So You Want To Sell Your Home Yourself (For Sale By Owner)
As the inventory of houses for sale shrinks and there are more buyers looking for houses than there is home inventory available, a seller’s market exists. That is exactly the market situation that exists in the early stages of 2017. Selling your house, especially in the markets of higher-rated school districts like Owen J. Roberts, Radnor, Lower Merion, Methacton, and Spring Ford, becomes much easier and it becomes tempting to try sell your house yourself (For Sale By Owner or “FSBO”). This is due to the laws of supply and demand. It is possible to you to do this successfully, but you need to know your limitations in order to manage expectations.
1. Get an Appraisal. The first step is figuring out the selling price of the property. A common, and accurate, point raised by realtors is that you may be leaving money on the table by pricing the property too low. DO NOT use Zillow, Trulia, Zestimate or any of those web based property valuators. I don’t know what algorithm they use to set a price, but it is frequently wrong and therefore unreliable. An appraisal does not mean calling up a local realtor and getting an opinion of value. Besides spending most of your time convincing you to list with them, the well-intentioned opinion of value may also not approximate the appraised value. The only appraisal that means anything is an appraisal from a certified real estate appraiser (which runs about $400 – $500) that lists the value for your property that a lender would use. It is of no value to have an agreement of sale on your property for $250,000 when your property only appraises for $200,000. Your buyer’s lender will only lend based upon the appraised value of $200,000, meaning your buyer will need to come up with another $50,000, which will most likely kill the deal, most likely through either the Appraisal Contingency or Mortgage Contingency contained in the Agreement of Sale. Get an appraisal.
2. You are not a Realtor. Realtors are excellent at selling houses as they have access to the existing inventory of houses listed in a particular area or particular area. You have no such access to these buyers as your house, as a For Sale By Owner (FSBO), will not appear in these searches. Do not put it on Craigslist as that may present a personal safety issue for you or your family. Therefore, you are left with the following marketing sources: a) posting it in the local supermarket; b) planting signs in the neighborhood or c) word of mouth. The most likely scenario is that someone will come to you because they love your house from driving past it on the way to their cousin’s house or they are neighbors and their son/daughter/best friend is looking to buy a house and it would be so nice if they were next door or right down the street (you know, that way they can babysit their grandkids easier). That’s your market and it’s not as big as the realtor’s market.
3. What do you do if a realtor calls and wants to see the house with their client. You must let them know what your plans are as the realtor will want to be paid for connecting a buyer with a seller. Your choices are: 1) pay zero commission as you will hire a lawyer to draft up the Agreement of Sale 2) have the Buyer pay the commission or 3) agree to pay commission from your proceeds. Get it in writing whatever option is chosen.
4. Do I need a Lawyer – No! Do I need a Real Estate Lawyer – Yes! Some realtors really are not excited when a Buyer or Seller has an attorney – and for good reason. Most sellers and buyers are under the impression that they should call up the attorney that did their will, or divorce or incorporation and have him or her get involved. This is a giant mistake as this is not the time to have an attorney that does not understand the transactional practice of real estate. This is why realtors often groan at the involvement of attorneys – because many are not well-versed in real estate law. Make sure you choose a real estate lawyer, one whose practice is not less than 75% devoted to the practice of real estate. This is not adversarial law, but a negotiation between two people with similar, and not divergent, interests. Just like you would not have your foot doctor perform open heart surgery just because each is a doctor, you should not have a non-real estate lawyer anywhere near your transaction.
5. Should I pull up a contract off the internet? Definitely not! Real estate laws vary from state to state. You should have your Pennsylvania real estate attorney draw up the contract, preferably using the Pennsylvania Association of Realtors (PAR) form. Your PA real estate attorney can guide you through the process from contract to closing for a price that should not exceed $1,500.00, regardless of the selling price. If your transaction becomes a nightmare, you will probably pay more, but you will be glad you had an attorney drafting up Addenda to the original contract, and not your realtor, who are well-trained in selling real estate, but not so much in drafting contracts. Like the divorce lawyer handling your real estate transaction, it is better to have your expert real estate lawyer prepare your important agreements rather than your realtor.
6. Remember, timing is everything. Now is the right market for a FSBO. Supply is low, but demand is higher. You may see some realtors bragging that a home sold in three days! Wow, they are miracle workers, right? No, the sale was a function of supply and demand, coupled with proper pricing. Now go sell that house so you can move into Owen J. Roberts, Radnor, Lower Merion, Methacton, or Spring Ford School District. Don’t forget to call the real estate lawyers at Wolf, Baldwin first!