What you should know before selling your home
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Common concerns about selling
Q: Does the time limit I set for my REALTOR® to sell my house make a big difference?
A: Not always, but understand that many times a salesperson will research you and your home. If an agent finds that you entered into a short-term listing agreement, they may interpret that as a sign of anxiety to sell and recommend trying a lower offer for your home than normal.
Q: Won't a REALTOR® work faster to sell a home with a short-term listing?
A: A long-term listing will actually help your home sell more quickly than a short-term listing. A short- term listing implies that you are anxious to sell and encourages low-ball offers. In addition, if you list your property for three months and two and a half months pass without a sale, you run the risk of being overlooked for advertising. When your real estate office chooses which ads to run they tend to choose listings that will be with them for a longer period. The office has no way of knowing whether you will extend your listing period or not, so they will rely on a sure thing—someone else’s longer listing.
Q: Won't I save more money by selling my house without a REALTOR®?
A: You may try to sell your home without a REALTOR® to save commission fees. However, are you really saving anything? Take a close look at all the key players. The seller wants to save some money so they decide to sell their home without the use of a REALTOR®. The For Sale By Owner shopper decides to forego the services, expertise, equipment, negotiating skills, connections, and knowledge of a real estate agent or REALTOR® to save the commission. Serious FSBO shoppers only shop FSBO to save this commission, so they find a FSBO property that they can live with and knock the commission right off the top of the price. In this situation, the seller did not save a commission—he or she just gave it away. Would you rather hand this money away to a total stranger or enjoy the benefits of letting an agent handle all of the details?
Q: Does it make financial sense to sell your home without a REALTOR®?
A: If you simply placed a sign in front of your house and the first person to drive by offered to pay your asking price, then yes. Selling your home yourself does make financial sense if you ask market value for your home. Unfortunately, very few properties actually sell just because of the sign in the lawn. Instead, the majority of sales come from the various contacts that real estate agents make through each other and in the real estate community by networking, advertising, delivering flyers, postcards, and sending emails, etc.—any one of these channels can find that one special buyer. By placing a few classifieds, running ads in homes magazines, placing your property on the internet, putting a sign in the yard, creating brochures, networking, through sales meetings, intranet, and direct mail, REALTORS® are able to maximize the exposure of a property and find the most qualified buyer willing to pay the highest price. All of these expenses are necessary to obtain the full market value of a home. Moreover, real estate agents and REALTORS® sell more than 95% of all properties, so the fee is generally included in the price of the home and not tacked on top.
Q: Can't I list high and come down later?
A: Yes, you can. However, there are many drawbacks to doing so. Pricing your home for anything higher than market value will cost you money, time, and headaches because an overpriced listing will actually help to sell more reasonably priced properties. Buyers will shop around and if similarly priced properties are in the area, they will view them all. If your home is overpriced, the buyer will be disappointed in what they see but in turn will be impressed with the apparent great value of a properly priced property in comparison to yours.
Another drawback to pricing your property higher than market value is that the first few weeks that your home is on the market is the most critical time. Buyers who have been waiting for new listings to become available will come to see your home. (These are the most qualified buyers because they are just waiting to find the right property; they are already working with an agent; and they are probably completely approved for their loan). If your home is overpriced, the buyers looking in that price range will be disappointed in your home and will buy something else. Moreover, the buyers in your home’s true price range may overlook at your home because they do not qualify. Your home will languish on the market until you drop the price to a more realistic figure. If these buyers have not yet purchased something else, they will wonder why your home has not sold in all this time. Your home is now shopworn or stigmatized property because buyers will wonder what is wrong with it. You will eventually find yourself lowering the price again, from the true market value, in order for the home to sell.
Q: Should I wait to find a property before I put mine up for sale?
A: It is common to fear that you might sell your home before you find a suitable one to replace it. However, this rarely happens and unless you are looking for a unique property, waiting might end up costing you thousands of dollars. For instance, you find the right property this weekend at an Open House, where you realize this is your future home. We will also assume that the seller is asking $175,000 for the house, and you want to try to negotiate the price downward a little. Now you have two jobs; you need to talk down the price but you also need to convince the seller to take the home off the market while you put your home on the market, find and qualify a buyer, and finally have the sale closed. Your seller will probably agree to wait a couple of months, but will almost certainly demand full price for the home. At this point, you have missed a $5,250 price reduction (according to the 3% national average) and in order to sell your home in two months you must aggressively attract buyers, so you price your home for a short sale. If your home is worth $100,000, you probably need to list it for $94,000 to sell in two months (going by the national average of 6 months to sell).
In this situation, waiting to list your home could cost you $11,250 dollars.
Q: Won't another office list my home for a higher selling price?
A: Keep in mind that agents do not establish price; the market does. What determines the market price is what a buyer is willing to pay for your property. While an agent might agree to list the property at a high price just to excite the seller into signing a contract, after a few months the agent will explain that the home will not actually sell for that price and ask the seller to drop the price to market value (this tricky behavior is called buying a listing). Now your property is shopworn and will fetch less than it would have if it had been properly priced at the beginning.
Q: Should I consider FHA or VA buyers?
A:Yes, though most government loan programs require stricter inspections and qualification guidelines. Sellers often fear that their homes will have to undergo costly repairs, but you are never obligated to make any repairs unless you wish to accept the offer. Government-insured buyers frequently offer to pay more than the asking price to offset any type of inconvenience to the seller. If you are willing to prepare your home for these loans, you open the door to a new market of buyers (nationally, half of all properties are sold through government financing). These buyers have three options: they can pay cash, buy an owner-financed home, or qualify for one of two loans.
Because very few buyers have the luxury of paying in cash and very few sellers have the luxury of offering an owner-financed home, government-insured also have two loan options. A conventional loan requires 5 to 10% down and a government-insured loan requires 0 to 3%. The latter is clearly more appealing, and by stating that you will not entertain FHA or VA offers you eliminate 20 or 30% of buyers on the market. We recommend that you consider every offer and weigh out your pros and cons with your agent, examine all offers, and decide with your agent whether or not the offer makes financial and practical sense.
Q: I'm not sure if I'm ready to sell at this time.
A: If you know you want to sell your home in the near future, putting it off may be costly. The sooner your house sells, the sooner you can get into a new home. Waiting could bring unexpected drawbacks such as a rise in interest rates—and even a little jump can make a costly difference. Also, the price of a home you are interested in purchasing may increase. Newly-built homes tend to appreciate at a rate of 10% per year and your current home may be worth less. If you find your future home right away but wait to sell the one you live in, you may incur vacant monthly expenses or wind up making multiple house payments. You could even find yourself making additional costly repairs. Waiting to sell is a good idea if you are not certain about wanting to move, but can be costly if you are.
Q: Why is Commission important?
A: The marketing fee or commission is the most vital part of the marketing plan because it excites cooperating brokers. Commissions are negotiable and normally divided evenly between the selling office and the listing office. If a sample average commission for a certain area were 7%, in a $100,000 home the commission would be $7,000 split between both offices ($3,500 for the listing office and $3,500 for the selling office's effort in securing a buyer). This $3,500 is divided between the office and its respective agent. Each agent must pay taxes, MLS fees, expenses incurred on advertising and promotions, desk fees, etc. from his or her share (50% or $1,750 in this example). What began as a large 7% commission has now dwindled to a barely 1% commission.
This is why it is crucial to offer at least the average commission for your area. We recommended that you consider offering a 1% higher than average commission for the sale of your home, because this slight raise in the commission translates into a 14% raise to the real estate agent's paycheck.
Q: Some brokers say they will sell my home at a lower commission.
A: Ask yourself if they said they would put it on the market at a lower commission, or did they assure you that they could sell it charging a lower commission—because there is a tremendous difference. If you just want to have your home on the market, 5% is a great number (3% is even better). However, a standard commission or better is necessary if you want your property sold in a timely manner. Many expired and unsold properties offered a smaller commission incentive to cooperating brokers. By offering a smaller commission to the buyer's agent, that agent is likely to ignore your property in favor of others.
Q: What are the odds of selling my home myself?
A: The National Association of REALTORS® conducted a study that found 70% of all people who see homes for sale cannot buy your home because they have frozen equity. In other words, they must sell their home before they buy. Of those potential buyers, 11% cannot afford what they are looking at and 15% prefer to rent. Only 4% are actually ready, willing, and able to buy your home. A real estate agent's or REALTOR®’s job is to locate those select few buyers among the numerous others. For Sale By Owner sellers should consider these odds closely; it is one of the reasons that over 90% of FSBO eventually list with a real estate agent.
