For Sale by Owner Closing: 5 Suggestions to Maximize the Advantage of Selling your Home Solo
Selling your home without a licensed realtor may seem like a great idea to save money. After all, having that extra 5-6% of the sale price can go a long way! But attempting a “For Sale By Owner” (“FSBO”) transaction definitely comes with its fair share of risks and hardships. Being properly prepared, along with hiring the help of a real estate attorney, may make the process a lot more manageable.
The For Sale by Owner Closing Process
In general, selling one’s home without a realtor is usually the more difficult route. But the potential for savings is sometimes too good to forgo. Before proceeding as an FSBO seller, you may want to consider the following list of general benefits and disadvantages you may encounter:
Pros of For Sale by Owner Closings:
- Avoid paying a listing agent to represent you as the seller which can usually cost between 2.5-3% of the sale price in commissions.
- You may be able to solicit friends and family members to buy your property without violating an ethical standard by which the realtor is held.
- You have control over the process and other aspects of selling your home.
Cons of For Sale by Owner Closings:
- Typically, an FSBO property sells for about 6% less than one being handled by a realtor.
- You may be legally responsible for misrepresentations or mistakes found on the sale contract with the buyer.
- You may find yourself having to negotiate with professionals who are used to negotiating similar contracts every day.
- Having to handle every aspect of the sale may become overwhelming.
Maximizing your For Sale by Owner Process
For the undeterred Seller, the following list provides five considerations to maximize the advantage of selling your property without the help of a licensed realtor:
1. Know the Market!
Before a home is even listed, one of the first tasks is getting an idea of the demands of the particular market and how your home may compare to others in the neighborhood.
This is where an objective perspective and professional knowledge of a realtor would be highly beneficial.
Without hiring such a professional, a FSBO Seller must study the market and recent sale history of the surrounding area without being influenced by the emotional attachment they may have to the home.
The Seller will also need to identify and be able to properly relate to potential buyers the pros and cons of their specific property, such as being in a desirable school district or away from high-traffic roadways.
After due consideration, the Seller will have to come up with an asking price that is both attractive to buyers and able to satisfy their required net proceeds.
Statistics show that this is historically the most difficult aspect of selling a home solo, as on average an FSBO sale is listed approximately 6% less than those represented by agents.
To overcome this challenge, a FSBO Seller should conduct extensive research into the sales of the surrounding area and remember to remove all emotion from the transaction – as hard as that may be!
2. Prepare the Home to be Sold.
Any Seller attempting to sell their property without a realtor will inevitably encounter the challenge of preparing their home to be shown to potential buyers.
This preparation comes in two phases: first, before being listed to attract buyers and, second, fixing needed repairs identified after an inspection.
While pretty landscaping, fresh coats of paint, replacing light bulbs and tidying up may all be easily accomplished by the solo Seller, more complicated repairs such as roof leaks, broken toilets and unpermitted prior improvements may prove to be particularly problematic.
Realtors usually are able to provide a list of professional options such as contractors, landscapers and handymen to quickly and cost-effectively repair items needed to avoid the cancellation of a pending contract.
Shopping around for third-party repair persons prior to listing a home for sale, will avoid the last-minute rush, may reduce the time necessary to make to ultimately make repairs and will ensure a Seller secures the best price available.
3. Figuring out how to market to and negotiate with potential buyers.
Aside from having access to the multi-listing service (“MLS”), most realtors are members of larger brokerages that allow them access to various other listings and marketing materials.
An Owner attempting a FSBO transaction must be prepared to advertise and market their property, which will inevitably include having to answer ongoing inquiries and questions related to the property and, ultimately, show the property to potential buyers.
One solution would be to utilize certain websites that assist with the listing of FSBO properties or post “for sale” signs on your property and advertise in the local newspaper.FSBO transactions will also involve having to negotiate with potential buyers and, hopefully, manage multiple offers.
Often times Owners may find themselves negotiating with experienced realtors or real estate attorneys. Being fully prepared and aware of the local market can help.
4. Coordinating with the title company and other third parties.
After an offer is accepted and the contract is signed, the closing process begins.
This involves several moving parts and the involvement of third-party professionals such as the title insurance/closing agent, inspectors, appraisers, and surveyors.
Aside from the need to be able to coordinate with all these parties and schedule timely visits to the property, the Owner must be able to understand the purpose and objective of each party.
This can become overwhelming for the average Owner who is not familiar with the process.
However, with proper research and self-study, as well as, being able to calendar all the necessary visits, a FSBO seller may be able to tackle this challenge effectively.
5. Involving an Attorney.
An experienced real estate attorney may be invaluable to a FSBO seller and can assist with matters such as the preparation of the Purchase/Sale Contract, drafting of the Seller Disclosure form, holding and confirming receipt of required escrow funds, delivering condominium association documents and many other services.
Further, with the exception of only a few counties in Florida (such as Miami-Dade and Broward), the Seller has first right to select the title insurance agent. Choosing an attorney to serve as your closing agent allows you to have the best of both worlds – the security of knowing that all matters related to the closing will be handled properly, as well as, the representation of an advocate who is looking out for your best interests during the contract preparation phase and throughout the closing process.
Having an attorney in your corner may also alleviate some of the anxiety associated with negotiating the terms of the agreement with the potential buyer, as well as, coordinating with their realtors.
While placing your home for sale by owner may not be the easiest or quickest option, a well-prepared FSBO Seller may be able to successfully sell their property – especially when soliciting the help of a well-versed real estate attorney.
To ensure your interests are being protected while selling your property solo, it is always advisable to hire an attorney who can serve as both the closing agent and your representative, if needed.