You’re selling your house yourself. Three weeks into the ordeal, a young couple bring a contract to you. You say, “It’s a deal.”
Then, before you’ve signed anything, another buyer gives you a better offer. He tells you that he’s dying of bone cancer and wants a home where he, his wife and three young sons could spend a few weeks together before he dies.
Welcome to the world of do-it-yourself real estate. Stick up that “for sale by owner” sign and watch the games begin. It’s a high-stakes world where homeowners, who often are armed only with advice from their relatives, wheel and deal with strangers. The pitfalls are many, but the payoff is profit.
With houses across the country selling faster than they have in a decade, homeowners are deciding they don’t need professional help. Scott and Charlotte Schmitt know well the sometimes-perilous path that leads to a wee pot o’ gold. When they put their 11-year-old DeBary, Fla., home on the market last year for $119,000, they had an offer within three weeks. Then they got a second offer. The second offer came from a couple who had looked at the house a couple times and were willing to pay top dollar. The man told the Schmitts he would soon die of bone cancer and needed to find a place for his family as he lived out his last few weeks.
“It was dreadful,” Schmitt said.
The buyer was confident he would get a veteran’s loan, but it became a question of which buyer was the most reliable, she said. The Schmitts consummated the deal with the young couple who made the initial offer and made a $35,000 profit. Instead of the real estate agents getting a $9,000 commission, the money will help send their two teenage children to college.
Like almost half of Americans who sell their own homes, the Schmitts did not want to pay a commission. Other top reasons owners manage their own sales: They sell to a friend or a neighbor or the buyer contacts them, according to a recent survey by the National Association of Realtors.
Candidates for do-it-yourself real estate are most often 25 to 44 years old with incomes of up to $100,000. Unmarried couples and bachelors are most likely to forgo professional help. Homeowners in cities and rural areas are more likely to sell their own homes than are suburbanites. The survey, taken this year, had responses from 1,778 people who bought or sold houses with or without real estate agents.
Regardless of age, marital status or locale, owners who sell their own homes have a few chores ahead of them. They have to make the house shine, price it right, let the world know it’s available and negotiate a legally sound deal. Real estate agent or not, owners have to work when they put their house on the market. Get out the checklist: Fresh landscaping, new paint and uncluttered closets are just the beginning. Owners should plan to repair everything that’s wrong with the house.
Without a real estate agent, the condition of the house is particularly critical, according to the book Kiplinger’s Buying & Selling a Home (Kiplinger Washington Editors, $17.95).
“A glib agent can talk a client past a plaster crack or dirty wallpaper,” but owners with no sales skills will have a much harder time of it, the book states.
Before they put their house up for sale, the Schmitts spent $1,000 on landscaping, ripping out the old and having professionals install the new. They repaired the irrigation system and had a small double palm tree planted in the front. The couple also spent $300 on a new vacuum cleaner for the pool, bought a new garage door opener, repaired the back-yard fence and had the air conditioning unit serviced.
The problem with owners putting a price on their pride and joy is that they often have an inflated idea of its worth, said Longwood, Fla., resident Wallace Guthrie who has bought and sold five houses on his own and hired real estate agents for other transactions.
Sell-it-yourself owners often overprice their homes, and so the houses end up sitting on the market for so long that they get a reputation of being undesirable or priced too high, said Guthrie, who has taken numerous real estate courses. Setting the right price is the toughest part of the game for sellers, according to the study by the Realtors. About 12 percent of the survey respondents who sold their own homes said they had trouble with pricing.
To get a price, owners who have shunned real estate agents should talk to, well, real estate agents. Aware that two out of every three people who try to sell their own homes eventually turn to professionals, agents can be very accommodating to the amateurs of the world. As a courtesy, many real estate agents will do market analysis studies and suggest price ranges, in hopes the owners will remember them when they decide to hire a pro.
Even without the help of real estate agents, homeowners can research the going prices of nearby houses by contacting the county property appraiser’s office. Most offices have Internet sites that display house sizes, features, sales prices and sales dates. Look on the appraisers’ Web sites for comparable houses that have sold in the past year.
When pricing, it may be good to know that houses sold by real estate agents generally cost more than those sold by owners. In the United States, the midrange price for houses sold by their owners is $113,000 compared with $129,900 for houses sold by real estate agents, according to the real estate association’s survey. Choosing a price, however, isn’t just a matter of picking a number. Real estate agents often call and ask if they will get a commission for bringing a buyer to the house. So sellers have to decide whether they will give agents commissions of 3 or 4 percent of the sales price. Should the owner have two prices, one for buyers with real estate agents and one for buyers with no agents? Should owners inflate their price by several percentage points to make up for agents’ commissions? Or should sellers ignore agents at the risk of losing buyers?
To answer these questions, owners should look at the price of comparable houses in the neighborhood, weigh the amount of profit they expect to make, and consider how easily houses in the area sell. They also should set a deadline for how long they will continue to try to be their own real estate agent.
Typical owners use three advertising techniques, according to the survey by the National Association of Realtors. About 60 percent of survey respondents used yard signs, 50 percent relied on friends and neighbors and 49 percent used a newspaper advertisement.
In addition, many buyers devise informational fliers including details about the house: year built, address, size, number of bedrooms and bathrooms, recent upgrades, features, room dimensions, mechanical systems, lot size, neighborhood amenities and schools.
In hot neighborhoods, where buyers are inclined to drive the streets looking for the right house, sellers can fare well without being on the multiple listing service. But sellers have a tougher job in more remote or low-profile neighborhoods. To gain more exposure, sellers should inquire about real estate brokers who sometimes list houses on the service without charging a full commission. Of course, the brokers will not provide the red-carpet treatment of marketing and negotiating, but the house will get listed on the marketing service.
If the house shines with curb and closet appeal, has a good price and is marketed effectively, sellers may be fortunate enough to entertain offers.
Before any serious negotiations begin, sellers should insist on seeing proof that the buyer can get a loan. The true test of whether it was worth it for owners to sell their homes themselves is if they would do it again. The survey by the National Association of Realtors showed that of the people who sold their houses without the help of real estate agents, one-third said they would do it again and 28 percent said they would hire an agent. But with 40 percent of the survey respondents saying they weren’t sure, the jury may still be out on those who try to sell their own homes.
