Selling a home can be an expensive endeavor – particularly if you use a realtor. Typically, realtors command a 6 percent commission on every sale they handle. On a $300,000 home for sale, that means $18,000 just to the agent alone. And that doesn’t even include closing costs, repairs and other expenses the seller might be incurring during the sales process.
Fortunately, not every sale has to come with these sky-high costs. In fact, savvy sellers don’t need a realtor at all to sell and market their property. They don’t even need to involve a lender if they follow these owner finance tips. The answer? Drum roll please… for sale by owner.
Selling Your Home Yourself
Selling a home yourself to many homeowners creates hesitation in their approach simply because they’re unfamiliar with the process or don’t have much time on their hands.
But thanks to various for sale by owner websites – as well as a few tricks of the trade, the task isn’t as hard as many expect it to be. And for most, the extra profits make the added effort well worth it in the end.
So how can you avoid realtor fees, maximize your profits and handle effective procedures when selling a home yourself? Here’s some guidance, according to a recent Wall Street Journal article:
- Use various for sale by owner websites – One of the downsides to not using an agent is that you won’t have access to the MLS, or Multiple Listing Service. Still, that doesn’t mean your home will be unsearchable. Consider adding it to websites dedicated to for sale by owner ForSaleByOwner.com, Owners.com and FSBO.com are all popular options, while sites like Fizber will actually help you list AND market the property. You can also list your FSBO home on Zillow for a small fee.
- Know how to spot the right offers – Always look for buyers that have a pre-approval letter, meaning a lender has already given them the green light for a loan. These are the best bets in terms of offers, as it’s less likely they’ll back out of the deal and leave you high and dry. You can also ask for earnest money, which is basically a non-refundable
- Get the home appraised – When selling your home yourself, pricing your home properly is vital if you want it to get noticed and attract bids. Hire an appraiser to evaluate the property in light of local comparable property sales (a/k/a comps), as well as the home’s overall condition. Use their valuation as a guide when pricing your property. Pricing too high could leave your home stagnant for months, and a too-low price could have buyers worried something is wrong. Determining the right price point is crucial in an FSBO situation.
- Consider consulting an attorney – Once you’ve accepted a bid, consider using a real estate attorney to draw up the contract and make sure you’ve covered all your bases legally. It will come with a nominal fee, but ensuring all the proper terms and conditions are included in your contract is vital to protecting both your finances and your investment.
- Use a professional photographer – Professional photos, videos and even video tours can make a significant difference in how quickly your home sells and how much you can earn from it. In fact, agents who use pros to handle their listing photos make twice as much in commission as other realtors! If you don’t want to spend the few hundreds it takes to hire a pro, consider one of these phone apps that can help you snap professional-quality pictures all on your own.
You can also consider something like Redfin’s concierge service, which not only helps list and market your property, but will cover services like cleaning, painting, landscaping and even professional staging to maximize your chances of selling a home. It comes with a 2 percent fee, but that pales in comparison to what a traditional real estate agent would require.
Seller Financing a Property for Your Buyer
In addition to selling a home yourself, you can also opt to seller finance the property as well. This essentially means you act as the lender for the buyer, who then pays you installments each month like they would a traditional mortgage company.
Opting to seller finance a property can have big advantages for a homeowner. For one, you can maximize your selling price. Because there’s much more flexibility in owner financing – no hoops to jump through or complicated red tape or application processes – buyers are often willing to pay a premium for it. And that means more profits in the long-term for you.
Owner financing can also offer a faster closing process, which is great if you’re looking to move or relocate on a quick timeline, and it can cut out costly capital gains taxes as well.
Selling Your Buyer’s Mortgage Down the Line
Once you’ve seller financed a property, you will then carry a mortgage note on behalf of the buyer (basically, an IOU with interest over a set amount of time). Depending on the structure of the deal, it could mean you’re on the hook for 10, 20 or even 30 years. During that timeframe, the property value could decrease, the buyer could default and dozens of other issues could arise.
If managing the mortgage and carrying that long-term risk ever becomes an unwanted burden, you can choose to sell the loan to a note buyer, who would give you cash in exchange for the note. Typically, a note buyer’s purchase criteria will offer you about $0.65 to $0.95 for every dollar of unpaid principal balance left on the loan.
If you think selling real estate notes will ever be on your radar, make sure to structure your seller-financing deal with the note sale in mind. Note buyers look for very specific features when considering a purchase, so structuring your mortgage note for resale is crucial to maximizing your returns.