JOSEPH SCROFANI JD - THE FOR SALE BY OWNER GUIDE

THE FOR SALE BY OWNER GUIDE

JOSEPH SCROFANI JD

Table Of Contents

Why People Sell FSBO

The Most Common Mistakes People Make When Selling FSBO 10

What are the Costs of FSBO?

Staging Your Home When Trying to Sell by Yourself

Determining the Right Price When Selling Your Home by Yourself

Advertising Your House

Showing Your Home While Selling It Yourself

Using Curb Appeal to Sell Your Home for More 62

Staging Solutions and Options

10. Preparation For Negotiation: Screening Buyers 80

11. Negotiating On Your Own

12. How to Write A Contract and Sell Your House Without An Agent

100

13. Inspections and Closing: Getting Things Done Without An Agent

108

Foreword When I first ventured into the real estate industry years ago, I did so with the hopes of helping sellers like you avoid the headaches often associated with the home-selling process. In my years of experience, not only have I helped alleviate the stress of selling for numerous clients, but I’ve also accumulated years of knowledge to help them get more money for their homes in the least amount of time. I decided to share my expertise in one place with potential clients. And that’s why you’re receiving this book. I want to help you have the best possible home-selling experience. And by that, I mean I want you to 1. Get the most money possible for your home 2. Sell in the least amount of time, and 3. Avoid the headaches most commonly associated with the home-selling process. Please think of this book as my gift to you. It contains insider advice on the home-selling process to help you achieve your ultimate real estate goals, including: • Secret strategies to sell your home for more money • Marketing techniques employed by top agents • Advice on how to appeal to today’s buyers • And much, much more If, after reading through it, you want to hire me to help you sell your home, I’d be more than happy to meet with you to discuss a specific plan to sell your home. Happy reading!

Joseph (Joe) Scrofani /JD Coldwell Banker Premier 702.882.4949 JoeScrofani4949@g i4949@gmail.com / www.jscrofani.realtor

About Joseph (Joe) Scrofani JD When I'm not busy serving my client's needs, you can find me with my wife and grandkids, playing golf and teaching real estate. Golf is how I unwind after a long week or weekend working hard for my clients — and that’s not just a cop-out. I have dedicated my life in real estate to helping my clients achieve their real estate goals. I was raised in Southern California with two siblings. From a young age, I was taught that if you want something in life, you must work for it. So that’s what I did. And I worked hard. (But that’s not to say I didn’t have fun along the way.) I entered the real estate industry in 1978 after Several years in the corporate world. My dad, my hero, was a real estate broker in Southern California and convinced me to get into real estate. So, I did, and I do not regret my decision. After three years into my real estate career, I enrolled in Law School, earning a Juris Doctorate Degree in Law. I enlisted in the US Army and served four years of active duty and seven years in the US Army Reserves. After my training at Officer Candidate School, I served as a platoon leader at Fort Ord, CA. I was then deployed to Korea, where I served thirteen months. After my four years of active duty, I fulfilled my commitment as a Company Commander in the US Army Reserves. I currently live in Las Vegas, Nevada, with my wife. I have two wonderful children, a beautiful daughter, an awesome son, and two grandchildren.

EXPERIENCE* SERVICE* RESULTS

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About Joseph (Joe) Scrofani JD

Throughout my career, I have earned numerous accolades, including: REAL ESTATE EXPERIENCE: Broker Salesperson with 45+ years in Real Estate Licensed Real Estate Broker Salesperson in Nevada Licensed Real Estate Broker in California. Specializing in Residential Real Estate, Seniors, Land, and Commercial DESIGNATIONS: Emeritus Status with National Association of REALTORS®

Seniors Real Estate Specialist® (SRES®) Certified Real Estate Negotiator (CREN*) r (CREN*) Certified Real Estate Instructor DEGREES EARNED: Bachelor of Science. Juris Doctorate Degree in Law. US ARMED FORCES: United States Army Officer Veteran.

Joseph (Joe) Scrofani /JD Coldwell Banker Premier 702.882.4949 JoeScrofani4949@g i4949@gmail.com Website: jscrofani.realtor NV RE License: BS 17796 e: BS 17796 CA RE License: B 613250 e: B 613250

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BUYER BROKER AGREEMENT GREEMENT WHAT YOU SHOULD KNOW!

Real estate agents who use and list properties for sale on a Multiple Listing Service (MLS)—a local marketplace used by real estate professionals (both buyer brokers and listing brokers) to share information about inventory in a particular area—will be required to enter into written agreements with buyers before touring a home. Those written agreements must include: • A specific and conspicuous disclosure of the amount or rate of compensation the real estate agent will receive or how this amount will be determined. • Objective compensation (e.g., $0, X flat fee, X percent, X hourly rate)—and not open-ended (e.g., cannot be “buyer broker compensation shall be whatever the amount the seller is offering to the buyer”). • A term that prohibits the agent from receiving compensation for brokerage services from any source that exceeds the amount or rate agreed to in the agreement with the buyer and • A conspicuous statement that broker fees and commissions are entirely negotiable and not set by law. Things to know as a home buyer or seller: • If you are a buyer and your agent is using an MLS, you must sign a written agreement with your agent before touring a home so you understand precisely what services will be provided and for how much. • Written agreements are required for both in-person and live virtual home tours. • You do not need a written agreement if you speak to an

agent at an open house or ask them about their services. • Agent compensation for home buyers and sellers continues to be entirely negotiable. • When finding an agent to work with, ask questions about their services, compensation, and these written agreements. • More details about these changes and their meaning can be found in the facts. Realtor.

CHAPTER 1 Why People Sell FSBO The advancement of technology constantly boosts the market and improves our standard of living. However, with an increasingly flexible job market, we are often required to move to grow personally and develop our professional careers. All too often, this means that while preparing for one significant change in our lives, we also need to deal with selling our homes. We all know that owning a home is preferable to and financially wiser than renting. However, when it comes to moving, selling a house might not always be as easy as it seems. While some people consider the convenience and ease of selling through an agent the absolute best way to go, others conclude that the thousands of extra dollars they might be able to make by selling their house on their own are worth the time, effort, and trouble that selling on their own might entail. As one may expect, the complex real estate market has its own tips and tricks that people should follow to make the most of their sales. Let’s examine what makes people sell FSBO and the pros and cons of this highly debated practice.

#1—WHY DO PEOPLE CHOOSE TO SELL BY HEMS ELL BY HEMSELVES?

FSBO, or “For Sale by Owner,” occurs when homeowners decide to put their house on the market and advertise it without the help and support of a professional real estate agent. Going FSBO means that the owner must know how to market and show the property professionally, negotiate an advantageous selling price 2

for the house, and, of course, be sure to get all the necessary paperwork completed for the eventual home sale. That last part usually includes finding an attorney to draft the necessary sale contract and a title company to help complete the sale. Unsurprisingly, all these tasks can be pretty challenging for someone not fully prepared to do such an imposing task. I would also like to avoid unwanted surprises by doing extensive market research beforehand. According to reports and surveys, many people who start confident about going FSBO end up either losing the sale or giving in and hiring an agent. So, if you are determined to sell your home on your own, please ensure you have the energy and time necessary to perform all these tasks before you begin selling your home on your own. Given all the hassle it entails, why do people do it without an agent? The number one reason why people decide to sell their homes without an agent is to save money. A real estate agent usually charges a commission of about 4% to 6% of the selling value. However, all commissions are negotiable, which can give many home sellers pause. In exchange for that sum, the real estate agent brings vast experience and a wealth of market-specific knowledge that can truly benefit the seller. Agents also usually help owners set a fair, realistic market price for their houses. A well-balanced price is crucial to sell the property successfully in a reasonable amount of time. Still, 4% to 6% of the sale price can be a sizable sum, and many more self- reliant homeowners may decide it’s worth the extra effort and risk to handle the sale solo and pocket the additional funds. However, a lack of expertise among average homeowners looking to go FSBO has its consequences. The National Association of Realtors® and Bankrate.com have reported that most FSBO homes are overpriced on their sites. That is true and

is usually a natural effect of people not knowing the actual cost of their property and the value of their hard-built equity, combined with a desire to draw as much profit as possible out of the sale. Unfortunately, overpriced properties are far less likely to be sold and have a much higher chance of scaring off potential buyers. While the issue of correct pricing can be bypassed with solid real estate and community sales market research, the following negotiations cannot. Many owners who lack professional presentation skills and/or developed negotiation skills end up selling their houses at far lower prices than they are worth. Statistically, an experienced real estate agent manages to sell homes for an average price of about $27,000 higher than private homeowners settle for. So, considering all of this, saving 4-6% of your house value in commission may be tempting at first glance, but is it worth it considering the significant percentage you might stand to lose on the final selling price? Suppose you lack negotiating skills and know nothing about the real estate housing market. Hiring a high-performing professional real estate agent might be a small price in that case. You’ll also get a fast, sweet deal on your property and resolve the matter with a nice profit, depending on what the market can offer. You get to work at your own pace, give the house a personal touch, and make all the decisions. Other factors that frequently encourage homeowners to go the FSBO route are the privacy, knowledge, and decision-making elements of a sale.

The owner knows their house best, so it is easy for them to focus

on promoting the good aspects and downplaying the bad.

However, cleaning and preparing the house for a viewing is challenging. Cleaning and preparing means thoroughly cleaning the house inside and out and emptying it of personal objects and unnecessary furniture to make it look as cozy and comfortable as possible while simultaneously making the space seem neutral and adaptable. The seller must be able to present the house in an appealing, professional way and help the buyer imagine himself living there—all while negotiating the best possible price. As for decision-making, FSBO grants the owner the authority to make all the decisions involved in the sale without having them brokered by an agent. That brings a definite plus regarding individual privacy, considering that the owner can schedule any viewings according to their availability and preferences. The final price negotiation will also take place between the owner and the buyer without an extra person in between. That sounds nice enough in theory, but it has downsides in practice. Making all the decisions and negotiating the final price entails tremendous responsibility. That responsibility is tough to bear for those with no real estate experience and/or extensive house market pricing knowledge. It significantly contributes to how many FSBO sellers end up agreeing to sell their house for less than the listed market value.

#2—THE UNEXPECTED CONS OF FSBO

The debate over real estate agent vs. FSBO sales has been increasingly heated over the past several years. However, even if the necessity for and role of real estate agents have been seriously questioned, they remain America’s favorite means to sell and buy homes. Statistically, approximately 80% of

American home sales are brokered by professional real estate agents. Numbers don’t lie—most people prefer to use an agent. With such a vast majority, it’s worth looking into why so many sellers choose not to go the FSBO route. To that end, let’s review some of the cons of FSBO to understand further why so many people prefer professional support when selling their homes. Selling the property as FSBO takes longer than an agent sale and requires extensive time and effort from the owner! Selling a home on your own is no easy task. On the contrary, it requires specialized knowledge, hard work, time, skill, and dedication to make it happen. Simply cleaning and preparing the house for a showing can be a challenge in and of itself without professional help and counseling. A home that has not been adequately cleaned and prepared for sale will give the buyer the impression that the owner has been slacking off on essential home maintenance. They will be reluctant to pay as high a price as they might have if they had seen the house looking its best. Too little cleaning or clumsy staging could result in a substantially lower price when you finally make the sale. The owner must also consider that real estate agents present and sell homes as a full-time job and, therefore, must be prepared to devote a considerable amount of time to explaining and marketing the house they aim to sell if they desire to do so without professional help and support. Finding the hours and energy to handle a real estate agent’s job and whatever other obligations you might have can be a serious challenge, especially for the unprepared. Moreover, the owner of an FSBO house might find themselves stuck with those extra duties for a lot longer than they expect: it is a well-documented fact that houses take considerably longer

to sell through FSBO than they do when handled by a professional real estate agent. Ultimately, when choosing between FSBO and a real estate agent, one must be prepared to make a realistic assessment of how much effort they are ready to invest in this endeavor and how much their time is worth. Listing a house as FSBO enjoys better support nowadays but is still a far cry from the real estate agent pool. FSBO listing now enjoys far better online support than it did a few years ago. Several networks specifically support FSBO properties and their owners and offer nationwide listing services and marketing tools, all at low or flat-rate prices. However, they struggle to compare to the more extensive, established resource pools that real estate agents usually tap into. This more restricted support structure also contributes to the house spending more time on the market before selling, further inconveniencing the owner. FSBOs are usually overpriced—but still end up selling below market price. Few owners who opt for FSBO have extensive knowledge of the housing market or finely honed skills in the real estate trade. Between that and the emotional factor of a homeowner’s bias, combined with a natural desire to profit from the sale, causes owners to overprice their homes. Overpricing frequently scares off potential buyers, leaving the house on the market for, yet again, a more extended period—which can be a real disadvantage to those who want a fast sale or need the money. When these houses attract interested customers, the owner is likely to accept a lower price than a real estate agent would—either because they are in a hurry and growing desperate or because they lack the negotiating skills and experience needed to successfully navigate such an involved

process.

Overpricing at the start and accepting a final selling price well below the actual market value of a property are two of the most common mistakes people make when selling FSBO. Many buyers don’t trust FSBO and prefer to work with a real estate agent. Trust is paramount in a transaction as costly and important as selling and buying a home. Sometimes, out of fear of getting scammed, buyers usually prefer to work with real estate agents just because they think it will offer a smoother bureaucratic process. A high-performing agent's professionalism and experience inspire buyers' confidence that they’ll be able to sail effortlessly through the sea of paperwork that comes with the real estate market. This puts FSBO homes at a clear disadvantage, no matter how you look at it. As the cliché goes, it is a buyers’ world out there.

What does all this boil down to?

With all factors considered, FSBO can be a great strategy—but only for good negotiators with excellent real estate trading skills and extensive market knowledge who are in no hurry to complete the sale and willing to dedicate considerable time and effort to the process. Selling a home FSBO represents a considerable responsibility for the owner. Having control of everything also puts all the decisions and consequences on the owner’s shoulders. However, if you are up to the challenge and searching for an adventurous new experience, selling your house is the way to go.

On the other hand, if you find yourself busy, have no time to do the required research, or cannot afford to take the required time, it is strongly recommended that you opt for a real estate agent instead. The same applies if you find it difficult to expend the effort needed to prepare the house for showing, think with dread about the numerous home presentations you will have to make, or are simply not confident in your negotiating skills. While some might not have the necessary skills to handle negotiating or the hassle of the paperwork, others might value their time enough to choose a real estate agent and the benefits of this choice. Whatever you choose, take the time to consider all the details of your different options. Your house is a life investment, and selling it is a big decision. Make it count!

CHAPTER 2 The Most Common Mistakes People Make When Selling FSBO So, why do people want to sell their homes without relying on the help and support of professional real estate agents? It keeps coming up time and time again: to save money. Depending on the service used, the commission fee for a real estate agent’s services generally ranges from 4% to 6% of the total property sale amount. To avoid this, some people try to sell their property on their own, hoping it will allow them to save some money. Unfortunately, they forget that agents are trained to do this for a living and know all the unique tricks and skills to do it right. It is their job, and at the end of the day, you’d be hard-pressed to find an amateur—no matter how enthusiastic—who can be relied upon to outdo a trained, experienced professional. The untrained owner risks stumbling along the way to a sale due to a host of unclear, seemingly minor bureaucratic tangles and marketing difficulties. Fees and fines are obvious drains on profitability, but just as costly are delays, postponements, and missteps when courting buyers and negotiating with—in all likelihood—someone who is, in fact, a real estate agent. This disadvantages the owner, preventing him from making the property sale efficient, smooth, and, most importantly, lucrative. Look at the most common things people overlook when spurning professional real estate agents and their extensive experience.

MISTAKE #1

MISUNDERSTANDING THE CORRECT MARKET VALUE OF THEIR P F THEIR PROPERTY

You should always know the proper market value of your property as early as possible when you decide to sell. An overpriced property listing will end up scaring off potential buyers; underpricing will net you a fast sale and a much smaller profit than you could have had. On the other hand, selling at the correct market value can cost you some of your hard-earned equity. The property needs to be evaluated carefully from a neutral perspective to get just the right listing price. Influenced by their emotional attachment to the property in which they have spent so many days and nights, many sellers tend to add value to some distinguishing aspects of the house, its character, its quirks—not realizing that a potential buyer might consider those same things a hindrance. It might be anything from room decorations, tapestries, or wall painting to more substantial structural changes—whatever the case, anything that requires renovations or costs money to remove might not appeal to the client. That is why a neutral evaluation is essential before listing the property on the market—take a step back, try to detach yourself from your home, and look at it as just a house. Ignore all your experiences there and try to see it as a buyer will. There are many variables that can affect a house’s pricing. These aspects include size, location, the number and quality of services in the area, the availability of reliable public transportation services, and neighborhood reputation, among many others. Pricing will also be subject to the area's regular house market pricing levels, of course—no house is an island (or at least, not for the average buyer or seller!).

Homeowners lacking real estate agent-specific training and experience are faced with the almost impossible task of evaluating all the aspects that affect the market price and the variables within that—many of which change with the seasons, sometimes literally, as one fad or trend waxes and another wanes. Real estate agents have extensive, current knowledge of the marketplace's trends and the contacts and resources to ensure that their knowledge stays up-to-date. They are also experts in pricing and all the little details that affect it. They have the professional skills to evaluate the selling property neutrally, as they do not let their emotions affect the quality of their work. MISTAKE #2 • NOT MAKING THE PROPERTY AS ATTRACTIVE AS IT CAN BE MEANS F E MEANS FAILING TO MARKE O MARKET IT PROPERLY One of the most common mistakes in FSBO comes up in property marketing. When the private seller starts to advertise their property, it is essential to provide pictures that make the house seem as attractive as possible, paired with a detailed and professional description. Failing to give all necessary information—or, worse, giving outright incorrect details—to a potential buyer is a quick and surefire way to torpedo a possible sale. Unfortunately, providing too little or too much information about your house is exceptionally easy. Making professional and tempting property ads is a challenging job. Like most other aspects of home sales, it requires either experience or extensive research and preparation to get it right.

Part of that preparation lies in understanding that, with some

work and investment, many aspects of the house—even things you might have considered its weak points—can be positively presented. Carefully and thoroughly cleaning and arranging the home is essential before any showing. Investing in a few plants and storing away personal items and unnecessary furniture can make the house look cozy without being too personalized to appeal to someone with different tastes than you. Failing to do so, on the other hand, can imply sloppy maintenance and a general lack of care, reducing potential buyers' earnest interest. If your property has them, taking good care of gardens and walkways can do wonders for the first impression you give to potential buyers; even the front door can make a difference, so clean up the whole face of the house in particular! It’s also imperative to fix all the minor potential flaws of the house. A slight renovation can go a long way and boost the property's value. When it comes to the furniture and details, consider getting help! If you aren’t confident in your ability to walk the fine line between a neutral and inviting home and a bland, sterile one, using the services of a professional staging expert can do wonders. There are trained service professionals whose only job is to make your house look just right for a showing. It is important to remember that potential buyers will have every little detail under a magnifying glass since they are preparing to invest money in whatever property they buy. In contrast to owners, real estate agents are professionally trained when it comes to property presentations. They will make sure the house looks as presentable as it can ever be. They will use every trick in the book to make the presentation pleasant and convincing. They might change the rooms' lighting, rearrange some furniture pieces, or offer refreshments and snacks to visiting buyers. They will do whatever is needed to make the premises look as cozy and comfortable as possible to

persuade the potential buyer that this is the perfect place for them. Anything beyond their expertise can be handled by one of the specialized professionals mentioned earlier—professionals with whom most agents maintain contacts, often allowing you to get a better deal on a reputable expert. Real estate agents also have full training on “seal the deal,” leveraging all that cleaning, staging, and detail work to create the most muscular possible negotiating stance from which to bargain. After all, no matter how much you spruce your home, there’s a limit to how much that alone can help you if you aren’t a skillful negotiator when the time comes. Professional agents can quickly weed out the most promising leads among a crowd of potential buyers or a long list of visitors from a series of showings and know how to coax them to the table and then to the contract.

MISTAKE #3

MARKETING IN THE WR G IN THE WRONG PLACE: FAILING TO USE THE RI E THE RIGHT CHANNELS ANNELS

A Multiple Listing Service (MLS) is the way to go. Many property owners who want to sell their home—be it a house, an apartment, a condo, or anything—fail to market their property as well as they can because they don’t want to spend hundreds of “extra” dollars to list their property on the MLS. This is one of the greatest mistakes people can make when selling FSBO. An MLS is a vast, comprehensive database of homes for sale, connections to real estate agents and other buyers and sellers, and market information, which real estate brokers routinely use. It’s a perfect way to attract the interest of many potential buyers and their buying agents. Even if you decide to go FSBO, working with buying agents is the way to obtain a fast sale.

Real estate agents have access to the MLS, which is a big part of how they can find potential buyers for all of their clients. They usually also have many personal and professional contacts to refer back to when needed, though, which is more difficult to replicate than MLS access. Unlike owners, an agent trying to sell a home is working on commission. Striving to obtain a hot deal at the highest possible price is in the agent’s best interest—even more than it would be for the owner. Someone looking to sell their house FSBO certainly wants the best deal, but an agent needs it. They will throw all their skills and experience into getting that perfect price because agents make their living this way, and upholding a good reputation for high sales prices is crucial to a good real estate business.

MISTAKE #4

NOT UNDERSTANDING THE NECESSAR G THE NECESSARY PAPERWORK

Not knowing what papers you need to sell your property can cost owners opting for FSBO dearly. There are lots of documents and many disclosures that need to be signed and submitted for filing throughout the home sales process. A seller must consider scheduling appraisers, arranging necessary inspections, and meeting many other conditions. Failing to meet requirements in terms of accuracy and timelines might cost the owner and buyer extra money and time—quite possibly in the courtroom. That is why all official documents and agreements involved in the sales contract must have been cleared and executed within a legally binding time frame. Real estate agents have thorough training regarding the timely handling of all the necessary

paperwork related to a property sale. Regarding contract terms and essential documents, real estate agents hardly ever make mistakes; doing the paperwork right is part of their job. They have their reputation to uphold because they don’t have a career without it, so they will do their part to finish everything accurately and timely.

MISTAKE #5

NOT KNOWING THE TERMIN G THE TERMINOLOGY OF PROPERTY RIGHTS! It is easy enough to welcome potential buyers inside your house and give them a tour, but when they ask about escrow, oil-, gas-, and water rights, maybe even about the possibility of leasing the property, do you know what to say to them? Most people don’t, which is another mistake many make when selling FSBO. This is also why people use real estate agents, as they are trained to respond to questions quickly, which the average person would never have any reason to think about. Unlike private owners, real estate agents are trained and experienced at considering all the details buyers may want to know more about. Agents will often have a checklist of any matters that could affect the property, and they will have answers prepared for all of them, just in case, as a professional should. Again, it’s their reputation and expertise on the line, so mistakes and misinformation are something they are motivated to avoid at any cost. MISTAKE #6 • SLIP-UPS IN THE HOUSE PRESENTATION Selling a house is an art. It’s all too easy to make a mistake describing something with sentimental value to someone who doesn’t see it the same way. It’s easy to use the wrong kind of adjectives or to exaggerate and say the wrong things at the 16

wrong time. What seems like wholehearted and innocent praise to you might annoy a stranger. It is often quite challenging for an owner to present their property neutrally simply because of the emotional attachments linked to it. That can hinder the sales process and is another common mistake people who sell FSBO make. On the other hand, real estate agents have the advantage of professionalism and detachment when it comes to property presentations. They know exactly what words to use to make the sale happen. They can show less desirable traits of the property in a better light. They don’t have emotional biases that drive owners to focus on the wrong elements of a home. To repeat, selling is an art, and no one makes for a better artist than an agent when it comes to selling property. • DETAILS Plenty of blunders can be made when selling your property without professional support. You'll need to be available for all contacts, set up all home showings, and answer various questions. There is much to do. The house must be clean and free of unnecessary furniture, pets, and personal objects. If you have any, finding somewhere else for the kids to be is a good idea. Real estate agents have experience dealing with all of that. They present houses daily, all year long. Where you, as a private owner/seller, might stumble, they will succeed. Again, they have extensive training and a long history of experience in the field. As a rule, they are familiar with all the mistakes and problems that might occur to complicate the process. They know how to dress up the risks, take advantage of the loopholes, and avoid the downsides of the deal since it’s in their best interest to do so. Actual housing market knowledge and professionalism are something you can only achieve through training and 17 MISTAKE #7

experience.

That said, selling for sale by owner is a perfect option for those with real estate experience and good negotiating skills. For anyone else, though, selling FSBO is not recommended unless accompanied by thorough research and a great deal of free time and patience. Please avoid the common mistakes people make when selling FSBO and refer back to a professional real estate agent if you feel overwhelmed; it is usually possible to consult with one for advice, even if you cannot retain one to handle the proceedings themselves. Selling your house is essential. Please ensure your home gets the attention it deserves as your most important financial investment. The result will be well worth it.

CHAPTER 3 What are the Costs of FSBO? e the Costs of FSBO?

When engaged in a transaction, it can be challenging to understand all of the costs. You will have expenses if an agent is involved or you are selling the property alone. This chapter will help break down the costs involved so you can easily understand the fees associated with selling your house—while putting more money in your pocket with these proven strategies.

BREAKING DOWN THE B WN THE BOTTOM LINE

This section lists the most common costs you may incur while selling your property. Some items may not be relevant to your specific situation, but if they are, you may find it helpful to write in the amount for each section.

Back Payments and Taxes = $________________ s = $________________

When you go to sell your house, if you have missed any payments, or if your home is in foreclosure, there may be back payments that you will be required to catch up on. There may also be other liens on your house, including Home Owners Association (HOA) fees, taxes, or other payments. One important thing to remember is that there may be penalties tied to these back payments, liens, or taxes. These extra costs are essential to factor in from the start because you cannot sell your house until they are paid.

Loan Pre-Payment Penalties = $________________ s = $________________

Some loans, usually non-government loans, have a pre-payment 20

penalty. A pre-payment penalty means that if you pay off your mortgage too quickly—typically within the first five years—there is a penalty. If you are unsure if this applies to you, track down your paperwork and see if you have a “pre-payment penalty” or “pre-payment rider” attached to your loan. If you do, that section of the paperwork should outline the terms and conditions surrounding it. Sometimes, there is also a penalty for settling the loan within a set period, regardless of the circumstances. Other times, there is only a penalty for specific situations. FHA, VA, and USDA loans never have a pre-payment penalty, but other non-government (or “conventional”) loans often do. This penalty can impact your bottom line, so knowing if you have a pre-payment penalty and its terms is essential.

Holding Costs = $ _________________ ts = $ _________________

Holding costs are the expenses you still incur while waiting for your house to sell. Most real estate experts suggest paying about 4-6 months of payments even after listing your house. Some of these costs include:

Monthly mortgage payments Monthly taxes and insurance Utility bills: electricity, water, gas, trash, etc. Maintenance: lawn care or snow removal and the like Pest control

Research statistics from Realtor.com indicate that, nationally, homes are on the market for an average of about 86 days. Looking at your area’s average days on the market, or their “inventory age,” gives you a good idea of how long your house might stay on the market before a sale goes through. This information is accessible either through Realtor.com or through Zillow.com.

To better understand your holding costs, we will use the national average of 86 days or about three months. Once an offer is put in on your house, the buyer’s lender usually takes about 45 to 60 days to close; however, that process can be even longer, depending on the circumstances. Remember that until you officially sign the closing documents, you are still responsible for paying your monthly mortgage payments, no matter how sure the sale seems. So, if your house is on the market for three months, and then you have to spend at least two months in the contract, you will end up with a minimum of five monthly payments. Whether you live in your house or not, you will still be responsible for its monthly mortgage payment and holding costs. You may run into a situation where you accept an offer from the buyer, start the closing paperwork, and then—at the last minute!—the contract falls through. According to Realtor Magazine, about one-third of all real estate transactions fall through at one point or another. If this is the position you find yourself in, you may need to fix whatever problems caused the failure and start the whole process again—adding more months of holding costs to the picture.

Transaction Expenses = $ ______________ s = $ ______________

Commonly referred to as “closing costs,” these expenses may account for 2-3% of the total amount of the loan. If you live in a high-cost region like California or New York, closing costs may be much higher and can account for roughly 5-6%. If you are unsure of the average closing costs for your area, you can talk to a lender who specializes in your county or state. Fortunately, transaction expenses are typically negotiable between the buyer and seller, so if you can negotiate for a higher

selling price in return for paying some of the closing costs, it can go a long way toward helping the sale, as the buyer will not have to bring as much to the table.

Cosmetic Fix-Ups = $ __________________ s = $ __________________

Most houses need cosmetic improvements, such as new carpet, fresh paint, or yard work. If you want to sell your home for top dollar, it must be in excellent, move-in-ready condition. When buyers view your property, they will always be mentally assessing what they will need to change or update and how much it will cost them to do it. If they choose to put in an offer, they consider these changes, which may lower the purchase price they are willing to propose. Properties in the move-in-ready condition generally sell faster and for a higher price than those without renovations or changes. A FOR SALE sign is not enough in today's market to sell your house. If your home needs more than just paint, carpet, or yard work, consider selling it as a fixer-upper or adjusting the price to include the cost of any more involved renovations required. Remember: this can limit your potential buyers, but if you invest in those minor cosmetic changes, you will see a faster selling time and a higher purchase price.

THE BOTTOM LINE

Selling a house without a real estate agent can save you thousands of dollars in sales fees; that is true. However, the savings might not be as dramatic as you would expect. The fee charged by an agent usually covers many of the costs associated with selling a house, rolling those other fees into the agent’s commission. Furthermore, the time involved in selling a home is transferred to the FSBO seller, and if that person is working, that can translate to more money lost in time taken off work. A meaningful amount of time and money is involved in selling a home, even when you

sell it FSBO.

Other costs involved in selling a house without a real estate agent include:

Determining the Sales Price of the Property

The seller can do this by comparing recent sales prices of similar properties in the area and adjusting their price to match those, hoping to hit the market sweet spot. Alternatively, they can employ the services of a professional appraiser (which usually costs $550 and up).

Writing a Sales Contract

You can get a real estate attorney to write one for you, purchase a boilerplate contract, or find one free online (this process usually costs $200 and up overall).

MLS Listing

You can purchase a listing on an MLS but must do so from a real estate agent, as agents are the only ones who can list on MLS. If you use this option, you must also stipulate a commission fee you will pay a buyer’s real estate agent ($200-$500 for the MLS service, plus a 2-3% final sales price commission fee).

Advertising the Property

Advertising costs can vary widely, depending on what methods you choose. Some websites, like Craigslist, will list a house for free; others, like eBay, can charge for a fixed-price listing. Advertising materials such as FOR SALE signs, brochures, pictures, or classified advertisements can also become costly (anywhere between $50-$2,000 on average, depending on the chosen methods).

Home Inspection

Many FSBO sellers strongly recommend requesting a professional home inspection. Most buyers will hire a professional inspector to find any flaws or deficiencies in the house they consider purchasing. A seller is liable for any deficiencies in the home they know about or reasonably should know about. A home inspection done on their terms gives the seller guidance on what a buyer will find in the house and offers the seller a chance to repair any deficiencies before listing the home for sale ($200-$500).

Surveying the Property

Having the property surveyed is essential to define the exact scope of the property being sold. Usually, you can find this information in a local tax office. For a small fee, you can get a copy of the official documentation of the property’s boundaries ($15-$200 or more).

Open Houses

Most real estate agents will hold at least one open house, but you’ll need to prepare your home and advertise for your open house on your own ($100).

Other costs

Many other possible costs are involved, including (but not limited to) staging your house to impress buyers, independently assessing the buyer’s financing, your financing of the deal, house warranties, the closing attorney, and negotiating an agreement with the buyer.

COMPARING FSBO TO USING AN AGENT

I want you to know whether to sell your house FSBO or through a real estate agent. It depends on your situation and your motivation to take on this process. Plenty of options and resources are available to you to help you sell your house, but as seen in the previous section, costs can become quite hefty, even without paying for an agent. Most of those fees are covered in their commission rate when you use a real estate agent. Even though 6% seems like a lot, it isn't that much when you break down the costs individually, and it can be counted upon to expedite the selling process. All in all, selling FSBO is likely to net you a lot less money saved than you might expect in return for a lot more work, time, and stress.

UNEXPECTED COSTS

If you start planning, you may find ways to reduce some of the costs involved by handling the tasks yourself or getting competitive bids. There will always be some unanticipated expense involved—that’s just the way of the world—but plenty of costs can be predicted and prepared for. Before the sale, here are some expenses you should expect: Cosmetic repair means painting, window washing, carpet repairs, landscaping, or other fix-ups. Staging your house to impress buyers can be very valuable, but it can also cost you storage fees, rental trucks, or new furnishings. If you choose not to stage your house entirely, adding a few decorative or new items is still wise to make it look fresher and less lived-in. Pre-inspection reports and other holding costs are inevitable. When it comes time to close the deal, you’ll hopefully get a good

payout, but there will still be some expenses, including: Real Estate Agent commissions, credits to the buyer, transfer taxes, house warranty for the buyer, capital gains tax, and moving costs.

CHAPTER 4 Staging Your Home When our Home When Trying to Sell by Yourself ourself

How Much More Money Can Staging Get?

According to the National Association of Realtors®, " Most homeowners know how important it is to make a home bright, clutter-free, and clean while on the market.” However, according to Realtors®, sometimes, going the extra mile and staging a home can boost its market value, ultimately giving the seller more money. According to the NAR president and an executive broker, “Homeowners should try as much as possible to carry out thorough home management practices such as brightening the home, keeping it clean, and fixing any major aesthetic-related issues.” Another good idea is to stage a home to help potential buyers visualize themselves living in it, increasing the perceived value of the home by the buyer and the actual monetary value for the seller. In a survey carried out on Realtors®, 49% of real estate agents believe that staging a home significantly affects how a buyer views the home; another 47% are convinced that only on some occasions does staging impact how a buyer views a home. Only 4% said that a buyer's perception is not affected by staging a home. On the buyer’s side of the issue, Realtors® believe that staging a home affects buyers' views in several ways. 81% of Realtors® said buyers are more likely to see the property as a future home, and 28

46% said potential buyers are willing to walk through a house showcased online. 45% said decorating a home to the tastes of its potential buyers positively boosts the home’s property value. Interestingly, only a tiny portion (10%) of agents believe that decorating a home contrary to the taste of a buyer affects its value negatively; that is to say, they’ll probably like the house more if your decor matches their preferences, but it may not be such a big deal if they think your decor is terrible. On the seller’s side of things, most agents use staging as a means in one circumstance or another: 34% use staging on every home, while 13% stage a home only when it is hard to sell, and another 4% will stage only homes that are highly priced. Overall, more than half of all real estate agents indicated that staging a house was worth the time in at least some cases. The average cost of adequately staging a house is six hundred and seventy-five dollars ($675). 62% of agents representing sellers say that home staging services are offered to sellers, while 39% say a home is listed only after a seller pays.

CLEANING AND ORGANIZING

Staging can significantly increase a home's perceived value, which generates more money for the seller. Staging may include keeping the home clean, de-cluttering, and making the home brighter and more beautiful. Below are some basic steps to take when cleaning and organizing a home for staging:

The entire house should be studied and straightened.

Sellers should try to erase their assumptions about the house—they need to look at it as if they have never seen it before. Then, with that mindset, they are advised to go through all the building rooms to ensure everything is in its proper place and to note what needs to be moved, repositioned, or removed. 29

Make piles.

It may not sound very organized, but sometimes, the best path to a neat home is through a messy one. Once you’ve taken a good, detached look at the house, start sorting its contents into piles. Piles should be organized as the seller clears each room. The value, appeal, and aesthetic of each item should be considered. Items you don’t want the prospective buyer to see during staging should be set aside; those you intend to keep should be recorded.

Have a spreadsheet.

Keeping some written notes makes the whole process much easier and less stressful. Please create a list of rooms that require organization and catalog their contents into different priorities to get a good, quantitative sense of what must stay and what must go. This will be very helpful for you as you move forward. It will also help prioritize expenses, like adding new staging elements, areas needing paint, and other small home improvement notes.

Empty closets.

Before staging a home, sellers’ closets should be emptied and cleaned. Any unused items in the wardrobes should be appropriately disposed of, either temporarily or—if the “Spring Cleaning” mood strikes you—more permanently. This helps the buyer see how much space they have to work with and lets them envision filling it with their possessions.

Clear off bookcases and counters.

Since most reading can be done electronically now, clear off books that will not be reread; as with the closets, this will emphasize the available space to potential buyers. Add some decorative items to keep the home sparkling and attractive rather

than sterile. A neutral but welcoming style should be the final impression.

The exterior of the home should be inspected.

The exterior of the house should also be well taken care of. The outside of the home may play a significant role in setting the buyer’s expectations for the interior, so clean and well-kept is the look to go for.

Bathrooms should be made spotless.

Not all sellers have luxurious, spa-grade bathrooms, but sparkly clean tiles, grout, vanity, and shower doors can significantly improve the appearance of an average bathroom.

The kitchen should be cleaned up.

People frequently accumulate the most “stuff ” in the kitchen—cell phones, backpacks, car keys, and much more. Sellers should not stuff the cabinets with dishes or the pantry with food; the freezer and refrigerator should be cleaned.

Purge attics, garages, and basements.

This is another essential task to carry out when preparing to stage a home for prospective buyers; like the closets, again, this helps emphasize storage space, create an impression of cleanliness and good housekeeping, and encourage the buyer to envision their things filling these spaces.

NEUTRALIZING GENDER

Whether you are preparing to sell your house or updating your decorations with the seasons, you must remember some styling tips to make things appealing to the tastes of both genders rather

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