of us will ever partake in throughout our lives. With an investment of this size, it’s important to be knowledgeable and safe if selling a home on your own.
The Better Way to Sell Without an Agent
All of the things mentioned above take place during an FSBO or For Sale by Owner transaction. In this event, the seller AKA you have no representation by a real estate agent and wants to list and sell the home on their own. Many do this simply to avoid paying up to 6% in agent commission fees, among other reasons. But, an FSBO sale may save you some when it comes to an agent’s fee but can cost a lot more in time, opportunity, and expenses down the line.
But, there is a way to avoid dealing with all of the paperwork headaches mentioned above, and every other element of prepping a home to sell on your own. If you choose to sell on your own to an investor or cash buyer, you eliminate the need to pay unwanted fees AND deal with the stresses of the transaction. If you worked with someone like us, for example, you wouldn’t have to deal with any of the paperwork or communication with title, etc. We would handle all of that for you. And, you wouldn’t have to worry about sitting through hosted showing after showing only to find out that your buyer can’t qualify. We qualify instantly…because don’t have to qualify at all. We pay cash and can close when you need.
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