Sell Your Home Without a REALTOR!

If you want to sell your home without a REALTOR, you will need a marketing plan that can help overcome the odds against you. If the following sounds like it was intended to discourage you, don't let it. They are just statistical facts, and the more you know, the more likely you will succeed.

The success rate for FSBOs is inversely proportionate to that of real estate agents. Overall, only 1:5 owners will succeed in selling their home, while real estate agents typically sell 4:5 of their listings during the first 6 months. The high end and luxury home market offers some disparaging statistics for owners, but should give most owners some hope. No data is available on the success rates for owners of homes in the $350,000 plus price range, but the success rate for agents falls to 2:3.

It seems reasonable that the low success rates are due to the same reason that any business fails. To some extent, this is also relevant to properties being sold through agents. Sellers do not seem to understand that they are in the real estate business when they sell their homes, and that their prospects are limited by the fact that they have only one product—competing against thousands of others like it for the buyer's dollar.

Worse yet, they go into business without a well thought out plan. That's where Selling Your Home By Owner comes in. It is a proven marketing plan that could well reverse the stats for owners who want to sell a home without a REALTOR.

How To Sell Your Home By Owner

Now available by download, Selling Your Home By Owner. This 42 page eBooklet provides everything you need to know about selling your home by owner in San Antonio, and the tools you need to do it! Get:

• Marketing advice to help you maximize exposure of your home to the market.
• A marketing plan that can help overcome the odds against success.
• A marketing strategy to help you maximize your net proceeds.
• In-depth tips for successful selling.
• Industry insight to the FSBO dot com marketplace.
• A title Insurance rate chart.
• The required legal disclosure forms.
• Spreadsheets for calculating seller net proceeds and buyer closing costs.

Go for it—and good luck!

Adios

I'm pondering how to close out this blog without waxing into cliched aphorism, so I'll just say that I wan never truly inspired by this blog. I'm not leaving the real estate business, or giving up the idea of blogging. In fact, I have a new blog and Web site that better fit the way my business has evolved.

If you are reading this, you might be interested in my first blog entry on how to find a real estate agent. The article is focused on substantive criteria which would help find the best listing agent, and i will soon follow it up with a post that addresses the qualities to look for in a buyer's agent.

Caveat FSBO Emptor: Buyer Beware

While researching for sale by owner (FSBO) properties on a popular FSBO Web site, I got curious about one of the listings with a "sold" sign on it.

$184,500 Estimated Savings: $8,302
?? Ferris Creek
San Antonio, TX 78254

At first, I thought, "did the seller really save that much?"—so I decided to do a comparative market analysis (CMA) on the property. While doing the CMA, I discovered that the property was listed in the MLS at $184,500, but had sold for only $174,250! "Aha," I thought as I proceeded with my investigation, "that's $10,250 below list price, and a 6% commission would only have come to $10,455 on the sales price."

The question of whether the list price was reasonably within the value remained though. The results of the CMA revealed nothing about the house justified its price. The interior features of the property were not remarkable when compared to other two story homes on the market, and it was no more lavishly landscaped than the comparable properties. In fact, two of the comparable properties had features worth from $3,000 to $5,000 more that the FSBO.

• 16 Sweetwood—Slate & Hardwood on first floor & carpeting in Bedrooms * Ceramic tile in kitchen and Breakfast room * Study/office through French doors off entry has high ceilings and built-ins * H20 softner [sic]* This home sits on a well landscaped lot with a deck overlooking the treed backyard
• 24 Canterview—Large deck in the back with Sunsetter awning, . . . soft water system, . . . central vacum [sic] system

Every indication was that it should bring no more than $168,571, which would have been based on an average of the sales prices for the comparable properties—but it was a below average property! Assuming that the minimum $3,000 added value in the comparables was a fair discount from the average value, the property appears to have been worth only $165,571. I had just proven that my original hypothesis was wrong!

After calculating that they had saved $5227.5 on commissions, paid for the "$629 MLS + Realtor.com for 6 months" to the FSBO site, and received $5,679 more than the house was worth, it's fair to say that they saved $10,277.50 by selling their own home—but the buyer got had!

If I had represented the buyer, we would have set a target sales price of $163,513 with the expectation that we may have to go as high as the average value.

There's really no way to know whether the buyers may have received any seller contribution to their closing costs, but it's a very common practice today. It's unlikely though that the seller would have accepted $10,250 less than the list price and contributed to the buyers' costs. That would mean that the buyers paid $10,737 more than the house was worth. If the buyers had an agent, it may be that the buyers wanted the house badly enough to pay so much more for it than it was worth. On the other hand, the agent may not have been up to the challenge, or the buyers may not have had an agent.

A FSBO Shopper's Guide

If you are a determined do-it-yourselfer, you may think you can find that special bargain by shopping the FSBO dot coms, or driving around looking for a FSBO. You need to know that over 2 in 3 FSBOs price their homes over market value, some by as much as 20%—or more—in the San Antonio market. Some examples are:

• A 1448 sf 3/2/2 in a bedroom community NE of San Antonio—$144,900.
  —Its value according to a CMA is $112,217, about 29% above market value.
  —Its value to a FSBO shopper is likely no more than $108,850.


• A 1870 sf 3/2/2 in a bedroom community NE of San Antonio—$179,900.
  —Its value according to a CMA is $158,208, about 13.7% above market value.
  —Its value to a FSBO shopper is likely no more than $153,461.


• A 3317 sf 5/4/2 in a subdivision NW of San Antonio—$339,000.
  —Its value according to a CMA is $297,670, about 13.9% above market value.
  —Its value to a FSBO shopper is likely no more than $288,739.

Real estate professionals often take listings for sellers who want to price their homes above what the market will bear. The advantage to those who are savvy enough to retain a buyer's agent is that they will not likely pay the inflated price for it. Some do-it-yourselfer who drives around calling on signs may, and professionals love getting both sides of a transaction—while serving their seller client. This rarely happens though.

Some sellers price their homes too high because they owe more than its value in today's market. Many FSBOs simply do not know their property's value—or as much as you are about to learn about property values. All of them want to net a larger bottom line by eliminating the agency commission.

Do not believe for one second that any of them want to save you any cost that you and they may mistakenly believe to be associated with agency commissions. A property's value has nothing to do with agency commissions—unless you are buying a FSBO.

To understand this, consider the definition of value: Value is the price agreed upon by a willing seller and a willing buyer. Whether I list a property at 6% or 8% commission, I cannot sell it for more than its value on the market.

When you are shopping FSBOs, you first need to decide on why you are doing so. If you think you can save the cost of the agency commission, you will likely also have to allow the buyer to net a bottom line that is equal to half the commission more than they believe they would have netted through an agency. A good agent could likely help you do much better with either a FSBO or an agency listed property, but you can make your best deal with a FSBO by doing the following:

• Determine the property values in the FSBO's neighborhood—

1. Go to realtor.com, and find other properties in the same neighborhood—not the zip code, the neighborhood. Zip codes can encompass several neighborhoods with widely differing property values.
2. Divide the list price by the square footage for each. Make sure that each property you use has the same features (fireplace, swimming pool, tile or wood floors, the percentage of brick in the exterior etc.).
3. Discard those properties that are obviously priced too high—they will likely not sell at all—and average out the price per square foot for the rest.
4. By multiplying the average price per square foot by the square feet in the FSBO, you will have arrived at an average list price—not its value. It's value will likely be as much as 2% to 3% below list price.

• Determine the property's value as a FSBO—

1. Find out how much agencies charge in commissions in your area. In San Antonio, most agencies find that they can compete well by charging a 6% commission on sales. Commissions will range from flat fees charged to FSBOs for listing them in the MLS to 10% or more.
   
2. To get your savings on the FSBO, while allowing the FSBO to net their savings, subtract the portion of the commission you want to save from the value you came to in the preceding step. This will be the value to you.
3. If that value is 10% or more below what the FSBO is asking, you will likely not be able to negotiate a price you will find acceptable.
   

• Make your offer & get ready to negotiate—

1. When you make your offer, you will likely have to subtract another 3% to 5% from the value you came to in the preceding step to get your price. Don't be surprised if your offer is rejected outright—especially if your offer is more than 10% below the asking price.
2. If your offer is rejected outright, don't waste your time.
3. If the FSBO's makes a counter offer that does not come down to the value you determined, make that value your final offer with an explanation of how you arrived at the value.
4. Negotiation is not a matter of wearing a seller down. Your options at this point will be to move on to the next FSBO, or to accept the FSBO's final offer.
   

Good luck—but don't leave it to luck. There is much more to buying a home than finding a bargain. Read this story about how important it is to have an agent (the right agent) represent you.

See the Buyer Info page of my Web site for more information about buying a home.

Short Sale Update

Everyone who has heard the nightmare scenarios about how long it takes to close on a short sale, and avoided them, can take heart in the new guidelines set by the Treasury for the Home Affordable Foreclosure Alternatives Program. Participating banks (and there are plenty of incentives for them to participate) are now required to give a response to an offer within 10 days.

For more info about this boon for home buyers, and the incentives for distressed home owners and lenders alike, I recommend the Treasury Department guidelines: Introduction of Home Affordable Foreclosure Alternatives (PDF).

Home owners, if the economy or circumstance has put you at risk of foreclosure, read the article! Read my posts for Mar 12 and May 24 as well. Don't risk foreclosure! A short sale may not be the miracle you might pray for, but it's a good bit better than the alternative.

Home Buyer Tax Credit Update

Some of the highlights of the new Home Buyer Tax Credit that differentiate it from earlier bills are:

• Move-up buyers who have owned a principle residence for 5 of the last eight years are eligible.
• The maximum amount of the tax credit is $6,500 (or 10%)
  
• Qualifying modified adjusted gross income (MAGI) limits have been increased from $75,000 for individual taxpayers and $150,000 for joint filers to $125,000 and $225,000 to claim the full tax credit, respectively. Like the earlier bill, the credit phases out for individuals with over $125,000 to $145,000, and joint filers who earn $225,000 to $245,000.

The information on the IRS Web site lays out most of the provisions of the extended Home Buyer Tax credit fairly well, so I'll just address a few questions which they do not sufficiently clarify:

• If you are a move-up buyer and you are wondering whether you qualify if your home purchase closes after November 6, 2009, but before December 1—you can stop wondering. Yes, you do. The new law went into effect when President Obama signed it, and home buyers, just like each of the earlier home buyer tax credits, can be claimed any time after the final settlement date (closing of the sale).
• The term move-up buyer is misleading. To claim the tax, buyers DO NOT need to buy a higher price home. Any single-family home or duplex bought as a primary residence qualifies.
  

Download this FAQ (PDF) from the National Association of REALTORS for more good insights to the Home Buyer Tax Credit.

The Extended Home Buyer Tax Credit

If you are waiting for lobbying efforts to expand the first-time home buyer credit to $15,000, don't! It appears unlikely that anything that generous will happen. There is hope however for move-up buyers though and first-timers who have tarried.

There should be little doubt that the single most potent element in the recent spate of economic stimulus programs has been the first-time home buyer tax credit. According to the Treasury Department, it has brought over 1.2 million first-time buyers into the market who have claimed only $8.5 billion of the $13.6 billion set aside for the homebuyer tax credits this year.

At the urging of industry participants to prevent home sales from declining further as the economy struggles to recover from the current housing industry lead decline, Senate Majority Leader Harry Reid announced this week that he has scheduled a vote on November 2, and Congress could approve extensions of an $8,000 first-time home-buyer tax credit as soon as November 3. The bill would also extend benefits to move-up buyers with higher income limits and include an extension of unemployment benefits.

The legislation, which had been delayed by Republican demands for votes on several amendments--including amendments aimed at the community activist group ACORN, immigration and another to remove Geithner’s ability to extend the financial bailout program beyond its expiration at the end of the year--would extend benefits to home-buyers who have lived in their current home for at least five years to receive a credit of $6,500. It also increases income levels, allowing couples earning as much as much as $225,000 and individuals earning up to $125,000 to qualify, while the income limits for first-time buyers would remain at $75,000 limit for individuals and $150,000 for couples.

Like the original tax credit, the extension is available only to owner occupied properties, and requires those receiving the tax credit to remain in their new home for three years. Otherwise, they would have to repay the credit. The bill also limits the tax credit to the purchase of homes valued at less than $800,000.

The Senate proposal would also provide $2.4 billion to extend unemployment benefits by 14 weeks nation-wide, and by 20 weeks in states with the highest jobless rates.

The proposed bill, which has the Obama administration's approval, has provisions intended to make it budget deficit neutral. The Joint Committee on Taxation estimated that the cost of extending the tax credit, $10.8 billion over 10 years, would be absorbed by provisions delaying a tax break for multinational companies scheduled to take effect next year, while the extension of unemployment benefits would be offset by extending an employer payroll surtax that is slated to expire this year.

All this has come at a time when most were deferring their first home purchase for better times, and the addition of provisions for move-up buyers is certain to help further strengthen financial industry ledgers.