Wednesday, November 20, 1996
Real Estate
FSBO
by Bob Lukas
(MF DogWind)
What do a priest, a rabbi and a real estate agent have in common? They are all middlemen you will have to deal with at some point! And which of the three would you excuse from the table if you could? Satanists aside, I think you get my drift.
My wife and I participated in one of the 15% of real estate transactions each year that occur in this country FSBO, For Sale By Owner. A little too close to SOB, I think, a flip-flop of the acronym I'm sure the industry has implemented to describe us stubborn, greedy, selfish homeowners who feel we have the right to stop 6% of our homestead's value from slipping out the back door. (Get it? Homestead, backdoor?)
We sold our home ourselves for two reasons: 1. It was the only way to get out even money (including money spent on upgrades, landscaping, etc.)
2. We had a hunch we could.
What have we learned and what can I tell you without writing a book?
The most important realization is, real estate agents are the BEST way to sell your home. Yep, I think they're great! Too bad they charge so much. If you expect to be as successful on your own, you need to eat, breathe and sleep real estate for a period of time. (No, you don't have to go out and buy the European sedans they drive, but it couldn't hurt.) By the way, be prepared for agents who come around to preview your house and helpfully pester you with advice; they are there to get themselves known to you so that they can come "pick up the pieces" when you fail. Smile and say "Thanks for the advice!" Since I've sold, I've had 3 times the agents approach me as when my For Sale sign was up. "Did you take your house off the market?," they all ask. After I tell them the disappointing news that I actually sold it myself, I can't help, wondering why they think driving clients around in a beat up BMW is communicating anything about wealth?
You must have a home that people want to buy. If it is in disrepair, or your back door is a freeway on-ramp and your front lawn is like the Serengeti during the dry season, you are better off trying to pay a pro to do the hard sell. You also need a realistic knowledge of what your home is worth to price it right. Price it out of this world and it'll just sit. Comparable home prices can be found in agent's flyers (I get them on my doorstep all the time) or by having an agent appraise it for you. After that, it is time to prep the house and market the house, telling every neighbor and friend your house is for sale. We found the sign out front is what got the most responses. I never realized how many people cruise neighborhoods on weekends to see what the houses look like and to see what is for sale this week.
You need to have at least 3-6 months to sell. It is long enough to take the pressure off a slow start. You never want to procrastinate though, because a house on the market too long gets stale in all buyers' minds. (Nobody wants it because nobody before them wanted it so it must not be a good deal.) We were lucky enough to sell during a time when the inventory of houses was at a low. In fact, that was my first encouragement that FSBO could work; even if I could not find a buyer, chances are the buyer would find me!
You need a real estate attorney to: a. Walk you through a game plan, the forms and events of a real estate transaction with all disclosures that must be made to a buyer about your property.
b. Review offers made to you. Review the contract presented to you.
c. Advise you on snags as they arise.
d. Recommend a Title Company to set up escrow. I presented my buyer with three Title Company business cards.
You need a mortgage broker looking for business who is willing to pre-qualify buyers for you, to separate the wheat from the chaff. Lots of folks come calling, looking to pick up your house dirt cheap but they owe Macy's more than they'd care to have you know. Real estate agents spend endless hours with dreamers who cannot afford to buy a home; better you avoid it by screening folks as soon as you can.
In the course of this "no agents" deal, be prepared to spend a little money if necessary: a. Split some or half of that agent's commission savings with the buyer. Negotiate!
b. Pay the real estate attorney $500-$2,000 in a straightforward transaction (more if the deal gets convoluted).
c. Buy a sign, print flyers, host open houses, buy open house signs, pay for newspaper ads, and have a courier deliver flyers to area agents. (We offered to pay an agent who brought us a buyer 3% and be happy with the other 3% for ourselves.) Most agents said 4% or no way; we said OK, no way! and my suggestion is to leave Broker Participation Welcome until the end of your strategy ("Things to do when you start to panic").
d. Pay for reasonable repairs, pay customary seller fees (they vary by region/state).
e. AND BE WILLING TO KICK IN FOR BUYER'S ATTORNEY FEES (negotiable). Have you ever written a purchase offer or contract? Neither have most buyers. The last thing you want is a poor legal document that does not protect the buyer. It can come back to haunt you, especially if it is determined that you, in helping the neophyte buyer write it, were in fact the author, not the buyer, and all was slanted to your advantage. Looks real stinky in a court of law!
f. Buy books on selling your own home (spend time in Borders, but know that there are good ones and bad. Nolo Press had one called Buying a Home in California and although written from the buyer's perspective it gave me all the parameters of a real estate transaction to consider.
I was fully willing to roll over and sell my house through an agent if after six months we were dead in the water. We sold the house in 4 weeks. Presentation, negotiation and luck. Those three things, in that order, sold our house. And that's my story. Fool On.