Two and a half weeks after they staked a “For Sale by Owner” sign in their front yard and ran a single ad, Jan and Tony Presco of Addison had a buyer for their two-bedroom home.
“It was great,” says Jan. “With the money we saved on a real estate commission, we’re buying a house with four bedrooms.”
Across the county, Judy and Marty McCormack have been trying to sell their four-bedroom Naperville home since mid-February. They’ve advertised in several newspapers and held a couple open houses. Dozens of prospective buyers have responded. At one point, they thought they had a buyer, but the deal fell through. Nevertheless, the couple is committed to selling the home themselves regardless of how long it takes.
“We want to keep our mortgage the same but get a bigger house,” says Judy McCormack, an at-home mom who doesn’t want to return to full-time work until their children are in school. “The money we would have to pay in real estate fees will knock us down a level. We wouldn’t get much more than we have now.”
Like the Prescos and the McCormacks, plenty of homeowners offer their properties for sale themselves. The numbers depend upon whose figures you believe. Real estate brokers claim somewhere between 8 and 20 percent of homes are sold by owner. Those who hawk how-to materials and sell advertising in For Sale By Owner publications say 30 percent. Both say their method results in quicker sales.
Saving the 5 to 7 percent agent’s commission may be the most common reason sellers go it alone, but it isn’t the only one. Jan Presco appreciated being able to set appointments for showings according to the family’s schedule.
“I didn’t have anyone calling me at 9:30 a.m. when I’m trying to feed my kid breakfast, saying, `I’m going to show your house in 20 minutes,’ ” she says.
Other successful private sellers say they can show their homes better than a broker because they are more familiar with them and that negotiations are faster without middlemen running between the parties. Some enjoyed the personal contact they had with their buyers.
On the flip side, real estate brokers point out that “fisbos” (industry jargon meaning “for sale by owner”) don’t have access to multiple listing services. They can also become so emotionally involved with the sale they can’t negotiate effectively for themselves.
“People think they are going to get a better deal because there isn’t a Realtor involved,” says Jill Steward, senior vice president/general sales manager with Baird & Warner Real Estate in Chicago. “What happens is both parties think they are going to save the full commission, which is impossible. The seller forgets there are other costs involved and the buyer makes a lower offer because he figures the seller isn’t spending any money. In most cases, we can get a better buyer for a higher price. Part of our fee covers our negotiation skills and getting the property exposed to a greater number of buyers.”
An inconvenience the McCormacks are experiencing as solo sellers is the deluge of calls from agents soliciting a listing.
“I know they are doing their job but they are very persistent,” says Judy McCormack. “One said, `You’ve made enough money in equity. You can pay me a commission.’ “
If you’re thinking about selling on your own, take a few tips from the pros:
– Do some research. You want to know what has sold recently in your area, how long it took and for how much money. You’ll need the information to develop a marketing plan.
“In some parts of the country, homes sell in a month,” says Bill Supple, president of the National For Sale By Owner Association in Albany, N.Y., and creator of a 67-minute video, “How to Sell Your Own Home.” “With more expensive homes, fewer people can afford them, so statistically it takes longer to sell.”
(For video information, call 1-800-836-5577. The cost is $24.95 plus $3.95 shipping.)
“We tell people to hire a professional appraiser,” says Bill Thompson, president of the West Dundee-based “Homes For Sale By Owner,” an advertising publication that promotes fisbos. “It’s the most expensive way (to set a value on your home) but it’s most accurate.” Recent selling prices can be obtained from public records and some newspapers.
Many real estate agents will be happy to do a market analysis for you, which includes current listings and past sales, even with the understanding you plan to sell yourself, says John T. Clery, a real estate attorney in Schaumburg and Lake Zurich. “It gives the agents a chance to sell themselves. It’s a way to get a foot in the door if you don’t sell and decide to list later.”
– Price your home competitively. When Thompson sold his townhouse two years ago, he checked out listings in the neighborhood and undercut their prices. As prospects came through, he politely mentioned that his price was the lowest and he had no room to dicker. He sold in seven weeks and his only concession was to throw in the washer and dryer.
The Prescos priced their home equal to the market but left greater room to negotiate.
“Price it right the first time,” says Thompson. “If you price it high thinking you can come down, your house can sit on the market and it gets old. You want to make a good first impression.”
– Plan to spend some money. Selling your home is not free, so don’t think you’re pocketing the entire commission. Advertising will be your biggest expense. Figure anywhere from several hundred to several thousand dollars in advertising. A professional appraisal will run about $300. You’ll also have to buy signs and print up brochures.
The Prescos spent about $500 to make their sale. The McCormacks have spent that much so far.
– Bring in a real estate attorney before you try to sell. A private sale may be more casual but sellers still have to follow the law. They have to fill out a form disclosing defects in your property and they can’t run out and spend the earnest money they receive from the buyers.
“We can make the transaction smoother,” says Clery. “We can supply you with contracts and a list of documents you have to have. You’ll also want an attorney ready to review the contract. Once you’ve signed it, you can’t change it.”
Steward advises sellers to hire real estate attorneys who practice in their areas. “The industry is changing at such a fast clip. You’ve got to protect yourself legally so you want to make sure your attorney is up to speed.”
– Take security precautions. Real estate brokers say their presence and lockboxes offer a safety buffer that private sellers don’t have. Supple, of the National For Sale By Owner Association, counters by saying that key boxes, even electronic ones that record agent comings and goings, can be vandalized.
“You have to use common sense,” he says. “You don’t show your home alone and you don’t show it at night. You want to get phone numbers and a little information from prospective buyers and then verify they are at that number. Anyone who doesn’t give you a phone number is either not serious or you have reason to be suspicious.”
– Don’t fear the negotiation process. Some buyers may be nervous about this step but Supple finds it a non-issue. “You have in mind a range of what is acceptable to you. If someone is unreasonable, there is no negotiation.”
He adds that when buyer and seller are directly discussing terms and conditions, fewer misunderstandings occur.
Because some buyers erroneously believe “for sale by owner” equals “distress sale,” you may receive an occasional lowball offer. The McCormacks, who undercut the market with their home, have had two, both more than $10,000 below their bottom line. “A couple of agents who have been helping us told us to expect it,” says Judy McCormack.
– Make sure the buyer is qualified to buy. This is another important job realty agents perform but you can do it, too. Many buyers are walking around with mortgage qualification letters in their pockets these days.
“Ask permission to call the buyer’s employer and lender,” advises Clery. “You want to know where the money is coming from so you don’t take your house off the market for someone who has no business trying to buy it. You can also put in the contract that you want them to put down earnest money and you want a letter to show they can purchase your home. If they don’t get a mortgage, you’re at square one.”
The Prescos did just that. “Our buyer had already sold his condo,” says Jan Presco. “We checked with his broker and mortgage company. He was prequalified.”
– Don’t give up. Any home, whether represented by an agent or not, can sell in nine days or nine months. If yours looks good and is fairly priced, it will sell, but no one has a crystal ball as to when.
“Some sellers get prematurely discouraged and list with agents, only to find that the home still doesn’t sell,” says Supple. “Realize it may take several months or more to sell your property depending upon market conditions and price range.”
