For Sale By Owner—by Mary-Anne Martell
Saving Those Real Estate Dollars
There is no question that the current state of the real estate market is in turmoil. Over the last several months, how long this state of affairs will last has been debated by numerous experts. The news has been saturated with horror stories of foreclosures, deteriorating property values, lenders not funding loans, and other rippling effects of the fall of sub-prime mortgage market.
A growing trend in saving those precious real estate dollars has resulted in an increase of sellers not utilizing the services of real estate agents and avoiding paying hefty commissions. A typical real estate transaction involves a 6% commission, usually evenly split between the buyer’s and seller’s agents. A $500,000.00 sale results in a $30,000.00 deduction in your closing proceeds. Over the years, that is a lot of built-up equity to lose.
“FSBO” stands for “For Sale By Owner”. Being a “FSBO” seller makes sense if the goal is to save money. However, the real estate process in itself can be complicated as well as daunting, serving as a deterrent for seller to participate in the selling process alone. There is a reason those realtors net those commissions. Real estate agents can be helpful in dealing with expediting a sale, providing the necessary paperwork, and decreasing the frustration during escrow acting as buffer between the seller and the buyer by dealing with any issues that arise during this period. However, a “FSBO” seller can effectively sell their own properties with some planning, organization, education, and patience.
As the real estate market continues to cool, “FSBO” sellers’ mentality need to reflect the reality of the market if they want to move their property. There is no doubt that it is currently a buyer’s market. Smart buyers will not buy the most expensive house in the neighborhood since it ultimately limits their potential appreciation. As a seller, if you are willing to wait and wait for an offer, placing your house at the top of the market is not necessarily a mistake. However, if you are compelled to move the property in a timely manner, then it is important to consider the selling price that you are listing and the “bottom line” price you are willing to accept. To start, conduct an analysis of comparable property over the past three to twelve months. This will result in a realistic expectation, set the framework for a successful sale and decrease your stress level. Multiple factors determine the worth of your home including whether prices have risen or fallen over the past three to twelve months.
Another deterrent that “FSBO” sellers face is their perceived inability to tap into the MLS listings. The “multiple listing service” is a directory of homes for sale exclusively used by real estate agents and buyers. In some areas, MLS access can be obtained by utilizing discount brokers. Many discount brokers also offer other services providing support with contracts and closings. There is currently a movement in the state of Maine to have the legislature make the “multiple listing service” available to the general public.
Without the benefit of a realtor, a “FSBO” seller will directly receive offers from potential buyers. Please keep in mind that offers are not binding contracts. To make a real estate contract binding, the offer and the acceptance, as well as counter-offers need to be in writing. These “purchase and sale” contracts have statutory requirements that need to be implemented, including but not limited to buyer’s and seller’s information, property information, and expiration dates. Retaining a qualified real estate attorney to draft and comprehensively review all contracts associated with the sale of the property is far less expensive than paying a 6% commission and provides legal counsel exclusively for the seller in this process.
If a “FSBO’ seller is motivated to sell their home then they need to motivate the buyer. This can be accomplished by several means, including establishing “end dates.” However, there is always the risk that a buyer will “low-ball” an offer and the strategy may backfire. Showing your home to as many potential buyers at the same time is also another good strategy. Put up a “For Sale” sign utilizing lead-in signs, advertising in the classifieds referencing your on-line listing, creating attractive brochures and locating them in the front of your property, and placing your property on the Internet multiple listings. Research indicates that over 80% of potential buyers start home searches on the Internet.
A seller should not be afraid to engage in a real estate transaction without a realtor. However, a seller is wise to utilize the services of a competent attorney in that real estate transaction. Once the property closes, it is too late to fix any mistakes; which can result in a substantial loss of revenue for the seller.
This article is not intended as legal advice and individuals should seek their own legal counsel.
Mary-Anne E. Martell, Esq., is the president and owner of Seacoast Law & Seacoast Title. The firm is located in Westbrook and offers professional services in a variety of legal areas including real estate, residential and commercial title services, business organization, family law, estate planning, and bankruptcy. Mary-Anne welcomes your comments and/or suggestions @mmartell@seacoastlawme.com or (207) 591-7880 or visit her website to sign up for a free monthly newsletter at www.seacoastlawme.com