How to Sell a House By Owner – What You Should Know
Selling a house by owner (FSBO) is a sales tactic where the homeowner lists and sells their home without help from a third party. So in simple terms, it’s selling your house without assistance from real estate agents and realtors. Also called “sale by owner”, this system is a fairly common sales process in the USA.
While there are definitely financial upsides to selling your home yourself, it’s definitely not always an easy process. Aside from the normal responsibilities that come with selling a home, there will be many additional steps, processes, and considerations that the homeowner has to make before inking the deal.
But if you’re up for the challenge, selling your home without a realtor can be a great way to get a little extra cash for your property. To help you along with the process, we’ve put together this guide with helpful hints, common questions and answers, and general guidelines on how to sell a house by owner. So without further ado, let’s get your house sold!
Pros and Cons of Selling a House by Owner
As you can imagine, taking on the responsibility of selling your own home or property will come with advantages and disadvantages. Things like profitability, time investment, responsibility, paperwork, documentation, and expertise will all come into play. While every property and every sale will be a bit different, here are a few of the most common pros and cons you might run into when selling a house by owner.
Pros of Sale By Owner
Generally, the most obvious pros of selling a house by owner will be financial. However, property owners that decide to handle the sale themselves will also have quite a bit more control over the entire sales process.
Make More Profit By Paying Less Commission
One of the first questions people ask when learning how to sell a house by owner is “how much will I really save?”. To get a better understanding, let’s look at how realtor commissions work.
Real estate agents make their money based on sales commissions. In a standard real estate transaction, there will typically be a “buyer’s agent” and a “seller’s agent”. As you may assume, the buyer’s agent represents the buyer in the transaction and the seller’s agent represents the seller.
While real estate agents may increase or decrease their standard commission on any given deal, the typical commission an agent will take is 3% of the total sale price. This means that on a house that sells for $500,000 the buyer’s agent will receive a $15,000 commission and the seller’s agent will receive a $15,000 commission.
However, when you sell your own home, at a minimum you will get to keep the 3% seller’s commission. Depending on the sale price, this will mean making at least a couple of extra thousand dollars than you would’ve otherwise.
Control Your Listing Price
Another advantage of selling a home by owner is that you’ll have more control over the specifics of your listing.
As the homeowner, you will have a say over things like the listing price, showing times, and marketing strategy, but at the end of the day, the listing agent will as well. Since the agent only makes commission once the house is sold, they will want to make sure it’s priced competitively to sell and that they can show it to any interested parties.
However, this can also mean that their suggested listing price is lower than you’d hoped for. For example, while you may think you can get $500,000 for your home, your agent may feel that it will have a better chance of selling in a reasonable timeframe at $450,000.
This does not mean that you wouldn’t eventually find a buyer for $500,000, but it may take a considerable amount more work and time to find that buyer, which will of course impact the agent’s bottom line.
Control The Marketing of Your Listing
A real estate agent may also want to spend considerable money on marketing your property for sale. This may include things like property photos, property videos, print materials, and staging furniture.
While all of these things may help to sell your house, they all come with a considerable price tag. When you decide to sell a house by owner, you have the option to choose whether or not you take on that additional overhead right away, or if you wait until you feel it’s a necessary investment.
Without a listing agent in the mix, you will have the final say when pricing your home.
Control The Showing Schedule
While a real estate agent will almost always list your property on sites like Zillow, Realtor.com, and the MLS, the actual “selling” of your home will almost always happen in person.
Whether the agent has set up an open house or is just scheduling individual showings to interested buyers, it’s very important that they’re able to bring the buyer onto the property and really sell it to them. While this is usually a non-invasive process, there may be times that your realtor needs to show the house that may conflict with your schedule.
Since the agent’s entire profit comes from the commission on the sale of the home, if you make it complicated for them to show the property, it’s likely they won’t remain your listing agent for very long.
When you sell a home by owner, you have the final say on when the property is shown and who is able to see the property.
Selling a House By Owner – The Cons
Just there are a number of pros to selling a home by owner, there will be some downside as well. If you’re new to this and are just learning how to sell a house by owner, you should definitely pay attention here.
Make Less Profit On The Sale
The biggest downside to selling your home with a real estate agent is that you run the risk of making less profit on the sale of the home. As mentioned above, the realtor makes a 3% commission on the sale of the home, so if your home sells for $500,000, you’ll immediately be taking $15,000 off the top to give to your agent.
However, this does not account for the expertise that the agent brings to the table. A good real estate agent will have experience in negotiations, a strong network of buyers, and an understanding of the market that can be utilized to really get the most for your home.
It’s An Investment Of Time Not Money
Preparing a home to be sold and finding the right potential buyers for a property can take a lot of time. Preparing and posting the listing online, getting photos taken, setting up the house for showings, scheduling the showings, and every other little thing that needs to be done can take a lot of time – especially if you’ve never done this before.
While you may be saving yourself that 3% commission on the sale of your home, you’ll definitely be putting in a huge amount of your own time to get a deal closed. For some homeowners, taking on these additional responsibilities makes sense from an investment standpoint.
However, many homeowners may find that the time required to prepare and sell their home is far greater of an investment than the 3% they’ll be giving to the listing agent.
Mistakes are a real possibility
Due to the absence of real estate experience, selling a house by owner can come with mistakes. For instance, the sale price may be too high. When amateurs price homes, it’s possible to come to the wrong valuation. This is why most people prefer to hire a real estate agent.
As to who pays closing costs when selling a house by owner, it may be either party. It’s common practice for the buyer to pay the closing costs. However, when selling a house by owner, the homeowner offering to pay the closing costs can fast track the sales process. It’s all a part of the typical fees for selling a house.
Knowing how to sell a house without a realtor includes understanding when to take on this task. Here’s when the homeowner should solely handle the real estate sales process:
- When there are already potential buyers
- When selling manufactured or mobile homes
- When there is no urgency in the need for a sale
- When the market demand is high
Paperwork & Services Needed For Sale By Owner
Although you may not need to hire a professional realtor to set a sales price, if you are well connected, getting buyers in the front door may not be too hard. However, closing a sale is near impossible without a real estate attorney. Also, home sellers may need the professional services of an escrow agent. In the case of the latter, you can find one using the American Land Title Association directory.
An escrow agent is vital to the process of selling a house by owner. They are the core contact point for exchanging necessary paperwork. Specific laws govern the sales process in the US. Therefore, whether or not the home seller hires a listing agent, these laws have to be followed.
For example, the Fair Housing Act makes discrimination against certain classes of people illegal and punishable by law. All in all, the housing laws in the seller’s state will determine the nuances of a contract and extra paperwork.
If you are not sure about the contract requirements, you should hire a real estate attorney. Alternatively, you can check out what this contract of sale should contain at FindLaw.
After doing all of the hard work that characterizes a sale by the owner process, some people prefer to close out the deal with a fee-only broker. Sometimes, this may be a great option for home sellers not confident of closing the sale themselves.
How To Sell a House By Owner: Important Steps
Selling a house by owner can be tricky but it’s definitely not impossible. With the right guide, the right resources, and plenty of hard work, any homeowner should be able to sell their property without the need for a realtor.
Step 1: Determine a fair market price for your home
This is by far the most critical aspect when it comes to successfully selling a home. If the home is priced too low, you run the risk of missing out on profits. If it’s priced too high, it may take months (or even longer) to find a buyer that’d be interested in purchasing. Finding the sweet spot for your valuation can be tricky, but luckily there are plenty of resources you can use.
- Check online valuation websites like Zillow and Trulia for the valuation of your property and the properties surrounding it. This will give you an idea of the general market value for your property and the area.
- Speak to a real estate agent about performing a market analysis. Even if you don’t end up engaging the realtor to sell your home, you can still likely get plenty of good information in regards to fair and accurate pricing.
- Hire a certified appraiser to create a valuation for your home. This will be one of the most accurate ways to get an up-to-date valuation on the home, but will also typically have the highest cost.
Step 2: Get the house ready for sale
The next thing you’ll want to do is to make sure the property is “sale-ready”. This involves any number of things from cleaning the house, improving the landscaping, making minor repairs, and even making some major repairs.
It’s important to understand that the amount that you get for the home will be directly related to how appealing the home looks to buyers. So even if the home has plenty of space and is in a great area, if a prospective buyer thinks that the house is going to be a “project”, then they are likely going to make an offer well below your asking price.
If the homeowner can’t look at the home objectively, it’s usually a good idea to bring in a trusted friend/third party to get their opinion. Most importantly, when they give you feedback, you need to listen. If they notice a smell, broken light fixtures, poor landscaping or anything else for that matter, it’s likely a potential buyer will too.
Step 3: Marketing the home
When it comes to selling real estate, there are no set rules as to what marketing approach is best. Instead, selling a house by owner requires a combination of different marketing techniques. Home sellers can use any of the methods below:
- Use High-Visibility Signage. Whether your home is on a busy street or in a quiet neighborhood, it’s always a good idea to have visible signage out front to let passerby’s know that the home is for sale. Signs can be purchased from a number of different retailers including Home Depot, Lowes, or even Wal-Mart.
- Create Flyers and Brochures. Creating print materials like flyers and brochures is a really effective and low-cost way of getting the word out about your property. Post the materials in high-traffic areas, place them on car windshields, and give them to friends and family to share with their network.
- Online Advertising. Another easy way to bring attention to your home is to pay to promote the listing on popular real estate search websites. For example, sites like Realtor.com, HomeFinder, and Zillow will all give you the opportunity to promote your home to a wider audience for a fee.
- Host Open Houses. Hosting an open house is one of the oldest, yet still, most effective ways to expose your property to potential buyers. Using this technique, house sellers open the home for a set time period, i.e. 11am – 3pm on a Saturday, and invite the public to stop by. Using this tactic, you’ll have the opportunity to meet face-to-face with a much larger pool of prospective buyers than you would via online methods.
Step 4: Negotiations
The toughest part of selling a house by owner is dealing with the nuances of real estate negotiations – especially when you’re dealing with an experienced buyer’s agent. This process can take some time and will likely involve multiple calls, emails, and text messages while a deal is hammered out.
In almost every situation, a buyer will submit their first offer below the listing price with the understanding that some negotiation will occur. The buyer’s agent will strategically pick that initial offer based on the current asking price and the maximum a property owner is willing to pay.
While an experienced real estate agent may be used to the negotiation process and how to deal with offers, it can be a complex process for someone who’s never done it before. While there are a number of great resources available online that will help with the process, the best bet is to start by watching some videos on Youtube that cover the basics of real estate negotiations before actually putting your home up for sale.
Step 5: Closing the deal
Once you’ve found a qualified buyer, worked out the sale price, and all of the finer points of the contract, it’s time for you to close the deal! While every other step of the process has brought you to this point, all of your hard work and effort could be for nothing if the closing isn’t handled properly.
In almost every situation, this part of the sale usually takes place in a lawyer’s office. With the help of a real estate attorney, a contract is drawn up, reviewed by both parties, and then legally executed. Additionally, the authentication and exchange of legal documentation, as well as paperwork, will take place during this stage.
In addition to a real estate attorney, you’ll also need to work with a title company and an escrow company to make sure that all aspects of the deal are above board.
Alternatives To Selling A Home By Owner
If you know that you’re not interested in engaging a real estate agent to help sell your home, but think that the for sale by owner process may be a bit more than you can handle, you do have some other options.
Selling your home to a local home investor like SFL Partners will take the headache out of preparing and listing your home, won’t come with the expensive commissions that working with a realtor will, and best of all will allow you to close the deal in about a week.
Once you submit your property for review to SFL Partners, we perform a quick check on the property, crunch some numbers, and get you a fair, no-obligation cash offer for your home in about 24 hours. Best of all, we will buy a home that is in any condition and in any area.
So even if your house is in total disrepair and you need to sell it “as-is”, SFL Partners is ready to make the process fast and easy. Want to find out how much you can get for your home? Just fill out this form to get started.