An excellent question. Frankly, I wish that I could tell you that hiring a Real Estate Agent to help sell your home is a no brainer and should be done without question. Unfortunately, this is not true. This has more to do with the business practices and professionalism of my colleagues rather than the rational argument of saving money by selling yourself.
The savings that you may incur by doing a FSBO (For Sale By Owner) and selling your home without hiring a Real Estate Agent/Brokerage is a significant amount of money and, for some, could be worth the savings. However, for most, the risk, the emotional roller-coaster, the legal liability, and the unknown are not worth selling your home yourself, and hiring a professional is well worth it.
The best way for you to decide whether to hire a Real Estate Agent to sell your home or to try and do it yourself is to consider the entire process of selling: what happens that the public doesn’t see, the legal ramifications, and the possible financial consequences.
Since there is limited space on this Blog post, I going to give you the ‘Cliff Notes’ version of selling your home. For an in-depth explanation we can schedule a one-on-one consultation where I can expand on each subject.
Pre-Marketing and Preparing Your Home for Sale
You wouldn’t just wake up one day and decide to sell your home and put your house ‘on the market,’ would you? That is foolish and could cost you TENS of thousands of dollars. Most of the sellers that I encounter plan ahead and know a few months in advance that they want to sell their home. I typically need between 3 and 6 weeks from an initial meeting with a seller to help them properly prepare and present their home to the market.
Shari at Staged Above is brought into on-board for all my listings, they are a key component in my ‘Warren Buffett Approach to Sell Real Estate’ –a Value-Driven Approach, and how I teach my sellers to look at their home as a business with a stock price, instead of a home with a sales price. Having Shari involved can easily put an extra $5k-$10k in your pocket at settlement
The award-winning Annie Walters is hired to professionally photograph your home and tell your home’s story – visually. What Annie does with a camera is nothing short of amazing. In a recent study by National Association of Realtors (NAR) the number of buyers that start their home search online is over 90%, so if your photos do not stand out and more importantly tell your home’s story, then you will be missing out on possible showings and, thus, possible buyers.
Additional services that our clients can receive leading up to the actual listing of their home are: a professional cleaning by Heidi Robar, a pre-listing home inspection that can uncover costly and unknown issues that can be addressed prior to listing, and a pre-listing appraisal that can help determine the value of your home.
Your cost a seller hiring these services individually to help properly prepare your home for sale is $2,000-$3,000.
Listing your home…
Imagine that the last month has been spent preparing your home for sale. All the work has been completed, the staging done, the furniture properly positioned for the photographs, the artwork hung, the photos taken, your house professionally cleaned, the issues from the pre-inspection have been fixed, and you are ready to list your home…
The sign has to be ordered and installed. How many times do you think buyers drive around an area looking at one home, then they see a sign for another home and want to see that home also? It happens more than you think. So you need to get a professional grade sign on your home.
Now your listing has to be disseminated to the public and Buyer Agents. From the MLS listing your home gets syndicated to the top websites: Zillow, Trulia, Redfin, Realtor and any of the hundreds of search engine websites, but none of this happens without getting your home on the MLS. And guess what? Only Real Estate Agents can use the MLS. Now there are companies that will put your home on the MLS for a ‘flat fee,’ but again, this costs money, and this is the ONLY service you receive with these ‘flat-fee’ companies.
These agents who are bringing, or possibly bringing, buyers through your home are known as ‘buyer agents.’ They represent the buyer, serve the buyer, and protect their best interests when purchasing a home. What I have found over the years is that 95%+ of buyers that are searching homes have an agent representing them and their best interests. And guess what? These agents expect to be paid for their time and expertise. These agents expect the SELLER to offer compensation in the range of 3% for bringing a buyer to your home. The seller offers ‘buyer agent’ compensation through the MLS listing and for agents to show and sell your home, the higher the compensation the more incentive these buyer agents have to sell your home. Think of ‘buyer agents’ as the gate-keepers to potential purchasers of your homes. You want these agents promoting and showing your home.
Next you need a lockbox. You don’t want to leave your keys under a mat on your front porch; you want to be able to monitor who visits your home. You want to be able to screen, if you will, the agents and buyers that come through your home.
How do people gain access? We have a company called Centralized Showing Service (CSS) that automatically uploads my listings from the MLS. Any potential agent that wants to show your home calls CSS, and they verify the agent is who he/she says she is and keeps records of your showings. Plus, they also follow-up directly with the agents to get feedback on the buyer’s showing.
The above services will cost you between $800-$1,200 PLUS Buyer Agent Commissions.
Marketing Your Home
Stories are written for our listings that help buyers create an emotional attachment to your home. Once a buyer has an emotional attachment, has visually moved into your home, has placed their furniture in your home, and the kids have picked out their rooms, the likelihood of them making an offer and purchasing your home increases. To see examples of some of my listings’ stories, check out www.EricVerdiProperties.com. These stories are molded from strategies learned from Madison Avenue and some of the best direct sales copywriters of all times. Make sure you read a couple of these stories.
Your home’s story is then turned into a 4 page booklet that is left at your home and also used in the sign rider. Imagine how much more powerful it is when someone picks up one of these stories from the sign in front of your home instead of the standard ‘features sheet’ of bedrooms, baths, etc. There is no emotional attachment from a ‘features sheet’. The entire premise of these stories is to help buyers envision themselves in your home.
A large component of being able to sell your home is getting your home’s Story in front of a mass group of people. Once the story is disseminated to the public, the likelihood of finding ‘the right’ buyer increases exponentially. Have you ever searched for a product online? Might be shoes, a TV, a book, clothes, or sporting equipment and you find an item, but you don’t purchase that product, you then notice that specific product’s ad shows up on other sites that you visit like Facebook, USA Today, CNN, ESPN or any of hundreds of other sites. Basically that product, that ad follows you until you purchase. I’m not sure exactly how this works, it has something to do with the cookies in your computer. Well, I’ve hired a company that once a potential buyer goes to Trulia and Zillow and searches for a home in your area, any home, that your home’s ad follows them around the internet, while drawing them back to your home’s story on www.EricVerdiProperties.com
Properly marketing your home could be the difference in selling your home vs. not selling your home.
Not everyone has the resources or ‘equity’ to have a professional list their home and want to look at alternatives, such as doing a ‘For Sale By Owner’ to save on commission. I have advised people in the past to look at the pros and cons of each and to make their own decisions. I then take them through the steps of preparing a home for sale, the necessary steps to achieve maximum value, and the rewards and possible pitfalls of selling your own property. Then with that knowledge about what goes into a real estate transaction, they can make their own educated decision.
You have endured 2 months on the Market and have been inconvenienced 23 times for showings, and finally AN OFFER.
Now we are moving forward to the second phase of the home sale. You have properly prepared your home for sale. You have already de-cluttered, de-personalized, Scientifically Staged, had Professional Photos taken, figured out how to get your home on the MLS (so buyers can find your home), bought a lockbox, installed a sign, and managed and logged all the showings.
This hard work has resulted in an agent calling you on a Friday evening, just as you are sitting down for dinner, and tell you that they have a buyer ready to make an offer on your home. Woooohoooo. “Someone wants to buy MY home,” you think to yourself. (This is how the conversation typically goes when I have a buyer that wants to buy a property listed as a For Sale By Owners). The conversation goes something like this. “Mr/Mrs. Seller, I have a buyer interested in your home and they have told me they are ready to write an offer. I have some questions so that I can best prepare an offer. Where can I find the Disclosure Statement, and the inclusions/exclusions list? Are you offering a home warranty to the buyer? What is your time frame for moving? Do you have a fax, or can I send the offer for esignatures? My buyer has to sell their home first; is this ok? They need closing cost help, and I’ll be putting that into the offer.”
My response, “Well Mr./Mrs Seller, a disclosure statement is required by law in a real estate transaction in the state of Maryland. Inclusions are typically what stays or goes with the property excluding personal items. Some sellers elect to enroll their home in a home warranty program when they list to protect themselves and then the buyer for a year after the sale.” Then I take a deep breath and realize that not only am I going to have to do all the work for my buyer, but I’m going to have to walk the seller through their legal obligations in regard to a contract of sale in Maryland.
You finally receive a Contract.
You have navigated through the above questions from an agent or buyer, and now you are awaiting for the ‘Contract to Purchase’ from the buyer. This day or two from the time that the buyer/agent tells you they are going to write an offer until you finally receive it is STRESSFUL, and you are asking yourself a million questions: Have they found another home? Did I vacuum before they saw the house? I hope the kitchen was clean? Did I price my home to high? Too low? Where the heck am I going to move? I heard my neighbor was going to sell their home; maybe the buyers want their home instead?
Then you get the offer from the other agent or buyer and it is 38 pages with a bunch of terms, figures, and addendums. If you are an attorney or deal with contracts on a daily basis you can navigate your way through what it all says and make sense of everything. If not, it could be a little overwhelming. But you finally figure out the terms of the offer and can estimate how much you will be walking away with when you settle. If this amount is where you want it to be, great, move forward and sign the contract.
If not, time to negotiate!
There is an art and science to negotiating a contract of sale. When do you call the other party back? How much should you counter? Are there other parts of the contract to negotiate besides price? These are just a few of the variables that go into negotiating a contract.
Sellers are emotionally invested in their home and have memories of raising their family, having Thanksgiving dinner, waking up Christmas morning with the kids. These emotions and emotional attachment to your home have ‘value’ to you, but have no ‘value’ to a potential purchaser. The first rule of negotiations is that the person with the greater emotional attachment usually gives in first and ‘loses.’ This is why professional athletes have ‘agents’ that do their contract negotiations with the teams, the same reason why home sellers hire ‘agents’ to negotiate the terms of the contract for their home sale.
Skilled negotiators are worth their weight in gold. After a few rounds of going back and forth with counter offers you finally agree to the terms of a contract with the buyer. You are emotionally drained and feel like you have been in a 10 round fight with Mike Tyson coming to terms on the exact structure of the contract but you did it. There is a meeting of the minds and a signed contract. This is why having a skilled negotiator can easily put $10k to $15k additional profits in your pocket at settlement.
Home Inspection Issues… Now What?
About a week after you get a contract with a buyer, there will be a home inspection on your home. This is typically a 3-4 hour process where a home inspector does a thorough inspection of your home. The inspector’s job is to ascertain the condition and to identify problems with your home as it currently sits. From this roughly 30-page inspection the buyer will send a list of repairs to you to fix prior to settlement. Some of these repairs are necessary under the contract of sale and/or non-negotiable (unless you originally agreed to an as-is contract from the beginning) and some of the repairs can be negotiated.
Once this addendum is received, you have a specific time frame to respond to these repair requests. This is basically a second round of negotiations. And if you thought coming to terms on the contract of sale was an arduous process, the process of negotiating inspection issues can be tougher and more emotional. You know that window lock that didn’t work correctly? Or that door that you had to put pressure on to lock? Something you just lived with. Well now, the buyer wants it fixed before they will purchase. Thinking to yourself, “That door has been that way since we moved in 8 years ago, and I have dealt with it. Why can’t the buyers?” And sellers become defensive and emotional again. Buyers and sellers can go back and forth a few times to finalize the details of what exactly will be fixed before settlement.
Now you, the seller, have a list of 8 items that need to be fixed prior to settlement: 3 plumbing issues, 2 electrical issues, a broken window pane, missing shingles replaced, and your HVAC system serviced. How do you know who to call? Do you call 3 contractors for each issue to get quotes? Maybe, but time is slipping away, and there are only 2 weeks left before settlement when the issue must be fixed.
Not only did you have to negotiate your contract and your inspection issues, you also have to coordinate the repairs.
Then, in the final couple of weeks before settlement there will be a termite inspection completed on your home. There will be an appraisal. A survey. And if there is a title issue you be will asked for additional documentation to get this issue resolved. Plus you need to call the utility companies, your insurance company, and the post office to let them know of your move. This all has to be done from 9am to 5pm, as these businesses don’t work nights and weekends.
Settlement Day- You started this process 3-4 months ago, and you are finally at the day that you have anticipated for months, the day that you sell your home and get your check. Settlement takes place at a ‘Settlement/Title Company.’ They are responsible for preparing all the legal documents for the transfer of sale from you to the buyer and recording the deed at the court house. When reviewing all these documents you get to what is called a HUD-1. This form includes all of the accounting that goes into the transaction. How do you know if the form is correct and all the figures are put in the correct column? Hopefully you know what key line items to double check and who you are to question if they don’t appear correct. If all of this is correct, you sign all the legal documents, turn over the keys to your home and get your check.
Now you know the details; the choice is yours.
This article takes you from preparing your home for sale to walking away from settlement with a check and some of the major steps in between. The decision is yours. If you think that this process is not overwhelming and will not cause too much stress, then going the For Sale By Owner route could be for you. If, like most, it appears overwhelming, and you would like a professional real estate agent in your corner, looking out for your best interests, fighting over your every time, then make sure you find a Real Estate Agent that puts their customers’ self-interest above their own. Find one that uses proven strategies that helps sellers unearth additional profits when selling. Because, like everything in life, not all agents are the same, make sure you find the right one.
Thanks for reading, I’m taking suggestions for next months ‘Story from the Street.’ If you have a question or topic you want answered, email me at Eric@ClientProfitSecrets.com
Stories from the Street is a series of monthly articles, using real life examples, told in story format to give you more knowledge of what actually happens behind the scenes of a Real Estate Transaction. I am often asked what exactly happens from the time you list your house until the time you sell or, if buying, what happens when you first make an offer on a home until you are handed the keys at settlement. Stories from the Street are real life situations that can, do, and may occur during a transaction. Most people never know the intricate details and the behind the scenes work that is done on behalf of my clients. I analogize this by telling my clients that they will only know the tip of the iceberg. Much like an actual iceberg that might rise from the water a few hundred feet, they sometimes are miles wide and deep below the surface. As a consumer you know and understand the ‘tip of the iceberg’. As a professional with over 11 years’ experience, it’s my job to know all the intricate details and the ‘below the surface’ aspects of a transaction.
Since each transaction ‘has a story’ or a twist that we have to overcome, the depth of this segment is going to be unlimited. I’m going to try and bring these to you in an entertaining and informational format. I have found through the years, that people learn best by ‘Stories’, so each month I’m going to bring you a new ‘Story’. If you have a question or a topic that you would like me to cover I encourage you to reach out to me by email: Eric@ClientProfitSecrets.com and just ask me the question. It might be, “How do you handle appraisal issues?” Or “When can I lock in on an interest rate?” Or “I’m thinking about building; do I call a builder first or look for land?” I have a ‘Story’ for pretty much any topic that you can think about, so shoot your questions over and I’ll be sure to cover one in an upcoming issue.