Cut The Middleman

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Written by Forbes.com, June 30 2011   

By Morgan Brennan

Over the last 20 years Barbara Marquardt has sold five homes without paying a dime in commission to a real estate agent. Her latest "for sale by owner" triumph was in October, when her five-bedroom, 3.5- bathroom colonial in the upscale town of Basking Ridge, N.J. fetched $785,000 after five months on the market. She and her husband bought the house for $685,000 in 2003 and spent $25,000 fixing it up over the years. Marquardt figures FSBO added $30,000 to their net profits from the house.

At a time when many home sellers are looking at slim gains or even losses, agents' commissions have actually been rising--from an average of 5% in 2005 to 5.4% last year, according to Denver-based Real Trends.

So should you try selling your home yourself? That depends. The proliferation of Internet real estate sites makes it more feasible, but the reason Realtors have been demanding a bigger cut is that selling a house in this weak market takes a lot more work.
In Pictures: Tips For Selling Your House Yourself

"Selling a house is not easy, and we don't tell people it is," says Eddie Tyner, vice president of classified marketplaces for Tribune Interactive, which owns ForSaleByOwner.com. "But if you're willing to put in the time and do the research, it's something anyone can do," he adds.

Maybe. But sell-it-yourselfers are still a small minority. According to the National Association of Realtors, FSBO homes made up only around 5% of completed sales in 2010, not counting the 4% of deals between family members and other acquainted parties.

Here are some points to consider.

THE RIGHT PROPERTY

If you're trying to unload that $70,000 vacation cottage that your uncle willed you, and it's two hours away, hire an agent. Your savings from selling it yourself won't be worth the effort. At the other extreme, if you've got a $3 million mansion to move, your upscale target clientele probably isn't going to want to dicker with you directly. Get a Realtor-- preferably one who drives a Lexus, Cadillac, BMW or Mercedes.

Where the FSBO strategy can work is in the broad middle market, as with Marquardt's property.

TIME AND TEMPERAMENT

Surprisingly, FSBO experts say the biggest barrier for many homeowners to selling a house themselves is emotional. Your home holds priceless memories. Maybe it's where you raised your kids. Are you ready to stow away those family pics contributing to the clutter and bite your tongue when lookers diss the decor?

"The best advice I can give someone is to be unemotional," says Marquardt, who coaches novice FSBOers for free. "You have to look at it as a transaction, or you can't do it," she adds.

Another hurdle is the considerable time it takes to research your home's value, prepare marketing materials and then organize and host open houses on the weekends and showings on the weekdays--possibly for months on end. Think of it as a part-time job.

"Calculate how much money your time is worth and figure out whether it's worth doing it," says Marquardt.

So be honest with yourself about whether you have the temperament, let alone the time, patience and marketing skills to do a bang-up job. You might be ready to put more effort into selling the house than an agent would. But if you're going to skimp on research or marketing, you'll likely end up sacrificing in a lower sale price what you'd save in commissions. Plus, you'll have sacrificed your weekends.

THE PRICE IS RIGHT

Fetching top dollar for your home requires you to do a lot of things well, and a big one is setting the right price. "Pricing is the one thing that people are most concerned about," says Tyner. "Get it right, and you can sell your house quickly and maximize what you get for it."

Fortunately the Internet now abounds with pricing data. ForSaleByOwner.com sells a customized pricing report for $40, which includes both comparable homes on the market now and those that have sold recently. Zillow.com, a leading real estate site, offers recent sales data for free, although it's up to you to decide what's comparable. You can also get a free "Zestimate" of your home's value (take it with a grain of salt) and a sale-to-list-price ratio report that shows the difference between the final sale and asking price for your area. (According to Zillow, the average house in April went for 4% less than the list price, but that varies by market.)

Don't limit research to cyberspace. Visit open houses to assess the competition. You're not going to be able to tell from the Internet whether the competition has, say, a better traffic pattern or more curb appeal.

Consider asking local Realtors for market analyses. Who knows? You might change your mind and end up hiring one. Even Marquardt asked agents to analyze her Basking Ridge home. "They offer the service for free and without any obligation," she explains. "I've never felt guilty about it."

If your homework still leaves you fearful of mispricing your home, consider paying for an appraisal. (It will run you $300 to $500 in most areas.) You might also pay for a home inspection in advance ($400 to $700). The inspection will alert you to any problems that could provide buyers with negotiating leverage or sidetrack a sale. It will also clue you in on legally required property disclosures (these vary by state) about, say, electrical defects or a buried oil tank.
In Pictures: Tips For Selling Your House Yourself

When it comes time to set an asking price, bear in mind that many potential buyers expect an FSBO property to be a bargain, cautions Marquardt. Be at least a tad sympathetic. After all, handling a transaction without a middleman is more work and stress for the buyer as well as the seller.

Do decide in advance whether you plan to cut out Realtors entirely or are willing to pay a commission to a buyer's agent, and factor that decision into your list price. (For more on buyers' agents, keep reading.)

MARKET LIKE MAD

In the home sale market you've got to spend money to make money. So make sure your home is primed to impress. Fix that loose doorknob. Repaint the fire-engine-red kitchen in a neutral color. Rent a storage locker and move your clutter out, including your photos and knickknacks. (That allows visitors to envision themselves living in your home.) Curb appeal matters, too, so be sure to keep the yard in prime condition. Of course, all this is a good idea even if you're using a Realtor--unless you're selling a home "as is."

Since you don't have an agent to do the marketing, you'll also need to budget several hundred to a few thousand dollars for promotional expenses. As you plan your spending, keep in mind that nearly 90% of home hunters begin their search online these days. Zillow.com charges $40 to make your home a "featured listing" for 180 days on its well-trafficked site, with your home sorting to the top of search results. That's a no-brainer.

A harder decision: Do you want to rely solely on potential buyers you drum up yourself or are you willing to pay a commission to a "buyer's agent" who spots your listing and brings a buyer through your door? In many areas you can now pay a limited ser - vice broker a few hundred dollars to enter your home on the Multiple Listing Service (MLS)--the dominant database used by agents in most of the country. But there's no point in doing this unless in the listing you indicate you're willing to pay a buyer's agent commission of 1% to 3% of the sales price.

Instead of finding a limited-service broker to list your home on MLS, you can also buy your way on to it through ForSaleByOwner.com. It sells a variety of marketing packages, ranging from $89 for a one-month listing on its own site to a $689 six-month premium package that includes an MLS listing. The site says you can advertise any commission you want but recommends you offer 2% to 3% to pique brokers interest. (Translation: You may be wasting your dollars on an MLS listing if you're not ready to pay a commission that Realtors won't sneer at.)

In terms of content, take a multimedia approach. Highlight the price, location, number of bedrooms and amenities, like a three-car garage, granite countertops or a finished basement. Then add high-quality photos and possibly a well-produced video tour that show off your property's best features.

Consider advertising in older media, too. A newspaper ad can still drive traffic, particularly if it runs on a day you're holding an open house.

Place professional-looking "for sale" signs in front of your house and (if local ordinances allow) near busy neighborhood intersections. "Signage produced a lot for me," says Marquardt. Buyers may start on the Web, but many still drive around looking.
In Pictures: Tips For Selling Your House Yourself

Note: This story corrects an error published in the first edition. The correct first name of Tribune's vice president of classified marketplaces is Eddie, not Edward, as originally reported.

 
 

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