For Sale By Owner! Is it right for you?

For Sale By Owner!  Is it right for you?

I want to warn you – this is a longggg post.  Additionally, I want to point out there are many more things involved in the transfer of real estate than noted here.

The Great State of Arizona affords homeowners the right to sell their home without the assistance of a licensed real estate agent or attorney.  Potentially good news if you have the desire to effectively complete the many phases involved with selling your home.
The important phases include:

  • Pre-Marketing
  • Marketing
  • Offer Negotiating
  • Contract to closing
  • Closing

Each of these five phases has their own unique issues and requirements that if not executed correctly may have negative impact on your ultimate goal of saving money by “doing it yourself”.  So let’s talk about each of these phases.  I can’t cover everything for everyone as homes in other areas than MaricopaCounty in Arizona require local customs, trends and regulations.  So, I will focus on the market area I know the best, Maricopa County in Arizona and more specific, the west side of Phoenix which includes Goodyear, Avondale, Buckeye, Litchfield Park and other nearby cities.

Pre-Marketing:
Sounds simple enough… It is the things you do before you put the “For Sale” sign in your front yard.  You know, stuff like clean out your house and make it presentable for others to see.  Some call it staging.  In staging, a little goes a long way.

The house is clean! Now what?  Well, now it is time to price the home.  The way you do that is get several comparable sold homes in the subdivision and several active homes in the same subdivision with similar features and amenities.  The comps you chose should be within a 10% price difference.  Well now, how is your pricing coming?  Depending on the market you could have many similar homes in a very tight pricing range, which makes it easy.  OR you could be all over the board with tens or hundreds of thousands of dollar price swings!  This is why we invented Appraisers! Well if I remember correctly, you are trying to save some money on not hiring a REALTOR so why would you hire an appraiser? There are literally hundreds of websites that profess to be “The Real MLS” with up to date information.  By the way, my website has the Real MLS too. And yes it has up to the minute IDX information. I digress.

Okay, house is clean and you have established a price or price range you feel will get the house SOLD!  Now it is time to set up your disclosures, showing policy & access, contract to purchase & addendums, lending & pre qualification standards.

SAY WHAT???  “What is all this other stuff you talk about…?  Disclosures, lending, addendums!  No, I just want to sell my house!” you say.  Well, yes… That is what we are doing.  You see, you must set up the system to sell a house before you can sale a house.  If everything is not in place before you start, you won’t know how to cope with an offer to purchase or any exception therein!  Keep reading, it get’s better!

  • We are still in the Pre-Marketing stage;
  • we cleaned the house- Check
  • we comped (set the price or price range)-Check
  • we went online or to some document warehouse and purchased a contract and some other home selling document-Check
  • we went to the local hardware store and purchase a lockbox (because that is what REALTORS do?)-Check
  • we called a loan officer at a bank to see if they would be available to help pre qual a perspective buyer-Check

Congratulations! It looks like you are ready to move into the Marketing Phase.

Marketing:
Marketing includes everything that you do to get the word out to potential buyers that you are selling your house.  REALTORS’ typically use the local MLS for this and it is highly effective!  However, if you have not hired a REALTOR and you are not a REALTOR you will not have access to list your home in the MLS.
I digress again; do you know what a REALTOR is?  Read my blog  at “What is a REALTOR?”  You might find some interesting stuff there.

Okay, back to the matter at hand “Marketing”! It is time to put that sign in the ground and go place ads on your favorite website(s).  Maybe even go take flyers to a shopping center… Oh, maybe even place a bandit sign at an intersection (after you review your local ordinances on bandit signs).

People start to calling from your advertising! Good news!  They even show up to your doorstep to see the house!  You are so excited!  You show them everything.  Room by room tour.  After you have showed them everything they say “well thanks for the tour, I will tell my son-in-law about the house and get back with you”.  What a downer.

No worries, more people are calling, but now you start to ask ‘qualifying questions” Stuff like “are you looking for yourself or someone else?  Are you looking for a rental or to purchase? Are you financially qualified to purchase? Now folks, I am going to tell you the two most important factors in marketing a house is price and access.  There are other factors, but price and access trumps most of them.  If the house is priced too high it is not likely anyone will purchase it.  If the purchasing party can’t get in to the house it is unlikely they will go thru with the purchase.  It is very necessary to give access to perspective buyers.  However, if you are opening your door to everyone and anyone, you maybe putting yourself at risk of robbery or burglary or some other crime!  I can tell you the greater majority of REALTORS typically will not show homes to buyers without qualifying them to purchase the home first.  That means identifying who they are and how to track them down later.  By the way, all licensed real estate agents and brokers in the state of Arizona go through a background check and are finger printed via DPS.  With that, you have a relatively good chance if an agent or broker is showing your house, they know who the buyer is and you have a method to track both the buyer and agent/broker down!  Good piece of mind.

Okay, the right buyer makes you an offer!  Yahoo!  You are excited, and prepared because you read this blog  “For Sale By Owner!  Is it right for you?”

Guess what’s next?  YES!  Offer negotiations.  The buyer offers a fair price but they need you to pay for their closing cost.  Sounds easy enough, you agree. They want to do an inspection of the hose with a certified inspector.  Sounds good, you agree. They want to move in after the close of escrow in the scheduled 30 days.  Sounds good, you agree.

You both sign the agreement and presto! You have a contract.

Contract to Closing Phase:
You take it to the local Title Company for them to prepare all the necessary documents to complete the sale and officially close escrow and record all the documents. The title company provides you and the buyer with a Settlement Sheet.  You review this Settlement Sheet and see the purchase price is good, the fees to the title company are good, tax & recording fees are good.  However, the Closing Cost fees are very high!  You notice the net proceeds (that is the profit or equity from the house) are unexpectedly low!

You decide you are not happy with the way things are going and tell the buyer you are not moving forward with the deal.  Now the fun starts!  The buyer reminds you that you had signed an agreement, a contract in fact and if not honored, they will pursue legal action.

As an aside, I just want to mention not all For Sale By Owner transactions go this way.  Most I have heard of go smooth.  However, the ones I know of had been conducted by people with extensive real estate knowledge and experience.

So, reluctantly, you decide to move forward.  The rest of the transaction is going smooth.  And now it is time to pack the house and move.  As you are packing you wonder to yourself how the buyer is doing and if they are having any issues with their financing…?  So you call the buyer and ask how things are going and if you can speak to the loan officer handling the transaction.  You call the loan officer and leave a message on the voice mail.  The voice mail sounded very professional and it said they will contact you promptly!  You wait a day but still no call back.  You call and leave another message.  Again, you wait a day, still, no call back.  You call the buyer and ask for an update.  The buyer says “I don’t know, I have not heard from my loan officer.”  At this point you are getting a little nervous.  Closing, or the date you are supposed to close is rapidly approaching.  Your stuff is packed and you have been moving.  You are just wondering, is the buyer going to be able to come through with their financing?

For a seller this is a very big deal.  For a buyer this is a very big deal.  In most cases both parties have made arrangements to move on a certain date or week.  If you don’t know how to obligate the other side to perform this may end up becoming a financial disaster and one of the parties having to stay in a hotel for a period of time.  Getting the advice from a professional now seems very necessary!

 

Well, we will get to the closing scenario now.  Closing is the best time ever.  It is the time when you the seller get to sign your house away and the buyer gets to sign on to ownership! If you are not familiar with the documents involved you may want to get some help from someone who is.  I am not talking about advice from your auntie or cousin in Baltimore, unless they are a REALTOR or attorney, I mean someone who can give you Real Estate advice.   Ohh, I almost forgot, you did not hire a REALTOR.  Okay, do it yourself then and hope for the best.

 

REALTORS don’t give legal advice unless they are attorneys too.  They give Real Estate advice.  Sometimes unexpected circumstances happen at the closing table that you are unprepared for and most people are ill equipped to handle without the advice of a fiduciary.  I am going to make two recommendations or tips if you are considering selling your home:

1. Read my blog on what is a REALTOR

2. If you are considering selling your home interview a REALTOR.  I would be happy to sit down with you explain my services.

If you have questions about this blog or need assistance in a Real Estate matter you can call or email me.  I look forward to serving you.

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