FOR SALE BY YOU: THE ULTIMATE GUIDE
Published by Authorify Publishing Copyright © 2020 Authorify Publishing
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Table Of Contents
Is FSBO Right For You?
Common Reasons Most FSBOs Fail
Why Some FSBOs Sell And Others Don't
What Does A FSBO Really Cost?
Make Sure The Price Is Right
Upgrades And Repairs
This Little FSBO Went To Market
10. It's Opening Day
11. Negotiation Prep
12. The Bargaining Table
13. How To Be A Contract Player
14. Closing Day
15. How To Declutter In A Hurry
16. Enhancing Curb Appeal
17. Let's Talk About Pets
18. What You Must Know About Appraisals
CHAPTER 1 Is FSBO Right for You?
WHY SOME PEOPLE SELL THEMSELVES
We live in a DIY world. We swap out toilet flappers instead of calling a plumber. We Google “red spots on neck” instead of calling a doctor. And, sometimes, we market and sell our own homes—For Sale By Owner (FSBO)—instead of using a real estate professional. Sure, doing things yourself can save you money. But unless you know what you’re doing, you could flood the bathroom, mistake hives for measles, and—this is my biggest fear for you—put a house on the market in the wrong shape, at the wrong time, and for the wrong price. The result is a low sale or—gasp!—no sale at all. Sure, FSBO listings can save you some real estate commissions, typically 3%, which is nothing to sneeze at. But, as I hope to show you, FSBOs can be penny-wise but net/net foolish. Here are some stats to chew on, thanks to the National Association of Realtors®’ 2016 Profile of Home Buyers and Sellers. • Only 8% of home sellers in 2017 were FSBOs—the lowest figure since 1981. • FSBOs typically sell for less than homes marketed by a real estate professional. A 2017 study by Collateral Analytics showed that the price of an FSBO sales is about 5.5% lower than Multiple Listing Service (MLS, agent assisted) sales. • Most FSBOs are bought by friends and family of the seller.
That means the seller didn’t have to figure out how to market his home; he just called a cousin and made a deal. • 28% of homeowners who sold homes themselves did no marketing at all; 28% spread the word via friends, relatives, and neighbors. • 15% of FSBO sellers said “getting the right price” was the hardest part of selling their home.
FSBO SKILLS YOU’LL NEED
If selling a house were easy, everyone would do it. Only 8% wade into the FSBO waters because most homeowners don’t have these necessary real estate skills. Research know-how: In order to accurately price your house, you’ll need to identify comparable sales, understand economic and neighborhood trends, and keep up with mortgage and prime rates. All this takes research chops. Declutter savvy: Decluttering a house is the first step to sprucing up a sale. But you must know what to pitch and what to display. How do you make your home a place someone else can envision as theirs? Staging experience: You love that leather couch; but will a buyer? That blue accent wall in the family room reminds you of Paris at midnight, but will it make a buyer feel claustrophobic? To get the highest price for your home, you must look at it through a buyer’s eyes. Negotiating chops: You’ll have to get a rush from haggling over price, responding to contingencies (and you have to know what “contingencies” mean), and discussing what repairs you’re willing to do. If negotiating makes you sweat, when was the last time you asked for a raise? Then selling your own home will be
Paperwork experience: Are you good at filling out forms, calculating percentages, dotting all i’s and crossing all t’s? Making a deal may be easy; but memorizing what you discussed is tedious and time-consuming.
HOW I CAN HELP
Sure, you can muddle your way through a sale. But I sell houses all day, every day. I will use my professional experience to help you: • Research your local real estate market to discover trends. • Market your home to real buyers. • Manage paperwork. • Stand by your side, from placing your listing to closing on the property. • I know the real estate business, what attracts buyers and what scares them away, and how this morning’s headlines might influence this afternoon’s showing.
CHAPTER 2 Common Reasons Most FSBOs Fail Fail is such an ugly word; so are “sold below listing” and “200 days on the market.” Of course, any real estate deal can go south, even ones represented by listing agents who sell homes day in and day out. In 1906 Italian economist Vilfredo Pareto helped shine light on why some homes sell, and some don’t. The Pareto principle, aka “the 80/20 rule,” found that in most endeavors, from growing peas to selling homes, about 20% of what you do matters, while the other 80% makes little or no difference at all. Sometimes, the split is 70/30 or 75/25. But the point is the same, and when it comes to real estate, the Pareto principle means: Stop trying to sell buyers on your entire home, because only 20% of your home’s features are important to the buyer, while 80% don’t matter much because most homes buyers see have the same features. The trick is to emphasize the 20% of your home that is unique, like a view of the ocean or a shady yard with mature trees. Following the 80/20 rule will save you time. Here are some unique features that will make your home stand out. Great views: Of valleys, mountain, river, lakes — any views that other comparable homes don’t have. Wildlife attractions: Perhaps your house looks over wetlands where many types of birds stop during migration, or you’ve got a wildflower garden that butterflies and hummingbird frequent. 6
Wildlife attraction can be a deal closer for nature lovers.
Breathtaking sunsets: Who doesn’t love an unobstructed view of a sunset? And if your patio faces west, make sure you schedule the show around sundown and have a glass of lemonade waiting on a patio table so the potential buyer can soak up the sunset. Stone patios: If your neighbors have wood decks, your flagstone patio will stand out. Fenced-in backyard: If a buyer has kids or pets, a fenced-in backyard can be a deal-maker. Fences are expensive. And if your home has one—especially a lovely wood fence—make sure you point that out. Failing to accentuate the uniqueness of a home is just one reason a house doesn’t sell quickly … or at all. Here are other deal killers. 1. PRICING TOO HIGH Experts say the #1 reason that listings go stale and eventually don’t sell is that owners price the property too high. Maybe fond memories make sellers think their house is worth more than the market will sustain; maybe sellers hope a big fish will bite at a high price, and if one doesn’t, they can always lower it.
Buyers aren’t idiots, and when big money is involved, they do their homework. Overpricing signals that a seller isn’t serious, or that he’s taking a flier and will eventually get real and lower the price. The result is a property that languishes on the market without an offer or sale. The longer a home stays on the market, the more a potential buyer wonders, “What’s wrong with this house?” Eventually, overly optimistic owners lower the price of their homes. But the bloom is off the rose; and a seller who initially was
driving the transaction finds himself chasing buyers, who become fewer as the listing becomes “stale.”
2. PROPERTY ISN'T IN TIP-TOP SHAPE
Your house has only one chance to make a good impression, the best reason to make sure the property is in white-glove condition. Unfortunately, many owners can’t see the imperfections that buyers will notice right away. When you’ve lived in a home for a long time, you can overlook nail pops, floor scuffs, and cat smells you’ve become nose-blind to. You may also not notice the weeds under foundation plants, or bird poop on walkways. These are small things that make a big impression on a buyer, who presumes that you don’t care enough about your property to give it a fresh coat of paint. And if the paint is chipped, buyers reason, what else is wrong with the house?
3. MARKETING MISSTEPS (OR NO STEPS AT ALL)
Houses don’t sell themselves. You’ve got to spread the word, whip up interest, and target people who actually want to buy a house, rather than just spend a Sunday touring other people’s homes. A Multiple Listing Service (MLS) is the first place buyers’ agents go to find a home that fits their clients’ needs. But the MLS is for professionals only, and you’ll likely have to pay a discount agent $500 to $1,000 to get your listing into the MLS. You’ll also need to take photos, hold open houses, create brochures, and show the house—all require specific skills and talents. If you haven’t honed your marketing chops, you can spend a lot of time and money creating brochures no one reads, holding
open houses that only neighbors attend, and placing ads online that don’t reach your target audience.
4. UNDERESTIMATING THE PAPERWORK
A ton of paperwork accompanies a property sale, and not knowing what paper you need to sell your home can cost you dearly. You’ll need to obtain, file, or fill out:
• Contract of sale • Deed • Title report • Tax statements • Insurance information • Appraisal and inspection reports • Disclosure forms • Lien affidavits • Mortgage documents • HUD statements at closing
Mishandling paperwork can wreck a sale and even put you in legal jeopardy, especially if you fail to disclose hazards, like lead paint or radon, within the home. Also, all official documents and agreements involved in the sales contract must be executed within a set, legally binding time frame.
5. IGNORANCE OF REAL ESTATE BASICS
You may think attracting your own buyer and skirting all real estate agent commissions is a godsend. But if you avoid all agents, then understanding all the details of the sale falls to you. That means you must become an instant expert on escrow, water rights, mortgage rates, mortgage types, property taxes, property assessments, disclosure obligations, lender requirements, and on and on. 9
Real estate agents learn these topics during pre-licensing courses that can last 75 hours; you’ll have to learn them on the fly.
6. PROPERTY MISREPRESENTATION
When it comes to selling property, your word is your bond. The way you describe the property—what you include, and what you omit—becomes part of a contract. If you exaggerate, misrepresent, or fail to include a problem you know exists, you risk losing a sale —best-case scenario—or gaining a lawsuit. You look at your property through years of memories, piles of receipts for upgrades and maintenance, and profit you hope to gain so you can move into that condo in Florida. This personal lens makes it hard to view a property objectively and present it neutrally. Professionals know how to describe your property in accurate, detailed, and attractive ways. Disclosure rules are different in each state, and professionals know what must be disclosed: termite infestation!—and what doesn’t: tiny chips in granite countertops.
7. RELYING ON ONLINE PRICES
Sure, Zillow will give you a “Zestimate” of your home’s value. But Zillow and other online pricing tools typically use comparable sales to arrive at the best guess of your home’s value. It doesn’t figure in your backyard filled with old-growth trees, or walk-out basement, or kitchen backsplash with eye-popping glass tile. A flesh-and-blood real estate agent looks at many different factors that affect the value of your home.
8. THINKING THEY CAN AVOID ALL COMMISSIONS
Just because a potential buyer sees your sign and knocks on your door doesn’t mean you’re off the hook for all agent commissions. Sometimes buyers are contractually obligated to buy a house through their agent, whether they find the property themselves or not. So, if you’re allergic to paying, make sure you find out if a would-be buyer has an exclusive contract with an agent. And let’s get real. No agent will bring a client to your home if there’s nothing in it for them. Would you spend your time working for free? Ultimately, refusing to pay any commission at all will drastically limit your pool of buyers. So don’t cheap out. Even if you avoid a listing agent’s commission, you’ll most likely have to offer a buyer’s agent commission, typically 2.5% to 3% of the sales price. Make sure you put that in your listing, so agents know it’s worth their time to bring you a buyer.
9. AVOIDING LAWYERS
Sure, you may not like lawyers. But some states require you to hire a lawyer for a property transaction. Even if your state doesn’t demand it, you should hire a lawyer to avoid legal hassles down the road. Lawyers can:
• Review brokerage agreements. • Discuss tax consequences of a sale.
• Explore and explain issues not contained in a standard contract, such as what happens if a property contains hazardous waste. • Review title searches. • Explain closing costs and help determine if all are fair.
10. TAKING ADVICE FROM
FAMILY AND FRIENDS
Everyone who’s ever sold a house has stories to tell and advice to give. But not all markets are the same. And if your cousin sold his house 20 years ago, in the middle of the housing bubble, and your uncle sold his condo 10 years ago at the beginning of the housing bust, their experiences will be different from yours today. The best advice your family and friends can give you is the name of a real estate agent they liked and trusted. HOW I CAN HELP: I will use my years of experience to help you in these ways. • Conduct a market analysis that helps us price the property realistically. • Train my fresh and experienced eye on your property and help you present your home in its best light. • Post your listing on the MLS and several other online listing services, where most people begin their property search. • Create must-read material and go to must-attend open houses. • Do the paperwork. • Help you locate contractors, lawyers, and title companies.
CHAPTER 3 Why Some FSBOs Sell and Others Don't
The key to this successful home-selling approach is a revolutionary finding discovered by Italian economist Vilfredo Pareto. The Pareto principle, or the 80/20 rule, is the key to this successful home-selling approach. In 1906, Pareto noticed that 20% of the pea pods in his garden held 80% of the seeds. Taking a closer look at this ratio, he found that 80% of land in his area was owned by 20% of the people. After detailed study, he observed that this ratio held true in many aspects of life. For example: 80% of your income is derived from 20% of your work; 80% of a business’s income is derived from 20% of its customers; 80% of your value to an employer is derived from 20% of your work. In a nutshell, approximately 20% of what you do matters. The other 80% is insignificant. Applying the 80/20 rule can save you time selling your home. Unfortunately, many real estate agents and sellers buy into the false idea that more is more. They completely ignore the Pareto principle. Stop trying to sell people on the entire home. Based on the rule, only 20% of your home’s features are important; the remaining 80% are trivial because they are the same features many other homes in your neighborhood have. Instead of focusing on those trivial features, focus on the unique features to grab the attention of buyers. These features make your home different from others. They’ll make it easier to sell your home for the full asking price. Let’s look at a few real-life 14
applications and examples of how the 80/20 rule can have an impact on selling your home. Remember that buyer in the market for a three-bedroom/two- bath house? Let’s assume the agent found that buyer five houses to preview. Each meets his general criteria and is located in the area where he hopes to live. The agent and her buyer drive out to look at the five houses. All five have similar features. The prices are comparable. In theory, you might think the buyer will have a hard time deciding between houses. But no matter how similar they may seem, no two houses are exactly alike. In real life, the 80/20 rule comes into play. Imagine four of the houses don’t have a pool, but one does. The buyer is not aware of this, though, because the agent didn’t mention it. The buyer sees the four houses that don’t have a pool. He isn’t particularly interested in any of them. Then, he sees the fifth house and the pool! Suddenly, he’s ready to make an offer. He might even pay full asking price, even though this house is more expensive than the others. The buyer’s offer isn’t based on the 80% of features this house shares with the rest. Instead, his bid is based on one unique attribute: a pool. The 80/20 rule predicted the sale of this house. Sadly, in this case, time was wasted finding the perfect house. Had the agent known to look for the 20% difference, this might have been her first stop. As a seller, you can leverage the rule to work in your favor. Draw attention to defining characteristics. Here is a real-life example. A real estate agent had a client visit from out of town. He did not have a list of criteria, just liked the area. The agent drove him from house to house. In each case, this buyer suggested offers 10% to
20% below the asking price. He would not budge.
She began to worry; the whole day was turning into a big waste of time. As the sun set, they stopped at one last house. It was not attractive and had little curb appeal. She was out of options. Nevertheless, this house broke the tough negotiator down. He was suddenly willing to offer the full asking price! What set this house apart from the others? It wasn’t because the buyer had a thing for ugly houses. Nope. The 80/20 rule kicked in again. Buyers pay more for unique features. This agent and her client had spent the whole day looking at houses that shared 80% of the same features. He did not care about any of those details. A bedroom was a bedroom as far as he was concerned. He fell in love with the one remarkable feature of this house. As he walked into the great room, there was a large window. The house sat atop a hill with a gorgeous view. And to top it off, the sun was setting below the distant tree line. That view sold the buyer. The other 80% could be improved. He did not buy the house because he liked the floor plan or the number of bedrooms and bathrooms. That view caused him to stop negotiating and offer full price on the spot. Such is the power of the 80/20 rule. Learn how to tap into this rule, and you will not have to settle for less than your asking price. Leverage a unique selling point. Buyers who fall in love do not haggle over pricing; they make good offers. In some cases, the 80/20 rule even helps people make a sale without conducting a showing. This is a huge time saver. The house in the following example had languished on the market for months. Unlike the previous house, this place was not ugly. On the contrary, it was a brand new custom-built home. But nobody seemed to care. It sat on the market more than seven months without a single offer.
The builder was baffled. His fancy new house would not sell. He ended up firing his agent and hiring a new one. Fortunately, the new agent knew the importance of finding that special feature. He drove out to give the house a thorough investigation. What he found changed everything. The house had a gorgeous five-acre yard. Other houses being sold in the area were all on one- to two-acre lots. Not only was the yard bigger, it was more private than other lots available. The new real estate agent marketed the five acres. He mentioned details and a description of the house, but the house was not the main selling point. He shifted attention to the five-acre lot. In no time, his phone rang! A buyer was relocating and had noticed the house was for sale, but it hadn’t caught his eye. That changed suddenly when the buyer learned it was built on a five-acre lot. He submitted an offer from 1,000 miles away, never having seen the property in person. He was afraid someone else would buy it before he could, and he would lose out on the perfect house. That sale happened in 45 days. The builder was amazed! His house had been on the market close to eight months without so much as a nibble. Suddenly it was sold. Purchased sight unseen, all because of the 80/20 rule. For a short time, this “unsellable” house became the hottest house on the market. Don’t create an advertisement like the ads for every other house in the area. Turn a spotlight on something different about your home. You will attract interested buyers willing to pay full price.
SELLING TO INTERESTED BUYERS
Find something unique about your home and build advertisements around that one item. It will catch people’s attention. Buyers who are looking for that one item will ask to
come see your home in person. As a result, you will stop wasting time showing to people who are not interested. Instead, you will be showing your home to buyers who are motivated to make a purchase. You won’t have to show quite so often. You also won’t have to sift through low-ball offers from apathetic buyers. Less stress for you. Take time to uncover your home’s most attractive and unique features. Compare notes with other houses in the neighborhood to see what makes yours stand out.
POTENTIAL UNIQUE FEATURES
Each house has unique features. You may already have some in mind. If not, these ideas should get you get started: Hilltop views are an excellent defining feature. As with the earlier example, a high vantage point offers a spectacular view of the surrounding area. Maybe your home looks out on an open field frequented by wildlife. Many people would like that view. Perhaps your house has an unobstructed view of the sunset. That would interest potential buyers. Patios are another great feature. Maybe the rest of your neighbors have smaller patios or none at all. That vital feature could help you sell your home. Location can set your property apart from others. A buyer once paid extra for a townhouse simply because of its location in the complex. Most of the surrounding homes did not have any yard. However, a few shared a large half-acre “yard area.” One of the owners whose townhome backed up to this yard area sold his
townhouse for a higher price. It set his property apart from others on the market. His home had a characteristic shared by fewer than 10% of the others. He had the only available listing offering that feature. With this easy point of difference, the house sold for a higher price. Another townhome seller in the same complex did not have a yard, but his property backed up to a lake and fountain. That extra feature helped him sell his townhouse quickly and for a great price. You might have a private location. For instance, your lot might be partially concealed by trees, or you might have an empty lot next to you. Use this to market your property. You might have a unique backyard. If you have a larger backyard than your neighbors, use that to your advantage. A shady backyard can also help you sell your property. Some people like the idea of lounging in the shade. A fenced-in backyard is also a big selling point. People with kids and pets flock to homes with fenced-in backyards. You can also look at other features. For instance, a finished basement can help you sell your home. You can market a large attic, an extra-large garage, a swimming pool, or anything else that makes your home stand out. Look for the 20% difference and find a way to market it. That is how you will get results. You cannot just throw the information into your listing, though. You have to take the right approach.
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