Selling Your Own Home? You May Want to Reconsider (But here are some tips if you do)

Is it Worth it to Sell Your Own Property?

In this article, we’ll explore the good, the bad, and the ugly of selling your home for sale by owner. I’m typically a positive guy so I’d like to start with the positives:

You “may” actually get to keep more of the money. After all of the additional risk you take on by attempting to sell by owner, it is only normal to assume that you’ll be compensated for it. Another positive is that you’ll definitely learn through the process about real estate transactions, negotiating, contracts, time management and stress management. Should you decide to undertake the task, here are some tips and things to be aware of throughout the process.

Pricing

There are only 3 things that need to happen to get a house sold. Yes only 3! First of all, the house has to be priced correctly. More often than not, when someone sells their home themselves, they really don’t have a clue where to price it. The tendency is to price the home as a product and add in some emotional value as well. Residential real estate is a commodity rather than a product. What that means is that the market dictates the price more than the seller Think of a product like a Wendy’s cheeseburger. Wendy’s creates that product and then sets a price that they need to make in order to earn a profit selling that cheeseburger. A Wendy’s cheeseburger is a product. They also factor in marketing as a part of that price because they have to create enough demand to have people come in and willingly pay the established price and Wendy’s makes money. Your home is like a barrel of oil, or a commodity. There is a supply of available oil, and a demand for that oil. If the supply is very high and demand is low, the price of that oil will drop in order to be able to sell it. Conversely, if the supply is limited and the demand is high, the price will be higher. The housing market is driven by supply and demand as well. This is true on a micro-economics level within certain geographic areas such as specific neighborhoods or cities or on a macro-level such as nationwide. Homes are difficult to move around so you pretty much buy them where they sit. Certain areas and neighborhoods are more or less desirable which does affect pricing. As Realtors we have access to a huge database of information and we can research in a matter of minutes what a home could potentially sell for based upon comparable sales in the surrounding area. Research suggests that missing the price by as much as 5% will effectively eliminate up to 45% of your potential buyer pool. Pricing is critical!

Tell Enough People About

It Next to pricing the home right, this is where many agents stand out. When listing your home by owner, where do you begin? As Realtors, we’ve done the research and know the most likely sources where your buyer will come from. Then we can effectively market your home to maximize exposure to potential buyers. Agents take all of the risk up front by spending money to market your property without any guarantee that it will sell. When you finally pay your agent for their help, you already have a 100% guarantee that the marketing worked. Remember we don’t earn a dime until your property is sold.

Without the correct marketing, your home will be exposed to a limited amount of potential buyers which results in a longer sale cycle as well as reduced selling price. Ask yourself, what is the best mix of marketing to maximize my home to the largest number of potential buyers? In addition to advertising online through the MLS and hundreds of other websites and placing a sign in the yard, a great agent will employ other marketing tactics to bring the most potential buyers to see it. We currently use a mix of internet, email, social media, television, magazine, and signage to direct people to see your home. All of this marketing isn’t cheap and is critical whether you are selling by owner, or hire a Realtor.

What about open houses? If you don’t have anything else to do with your precious time and want to stay at home while allowing stranger to walk through your house then by all means, have an open house. They are a great way to get traffic through the home although success in selling a home via an open house is actually quite low. Agents love to hold open houses because it gives them a chance to meet potential buyers and gain more clients. If the house happens to sell, that is just a cherry on top for the day but most likely, not the main reason the house is being held open in the first place.

Keep it Ready to Show

The last puzzle piece to a successful sale, whether you sell by owner or not, always falls on the home owner. The property needs to be in top condition and ready to show at a moments notice. An agent may be able to recommend a cleaning service, stager or handyman to help keep things in top condition but ultimately if the house is not presentable, it won’t command top dollar. Some tips to optimize presentation include removing any personal photos and keeping minimal items on the countertops. Replace worn or damaged carpeting and repaint walls to a neutral color. It is true that spending money to upgrade the kitchen and bathrooms will get you the biggest bang for your buck but be cautious not to upgrade the house too much where the neighborhood won’t support the price your are asking. Additionally, the property can never be too clean!

Showings

Let’s talk about showings. You’ll need to establish a communication method where potential buyers can reach out and schedule showings. Most sellers would provide their personal cell numbers or email addresses to schedule showings. That works in most cases. Then you need to determine how the buyer will gain access. Will you be home while they are viewing the property? That is fine, but it also makes for an awkward experience for the potential buyer to feel like they are walking through their potential home and not someone else’s home. After the showing, how will you follow up with the buyer to get any feedback so you can adjust your marketing plan? How do you secure the property once they have seen to keep you and your family safe? My team uses electronic lockboxes that use codes only available for a single day and never accessible between 9:00pm and 7:00 am.

You’ve Found a Buyer

Congratulations, you have an interested buyer. Now it’s time to negotiate. The better you do in the negotiation, the more money you get to keep. Unfortunately, you’re already starting off at a disadvantage. How is that possible? The buyer knows you are selling your home yourself and are not paying an agent in the transaction. They will want to share in that “deal”. Since you now have extra money coming to you, they will try to get concessions on the sales price. Since you don’t have a large pool of buyer’s wanting to buy, you are more likely to give concessions.

The truth is that everybody pays a commission. Sometimes it is to an agent, sometimes it is to the buyer, sometimes it is to both. In most real estate transactions in Colorado, the agents on both sides of the transaction (buyer and seller) are paid by the seller. Buyers love using agents to find the right home for them because they know they have a professional working on their behalf to help locate the perfect house and help them negotiate an acceptable deal. Many times a seller that is selling themselves still pays the buyer’s agent a co-op fee. This co-op fee is usually around 3% of the purchase price. It is also important to note that the co-op fee is paid in transactions where the seller has their own agent. It is taken out of the percentage agreed upon at the time of listing your property.

Now this puts you in a tough situation because the buyer has a professional negotiating on their behalf who knows the ins and outs of the real estate industry against your own negotiating abilities. Push too hard, and the buyer will walk away and you are starting again from scratch. Then there is all of the other points of the contract to negotiate like dates and deadlines, contingencies, earnest money and financing. Is the buyer even loan worthy? All of these things, your agent will check out for you and make the process go smoothly.

Getting to Closing

You’ve successfully negotiated the contract and now the buyer schedules an inspection. What should you disclose in order to stay out of legal trouble? What things are required by Colorado law for the seller to provide? After inspections and another round of negotiating, you still have to navigate title insurance, appraisals, surveys, home owners associations, utilities, etc. While doing everything above, you still likely work your regular full time job. I hope you are starting to see the point and understand why so many by owner sellers end up listing with a Realtor. In the end, you’ll sell your home for the most possible in the shortest amount of time and the process will be handled by a professional to get you to a smooth closing with a lot less stress. You will have an ally in your corner to guide you throughout the process. If you would like to learn more about the services we provide. Contact us via the link above.