by Tolbert Rowe
Selling your own home without using the services of a Realtor can save you 5% to 6%, leaving you with more money available toward the purchase of another home. Selling your own home without the services of a realtor can be a pleasant way to meet strangers who could have ill intent and will see all that your home has to offer, including all of your lovely belongings.
Selling your own home without using the services of a Realtor will involve many interruptions in your life as strangers interested in checking out your home call and even stop by unannounced. Then they proceed to enlighten you as to why your home is overpriced and your expectations are unrealistic.
Probably one of the biggest reasons you can sell your house without the services of a Realtor is because you went online and looked up the value of your home on a website like Zillow. How simple it is to just go to a website, punch in your address, and have an immediate number. Heck, that’s probably how most Realtors figure out what your house is worth in the first place, right?
Wrong. Selling your home as a “For Sale by Owner” or “Fizzbo” can take much longer and actually put you in a position where you actually sell for less than what a realtor may have gotten for you, even after paying them a commission.
Don’t get me wrong, not having to pay a commission will save you money because you won’t have that expense to pay when you sell. But the cost to you can be much more than what you pay in commission.
Inviting anyone and everyone into your house for the purposes of showing it off to a prospective buyer can cost you much more than money. Anyone looking at your house will get a firsthand look at what you value, how you live and what amenities in your home are important. What you don’t know is what they will do with all this firsthand information about you, your family and also your neighbors.
How do you know if they are “qualified” to even purchase your home? As the seller, don’t you have a right to ask them about their income, their debts, how much money they have, what their credit scores are? If you do ask them this information, do you know how to interpret it? You certainly want to know if they are qualified. And I am sure a potential buyer will just love telling you their whole financial story.
Oh, but wait, the potential buyer can tell you that they got preapproved by an online lender who gave them a nice printout that says they are qualified for $300,000. But what the online lender may have missed was that the borrower’s income actually comes from a commission sales job that they started 6 months ago. And their “salary” is actually a draw against future commissions and cannot be used as income for qualifying because you need to be in commission sales for at least two years. Unfortunately you find this out after you have negotiated a price, had an attorney draft a contract, and the buyer has made application for a mortgage.
Realtors don’t show potential buyers properties they are not qualified to purchase. No Realtor wants to be a tour guide. A Realtor will require potential buyers get preapproved with a lender they have confidence in. And not many of them have confidence in preapprovals from online lenders.
Regardless of the perils of finding qualified buyers, determining how much your house is worth can be the really easy part with websites like Zillow. And don’t Realtors use Zillow to determine how much to list our home for?
A Zillow estimate or “Zestimate” is derived by compiling information about a property from the public domain, primarily tax records and building permit information. Then, based on square footage, room count, number of bedrooms, bathrooms and other factors a value is derived. But what is most important about a “Zestimate” is what it does not do.
A “Zestimate” does not smell the cat, see the roach hotels in the kitchen and bathrooms, see the mold growing around the kitchen ceiling, the linoleum and shag carpeting from the 1970’s, hear the noise of the cannery running 24/7 during the summer, and look at the high tension power lines emitting EMF’s 100 yards from the property line.
It also doesn’t see the updated stainless appliances with the updated kitchen, new windows (no building permit necessary), or the built in walnut bookcases, bamboo floors and crown molding.
The Zillow website even states, a “Zestimate is a good starting point as well as historical reference. But is should not be used for pricing a home”. So they admit that their estimate should not be used for pricing a home.
“Zillow says our house is worth $200,000 and we owe $178,000. We have to sell for $200,000 or we won’t have enough money to purchase our next home for $280,000. We can’t afford to pay a commission”. This is the exact situation that requires you to consult with a realtor.
Why would you not consult with a realtor, especially when you don’t have a lot of equity? You may find that a Realtor actually tells you the value of your home is greater than the Zestimate. Or, they tell you it is not worth what Zillow says it is.
In either case, you must know what your home could actually sell for. Zillow is not appraising your home, nor are they going to buy it. Neither is a Realtor. A Realtor will tell you what you can potentially sell your home for, based on sales of similar homes in the area, and most importantly, based on what is currently on the market. They will develop a marketing plan to expose your desire to sell your home to the most potential buyers using many different vehicles to do so.
Like it or not, your home is a commodity that is being offered for sale in the marketplace where buyers will be able to pick and choose what homes will best meet their needs within their budget and qualifying requirements. The variable that any buyer is going to consider first is what the seller’s value expectation is, which is the listing price. If the listing price of your home is too high, you will have very few showings.
Price your home too low, and you will have immediate showings and multiple offers. It is basic economics. Your goal is to get the most for your home that the market will bear. The Realtor will focus on pricing your home to attract potential buyers while at the same time not scaring off potential buyers by pricing too high so no one will even look at your home.
There is a situation where the services of a Realtor really aren’t necessary and that is the sale of a home to a family member and getting the highest price for the home is not a primary consideration. If the price is agreed upon and there are no issues with the property as far as condition or amenities, the transaction can be relatively simple.
The first step in these situations is to talk with a lender to determine which mortgage program works best for the buyer and will meet the goal of delivering the amount of money the seller is looking for at settlement.
A lender experienced in the sale of properties between family or friends can recommend a loan program that will work best for the buyer. Factors such as minimum property standards if borrower is using a government loan, seller paying of closing costs if buyer has limited available funds and recommending legal counsel for the drafting of an agreement of sale that satisfies loan program guidelines can easily be done by an experienced loan officer.
I must make it quite clear that any loan officer who gives advice about loan programs that will best suit the buyer’s needs is not acting in that capacity of a real estate agent and will not, and should not, be involved in the drafting of a contract between buyer and seller. They should recommend a local title company attorney or attorney to handle all contract language and for doing so will charge a fee.
Selling your home is an emotional event for most people. You should not trust yourself to negotiate in your best interest unless you are selling to a family member or close friend. Going it on your own and becoming a Fizzbo in the open market is very risky and can be extremely frustrating and possibly dangerous.
Being a Fizzbo when selling to a family member can be done very successfully. Making sure that the interests of both buyer and seller are accomplished requires the services of a loan officer well versed in these transactions. If considering selling your home to a relative call me at 410-819-3005 or 410-310-3520 to discuss details and I can provide references of those who I have helped make these transfers happen.