Moneywatch produced this video to expand on this story about successful selling by owner. Reproduced with permission.
Kristen and Chuck Dvorscak of Midland Park, N.J., need to sell their 1929 three-bedroom Colonial now. The couple just had a second child, so the Dvorscaks, 33, want to upgrade to a bigger home nearby. Trouble is, their house’s value has plummeted about 7 percent from the $535,000 they paid four years ago. They’re resigned to taking a loss, but hope to save the traditional 6 percent real estate broker’s commission by having Kristen market the house herself. (Asking price: $499,900.) “Frankly, I don’t think a Realtor does much that I can’t do myself,” she says.
Like the Dvorscaks, about one in four prospective sellers are going it alone, doing something known as a FSBO. (Short for “For Sale by Owner,” it’s pronounced fizz-bo.) “For homes worth $300,000 to $400,000, not paying a real estate broker’s commission is $18,000 to $24,000 of potential savings,” says Greg Healy, vice president of operations for ForSaleByOwner.com. “With the economic uncertainty we’re living in today, who isn’t going to try to save that kind of money?” The Dvorscaks will avoid shelling out almost $30,000 if they get their price and sell directly to the buyer — or about half that if they end up paying a 3 percent commission to a buyer’s broker.
Selling your house on your own is tougher than when the economy was booming and buyers were falling over themselves to make offers. But FSBO owners often fare well. A 2008 Consumer Reports study found that nearly all homeowners in their survey who sold on their own got their asking price, while sellers using agents received an average of $5,000 below their asking price. Similarly, National Association of Realtors figures show the average sales price for by-owner sellers was 97.5 percent of their asking price — while sellers with agents got just 95 percent. (A third study, dating to 2007, found no significant difference in sales prices, although it did find that agents unloaded homes faster than FSBOs, on average.)
CBS MoneyWatch asked FSBO experts for their best advice to sell your home on your own in today’s slow housing market.
1. Get the Price Right
Realtors like to say that pricing your home is an art that only a pro can get right. But you can compile your own comparative market analysis of recent sales to help determine an asking price. “You don’t need a Ph.D. to figure out how to price your house,” says Robert Irwin, author of For Sale by Owner: A Complete Guide.
An online appraisal service, like the one offered by ForSaleByOwner.com, can help determine a price range based on public record information, for about $20.
But if you’re willing to spend the time, you can get a better estimate through a little research. Start by entering your address on Zillow and Trulia to find your estimated home value and nearby sales within the past six months. Then, check newspaper ads and real estate blogs for a sense of the market and spend a weekend visiting open houses within a mile or two of your home.
Next, take into account your home’s upgrades or special features. Just don’t be unrealistic about their value. In better times, kitchen and bath remodelings often recouped nearly their entire cost, but not today. “Roughly speaking, expect to capture at most 75 to 80 percent,” says David Zwiefelhofer, of FSBOMadison.com.
Check with an escrow holder or title company to gauge your closing costs and add that figure to your asking price.
2. Flex Your Power
In today’s depressed housing market, buyers are extremely price sensitive. Your advantage as a FSBO seller is that you can afford to offer a more competitive price than sellers using agents, since you don’t need to build the commission into your price. So if you want your house to move quickly, consider pricing it 2 to 3 percent below competing homes.
3. Use a Flat-Fee Multiple Listing Service
To get your home noticed by more prospective buyers, you might want to sign up for a “flat fee MLS” (Multiple Listing Service). Available through FSBO Web sites such as ForSaleByOwner.com, Owners.com and FSBO.com, you pay about $400 and your home will then appear on the Multiple Listing Service seen by Realtors. You’ll also pay the 2 to 3 percent commission if a broker brings in your buyer. “Most FSBO sellers don’t mind paying buyer’s brokers because they view them as doing a lot of work: preparing the buyer to qualify for a mortgage and helping with the closing,” says Steve Udelson, CEO of Owners.com. “What they don’t want is to pay another 3 percent to a seller’s broker who, in many cases, is not doing nearly as much work.”
4. Piggyback on Other Sellers’ Marketing
Keep a close watch on the marketing efforts of real estate brokers in your neighborhood and try to piggyback on them. Open houses are a good example: “If someone on your street is using an agent and having an open house, put your lawn signs out and have one at the same time,” says FSBOMadison’s Zwiefelhofer. “Then you can catch the traffic that they are spending all that money to generate.”
5. Have a Gimmick
As a free agent, you should do things a little differently to make your house stand out. When one North Carolina seller noticed local sellers dropping their asking prices last fall, he offered to pay for a new car lease if a buyer agreed to his full asking price. “He figured it was worth spending $12,000 for the lease to secure a buyer rather than dropping his price $15,000 and hoping that a buyer would appear,” says Eric Mangan, spokesman for ForSaleByOwner.com. The gamble worked.
Other FSBO sellers have offered buyers free flat-screen TVs and $5,000 American Express gift cards. Gimmicky? Sure. But think of all the flat-screen TVs you’ll be able to buy for your new house with the money you saved on real estate commissions.