Tips To Sell Your House For Sale By Owner

Tips for Selling Your House “For Sale by Owner”

Do you know what a “For Sale by Owner’s” biggest obstacle is and why their homes fail to sell? They are selling at a price far above what similar homes are selling for in the same neighborhood.

The value of your house is tied to the selling price of other similar homes in your neighborhood. Unfortunately this is the case no matter how much time and money you have invested into your garden, bathrooms, or kitchen appliances.

You have to balance the cash you want with the actual value of the property, and that’s where it gets complex.

1.       Today it is very easy to estimate your home's true market value by finding the selling price of similar homes in your neighborhood. Using the internet is the easiest way to get this information.

Another option is to hire a real estate appraiser to put a value on your home, based on its condition, plus past sales of comparable homes. This appraisal can be used to help justify your price when negotiating with buyers. Keep in mind that this service will cost you between $200-300.

Now that you have neighborhood comparable sales information, here are some helpful tips when setting a selling price for your house:

·         Make a list of the homes that are similar to your own in terms of size and number of rooms.

·         Take a walk around your neighborhood and write notes and pick up flyers from the homes you have on your list. Determine if the lots are bigger or smaller than your own. Is the general condition better or lacking than your house?

·         Based on your observations you can set your asking price higher or lower than the selected neighborhood homes.

2.       Don’t start with the amount of cash you need and work backwards to a price. Consider closing fees, other selling costs, and the amount of cash you want after the sale. Set your price based on how your home compares to similar size homes in the same neighborhood.

Here is information on fees that must be paid by the “For Sale by Owner” Seller on closing day.

·         Buyers mortgage costs: In most states, the Seller traditionally pays fees associated with the Buyer getting a real estate mortgage loan. These fees are typically 1% to 1.5% of the loan amount.

·         Other Closing fees: These include attorney fees, title search, and recording fees (see second page of settlement statement). A good estimate is 1% to 1.5% of the sales price.

·         Brokerage fees or commissions can easily be the Seller's biggest cost. If the Homeowner lists the home with a real estate agent, he can expect to pay between 6% and 7% of the purchase price. If the homeowner sells the home on his own, but accepts a Buyer from a real estate agent, the homeowner will usually have to pay half of the above amount or 3% to 3.5% of the purchase price.

·         The best situation is where the Seller advertises his own home, gets his own Buyer, and pays nothing to real estate agents.

·         The Seller can limit his costs by stipulating in the Sales Contract a maximum amount he will pay towards the Buyer's mortgage costs and Other Closing fees.

·         Real Estate Brokerage fees are subject to a separate agreement with the real estate agent and are not usually limited in the Sales Contract.

·         See "Net Cash from Sale" for a calculation of how much cash you can expect after the mortgage balance and fees are subtracted from the selling price.

3.       Another alternative to consider is special financial terms when selling your own home. A Buyer might be willing to pay more for your house if he or she can assume your current mortgage, or if you are prepared to provide Seller financing.

The following can help sell a “For Sale by Owner” home:

Assumable Mortgage: If a buyer can assume your present mortgage without having to qualify with a mortgage company, your home might sell for a higher price than a similar house without an assumable mortgage. 

·         This is especially true when the interest rate on your mortgage is lower than present market rates. Check with your mortgage company to see if your mortgage is assumable at an attractive rate.

In some situations a good Buyer is temporarily unable to get a big enough mortgage to purchase your home. The Buyer's funds are tied up in an IRA or other long-term investment or Buyer has children in the last year of college. In these cases you could try the following:

·         Balloon Mortgage Loan: The buyer begins by making equal monthly payments, but must pay the entire balance at the end of a short period (commonly between 6 months to 3 years).  This type of Seller financing gives the Buyer time to arrange a regular mortgage loan through a bank and repay the Seller.

·         Regular Mortgage: Usually, this is a second mortgage to cover the difference between the price of the home and what the Buyer can finance.  This differs from the balloon in that the buyer makes equal, monthly payments until the mortgage is paid off. This type of mortgage is usually implemented with a Mortgage Bond.

·         The form used to certify that each of the above mortgages has been paid is called a Discharge of Mortgage. You can usually reduce your legal fees by filling out forms and having a lawyer review them rather than draft documents from scratch. Forms for balloon and regular real estate mortgages are available at most large office supply stores.

“Lease with option to buy” or “Rent to Own”: Is an option when a home becomes impossible to sell because prospective Buyers can't qualify for a mortgage.

Your prospective Buyer rents the home with an option to buy within six months to two years. If he exercises the option, the Buyer/renter pays a lump-sum of 3%-5% of the purchase price to the Seller. In addition to this down payment, the Buyer/renter pays a monthly sum (usually $50-$300) in addition to the regular rent. This monthly sum is credited to the purchase price and is non-refundable.

“Lease with option to buy” or “Rent to Own" agreements are available at most large office supply stores. 

4.       Home prices tend to be higher in the spring and summer with the exception of Florida, Hawaii, and a few other sunny spots. Buyers usually start looking for homes in the Spring and Summer, making it harder to get a high selling price in the Winter when fewer Buyers are looking for homes.

Keep in mind the following ideas during this time of the year:

·         When there are less Buyers out searching for homes in the Fall and Winter months, a “For Sale by Owner” seller may have to lower the selling price to get a Buyer’s interest at that time of the year.

·         It is also a good idea to keep in mind that families with children don't want to move during the school year.

·         Home Buyers come out in droves during the Spring and Summer months. This abundance of Buyers will allow you to set a higher price during this time of the year.

·         In warm-weather regions, the above trends are reversed. Buyers avoid the hot summer months and do their house hunting in the Fall and Winter months. Warm-weather region owners should set a higher price during this time of the year.

5.       It is important to make a list of the items that are not included in the sales of your home. Expensive chandeliers are usually bolted to the ceiling. If you want to take your chandelier with you, list it as NOT included in the sale. In general, items that are bolted to a wall, floor or ceiling or attached by a pipe are included in the sale.

Be sure to disconnect valuable chandeliers, grandfather clocks, window treatments or other      “built in" units you want to keep. Be sure to list them on the sales contract as personal property.

Some of the biggest disputes between Buyers and Sellers arise when the Seller attempts to remove an item the Buyer believes is part of the sale of the property.

A Seller might ask for a higher price if the sale includes appliances not usually included with the sale of a home.  Again, the general rule is that anything bolted down or connected by a gas line is included in the sale of a house.

Usually Included:

·         Stove

·         Dishwasher

·         Gas Grill (even if outdoors)                        

Not Usually Included:

·         Refrigerator                                      

·         Clothes Washer               

·         Dryer

Chandeliers and wall clocks are technically part of the property. If they are valuable family heirlooms, take them down! Replace them with good looking, inexpensive items before showing the house.

Items that often cause the most problems between sellers and buyers:

·         Chandeliers                       

·         Wall clocks

·         Kitchen cabinets              

·         Window treatments