For those hoping to maximize profits on a home sale, posting a "for sale by owner" sign in the yard is an appealing option. Real estate brokers typically take 5% to 6% of the sale price, which could mean as much as $12,000 in commissions on the sale of $200,000 house. Considering many sellers also have a mortgage, the commission could result in a significantly higher percentage of the profits being lost to broker fees, says Colby Sambrotto, chief revenue officer for Home Captain, a real estate concierge service.
Regardless of whether you want to sell your own home to walk away with more money or retain more control over the sales process, you need to do it the right way. That may involve spending a little extra money upfront to maximize the sale price and minimize any headaches. Here are eight things you should do to make selling your home on your own a success:
-- Decide whether FSBO is right for you.
-- Price your property right.
-- Prepare to show your home.
-- Get serious about your listing.
-- Be flexible and responsive to buyers.
-- Negotiate the price.
-- Hire a real estate attorney.
-- Consider an iBuyer.
Decide Whether FSBO Is Right for You
The very first step to successfully selling your own home is deciding whether you are up for the challenge. "It can be done, but you have to be really cautious," says Mike Hills, vice president of investment brokerage at Atlas Real Estate in Denver.
Home sales are complex and time-consuming transactions. As a personal seller, it will be up to you to prepare, market and show your home. Plus, there is paperwork and legal requirements that may demand you hire a real estate attorney, title company and other professional service providers. For some homes, such as vacation properties in other states, it may not be feasible to sell a property without an agent to handle these matters.
Owners who do decide to sell their own property should have a plan in place for what that process will look like, says Zachary Schorr, head attorney at Schorr Law, a real estate law and litigation firm in Los Angeles. This plan should outline each step in the sales process, and it's also helpful to identify in advance which professionals, such as attorneys and escrow agents, will be used when the time comes to finalize a sale.
Price Your Property Right
Pricing a property correctly can be among the most challenging aspects of the FSBO process, according to Sambrotto. "Ultimately, your property is worth what people will pay for it," he says, but it can be tricky to determine that number.
Normally, a real estate agent provides a comparative market analysis to price your home appropriately. This analysis will look at the features and condition of your house and compare it to other recent sales in the area to determine the appropriate asking price.
If you don't have an agent, you could do your own market analysis using free online resources such as Zillow and Trulia. "I wouldn't necessarily rely on the estimate they provide, but they are a good starting point," Schorr says. Sellers could also scour local tax records for recent sales data to determine going prices in the neighborhood.
Prepare to Show Your Home
After pricing, the next hurdle to overcome is preparing the home for listing and showings. Clearing out the excess, improving lighting and making cosmetic repairs can go a long way toward making your home attractive to buyers.
Rather than taking your own photos, hire a professional photographer who can make your home look its best. Another option is to use a service like roOomy, which allows people to virtually stage their house by uploading photos of rooms, erasing old or unsightly furniture and replacing it with images of more stylish décor.
"It's a cost-efficient way to show off these spaces," says Lindsay Dillon, vice president of strategic partnership and marketing for roOomy. There is no need to buy or rent furniture or bring in a staging expert. Dillon stresses that the service isn't about misleading customers about the condition of a property.
"What's important to us is that we are showing the home's potential," she says.
Get Serious About Your Listing
Now it's time to create a listing. Homeowners have options that run the gamut from posting free ads on Facebook sales groups and Craigslist to setting up a dedicated website to market the property.
However, the visibility of listings on these sites can make selling a challenge, Hills says. Without inclusion on the multiple listing service, known as MLS, a property won't turn up on many real estate websites. For a flat fee of around $400 to $500, you can be included in the MLS and expand your potential customer base, but be aware you'll likely need to pay a 2% to 3% commission to the buyer's agent if they have one.
Be Flexible and Responsive to Buyers
When it comes to listing and showing your home, remove emotion from the process. Homeowners undoubtedly have their favorite property features, but buyers may have other priorities, and focusing only on the things you love could be off-putting. For the sales process, you need to shift your perception from selling your home to selling a house.
You also need to be ready to put in the time to show the house, respond to emails and calls promptly and provide thorough information. "You have to ask yourself if you can adequately market the property," Schorr says. In today's digital world, homebuyers may move on to the next property if you wait too long to address their concerns.
Negotiate the Price
Every seller should be prepared to negotiate the price with buyers, Sambrotto says. Buyers often expect there will be some haggling over the price. Failing to do so could mean a lower selling price that what the buyer may have been willing to pay.
"Usually when an offer is made, you have two to three days to respond," Schorr says.
If you have a real estate attorney already lined up, that individual may be able to review the offer details. In some cases, the highest price may not be the best offer. For instance, it may be better to take a lower cash offer than a higher bid that is contingent on financing.
Hire a Real Estate Attorney
Between the documentation needed for the mortgage, title transfer and other legal requirements, the paperwork for home sales is extensive. "The standard real estate contract in Colorado is 17 pages long," Hills says. "If you're not using a broker, you need to use a lawyer."
A handful of states, such as New York and Georgia, have laws requiring all sales, even those in which the buyer and seller have agents, be overseen by a real estate attorney. Even if your state doesn't require it, a real estate attorney can be a trusted guide who may be able to provide referrals for escrow agents and title companies as well as answer any questions about the selling process you may have.
While some attorneys may dabble in real estate as well as other practice areas, Schorr recommends finding a lawyer who specializes in these transactions. "I see the same contract over and over, so I can go through it quickly," Schorr says.
The attorneys in his office know exactly which paragraphs and terms may need to be adjusted to meet a client's needs. While billing practices vary, Schorr says many attorneys charge a flat fee or on an hourly basis.
Consider an iBuyer
A newer option for homeowners is to sell their property to an iBuyer. Companies such as Zillow, Opendoor and RedfinNow make cash offers for homes, and this can be a convenient way to quickly sell a property.
"We've reduced the typical 90-day home sales process into a few simple steps online," says Beatrice de Jong, consumer trends expert for Opendoor.
Homeowners submit a short questionnaire about their home and receive a cash offer within 24 hours. Once accepted, the company conducts a free home assessment to determine what repairs, if any, need to be completed. The homeowner then has the option of completing those repairs themselves or allowing Opendoor to do it and deduct the cost from the sale price.
"We pride ourselves on providing the most accurate and transparent offer possible," de Jong says.
Not every home is eligible for an offer through an iBuyer, though. For instance, de Jong notes Opendoor operates in 21 cities and typically only buys homes with values from $100,000 to $500,000. It does not buy properties built before 1960.
Going the "for sale by owner" route can result in more cash in your pocket, but you need to be smart about how you approach the sale. Spending time and money on your listing and an attorney can help ensure you get the best price possible and that the transaction goes smoothly.
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