Prior to becoming a Realtor, I sold a house with no realtors on either side of the transaction and these are the 10 tips and tricks I learned during the process…
My two partners and I were flipping a house, and as these things go, we were significantly over budget (see our guide on saving money and maximizing profit when you sell your house). We knew we had to save money each step of the way in order to eke out any sort of profit, so we bit the bullet and decided to sell the house as a for sale by owner with no real estate agent. I now share these lessons I learned the hard way so you don’t have to.
1. Craigslist vs ForSaleByOwner.com vs Flat Fee Listing companies
The term “for sale by owner” generally means selling your house without the help of a Realtor. But there are still different options to market your home if you decide to go that route. Here are three…
1. You can sell your house truly on your own by purchasing a For Sale sign at your local hardware store, and listing it on Craigslist, Zillow, and Trulia. Yes, you can actually enter your listing manually on Zillow for free. Since Zillow is the #1 source buyer’s use when searching for homes, this is absolutely required if you decide to go this route. After completing your listing on Zillow, it will also automatically post to Trulia, although it seems to me everyone just uses Zillow now.
2. Use forsalebyowner.com and pay for one of their packages that gets your house on the local multiple listing service (MLS), which is what all the real estate agents use. We ultimately settled on using the forsalebyowner.com “enhanced MLS package” with a 0.5% commission. As of the writing of this post, they seem to have changed their options to various levels of flat fee packages ranging from $300 to $500. This option gets your listing on the MLS which provides even more exposure and also typically syncs with all the large real estate websites like Zillow, Realtor.com, Redfin, etc. (this depends on the specific MLS rules in your area).
3. Use a flat fee listing brokerage that will put your house on the MLS for a few hundred dollars up front, but there are usually upcharges for more photos, video, or simply changing the price or other details of the listing.
We went with option #2 above and were paired up with a broker who seemed to operate out of Chicago, but must have also had a brokers license in Michigan. Communications related to the listing disclosures and listing agreement forms was handled via email through various administrative staff. Any phone calls had to be scheduled in advance via email too. The listing agreement was called a “limited service agreement” that specified no advice would be given related to the listing price, negotiating offers, or anything else. These types of real estate companies rely on being hyper efficient, so the customer service isn’t great, but it’s hard to beat the cost.
2. How to price your home
You may have heard real estate agents use the term CMA, which stands for comparative market assessment. This is just a fancy way of saying you should price your house pretty close to what other comparable houses (“comps”) in your area have recently sold for. Real estate agents have access to some fancy software with tons of features, but you can definitely create your own CMA for free. You can search for recently sold houses on Zillow.com and even set the filter for how far back you want to look. The three keys to a good CMA are to find properties that…
(1) sold recently, preferably within the past 3 to 6 months since the market can change quickly
(2) are geographically close to you, such as within half a mile, but this is dependent on your specific area. For example, my subdivision is comprised mostly of ranches from 1,000 to 1,500 square feet built in the early 60’s with large and deep lots. However, we are surrounded by subdivisions filled with colonials well over 2,000 sq ft built in 1980’s with smaller lots. Doing an arbitrary search for recent sales within a certain distance will not provide good comps, so I have to limit my search of sold homes to my specific subdivision.
(3) are similar or comparable to your house. Like in point #2, try to select properties with the same architectural style, the same number of bedrooms and bathrooms, built in the same decade and that are within a few hundred square feet in size of your house. Once you have selected 5-10 houses that meet this criteria, calculate the min, max, and average price per square foot, and multiple by that by the square footage of your house. This will give you a good range in prices for your house. You can then make adjustments based on how fast you need to sell it, and how much updating or repairs it needs compared to your comps.
3. Use professional photos and video when marketing your home
As a DIY’er kind of person, you will be tempted to take photos of your house on your smart phone. While I readily admit the last two Samsung Galaxies I’ve owned take much better photos than first real camera, a 2004 era Canon, trust me….the photos you take of your home are going to look awful. They always do. Go ahead and try to take a photo of your bathroom and get more than just the corner with the toilet, and also without yourself in the mirror. Unless you want to have a selfie in all your listing photos, don’t try it. Or try to take a photo of your bedroom that doesn’t make it look twice as small as it is.
Thankfully, here in Michigan there are some great and affordable options for photographers that specialize in real estate photography. Check out Mixed Media, and HouseLens, which even offers options for video walk-throughs, aerial drone photos, and 3D tours. You will save money in the long run when your house sells faster because it doesn’t looked haunted in all the photos.
4. Don’t miss the legally required disclosures when selling your house in Michigan
You are required to complete a sellers disclosure form, a lead paint disclosure form, and provide a pamphlet about protecting your family from lead based paint when selling a residential property in Michigan. These must be provided to interested buyers, and most purchase agreement contracts will have a spot for the buyers to initial confirming that they have received these three documents. Depending on which option you choose above, you may have these forms provided to you. If not, they are also publicly available here:
5. How to handle the purchase agreement process
If the buyer has an agent
- Most likely the buyers will be working with an agent, and she will draft the purchase agreement and coordinate everyone signing. The buyers’ agent can even add you into their electronic signature software to sign electronically from the comfort of your own home.
If the buyer does NOT have an agent
- This is probably your dream scenario since you don’t have to pay either the listing agent commission or the buyer’s agent commission. The problem is, now you have to come up with your own purchase agreement and get everyone to sign. In my case, this is exactly what happened, and we immediately called a local title company. I was super happy to learn that they provide a blank purchase agreement for free, along with the lead paint disclosure forms!
6. Sign up for Docusign to easily get signatures
The easiest way to obtain and track signatures, especially if there are no realtors involved in your deal, is to sign up for your own Docusign account. You can usually get a free trial for 30 days, but if not, it’s only $15! In my case, myself, my partners, and the buyers were all able to sign from the comfort of our homes after 5 minutes of setup on my end. Well worth the $15 account! Another option (there are numerous companies in the e-signature space) that I’ve heard good things about is Hello Sign, which also appears to offer a free trial period on their website.
7. How to handle the earnest money deposit
You will probably want to collect an earnest money deposit from the buyers worth a couple percentage points of the sales price to make sure they are serious. However, they aren’t just going to write this check over to you, so you need to put it in escrow somehow. This is where you again use the title company! In our case, they provided free escrow services, and we simply had the buyers make a check out to the title company and go drop it off. Easy as that.
8. What is Title Insurance, and do I need it?
The buyers will want to be assured that after they buy the house and get the deed, that nobody else down the road will come claiming they have a stake in the house. This could be an old home equity line of credit, or a lien from a contractor that never got paid. Most purchase agreements state that the sellers will provide title insurance at their own expense. In my experience, this seems to cost about $1,000 but could vary by region and home value. Again, you provide the signed purchase agreement to the title company and work with them to get the correct type of insurance.
9. Inspections and Negotiations
Most negotiations after the purchase agreement come after an inspection. We are working on an entire post about negotiation techniques, but in general, keep in mind your BATNA. That is your “Best alternative to a negotiated agreement.” In other words, before negotiating, think of the next best alternative to the current offer, and work within those boundaries. If you have another offer waiting, you can play hardball. If the market is slow, you may have to give in to some of their demands. A lot of this is common sense, but it is important to think of your BATNA and limits in advance! Otherwise, you will find yourself getting annoyed with those unreasonable buyers, and letting emotion get in the way of that check! Don’t let your pride get in the way of getting a deal done. If you need inspiration, watch this little girl take Adam Sandler to the cleaners with her negotiation skills.
10. Closing Disclosure Form and Closing day
The title company will provide you the closing disclosure form a day or two in advance of the closing. I admit, these documents are are pretty confusing, but they do show exactly what types of credits you and the buyer are receiving, who gets paid what, and how much everyone has to bring to the closing via check or wire in advance. Some common examples of items on the closing disclosure statement are that the seller would get credited for property taxes paid in advance, and the buyer would get credit for the earnest money deposit they already paid. It would also show the commissions to any real estate agents (for the purpose of this post, it would be just the buyers’ agent), mortgage origination fees, title insurance fees, bank appraisals, and on and on and on. If you find this form confusing, it is worthwhile asking to review it with someone at the title company in advance or even an attorney. You want to avoid any hiccups at the closing after all the checks have been written and money wired.
11. Is doing a for sale by owner right for you?
Why is VendCasa Realty touting an example of a successful for sale by owner deal with no real estate agents involved? Just being honest. We want to educate people about all the options out there. Doing a for sale by owner is definitely not for everyone. However, if you actually enjoy negotiating and are willing to accept the work and headaches, it is a valid option. On the other hand, if you want professional advice regarding your sales price, negotiations, closing forms, professional photos and video, a nice yard sign, electronic lockbox, someone to vent to, want to save money vs a traditional agent, AND feel good about the company you’re doing business with, shoot us an email, or a text, or a FB message, or whatever. Reach out even if you just have questions about the whole process. If you still want to do for sale by owner, or go with a full commissioned traditional agent, that’s fine too. We won’t judge.
I need to point out that these are simply my lessons learned and opinions from experience. Do not take this post as any sort of legal or financial advice.