By Owner FAQs
Questions Astute Sellers Consider & Some Additional Food for Thought
People put their homes on the market every single day of the year. That being the case, it's not uncommon for home owners to believe they can sell their home on their own without the assistance or cost (real or perceived) of a Realtor. And for some that decision works out well for them. But selling a home is not the same as selling furniture, or a boat, or a car. There are many facets to the process that are too easy to overlook until you're in the heat of the situation. It's MUCH BETTER for you, and your potential sale, if you begin to think through the many aspects of your marketing, negotiating, and transaction well before you're in those situations, you'll be much better prepared to handle the situations to your best advantage. To help you get started, we've put together a variety of issues that should be on your "pre-marketing / pre-offer / pre-contract" checklists, things about which we recommend you learn your options, and weigh the pros and cons of each. Some of these are very basic in nature; others require more in-depth understanding of the real estate transaction and process in your marketplace. However, all are important for you, as the "manager" of your prospective sale, to have a clear understanding about.
When I put my home on the market, how will I let people know it’s for sale?
- Yard sign (window sign in my condo/townhome unit, if permitted)
- Newspaper (which papers, photo or no photo, address or no address, how much detail, what does it cost…per ad, per week, per month)
- Fliers or mailers (where should they be sent)
- Internet (which websites, what are their costs, what local exposure do the websites generate, what information do they allow me to include
- What about photos/tours of my home? Do they help or hurt me?
NOTE: We’ve seen times when generating offers took little more than a sign in the yard (provided the property was located in an area easily accessible to drive-by traffic) and a couple of ads in the paper. I say “generating offers” because getting an offer and getting a home sold are two vastly different situations…not all offers result in a closed transaction. Items to consider in an offer are “does the buyer qualify”, “do the terms of the offer conflict with the seller’s best interest”, etc.
What about all those internet sites that offer to advertise my home?
- How much is my out of pocket cost?
- What do they guarantee to give me
- Where do they promote my home OTHER THAN their own website
- When an offer comes in, what assistance do they provide (counsel and advice with regard to the TERMS OF THE OFFER, qualifying the buyer, checking on any contingencies, etc.)
- Might I still have to pay a “commission”
NOTE: Many/most of these websites charge up front fees (often quite high) WITH NO GUARANTEE OF SELLING YOUR HOME. They get their money whether you sell or not. Where is their incentive to assist you? They use your home as advertising fodder with which to attract buyers, and sell OTHER homes to those buyers collecting commissions from OTHER BROKERS… OR sell those buyer leads for substantial referral fees to other brokers. Then, if your home doesn’t sell, you may wind up eventually listing with a full service Broker and the fee you’ve already paid is LOST EQUITY. Though I recognize there are all sorts of viable options for sellers, my caution to you is that you ask a lot of questions, and be sure you thoroughly understand what options you are considering.
What about Disclosures in the sale of my home?
- What disclosures am I required by law to provide to my buyer?
- What is my potential risk for not providing the proper paperwork?
NOTE: “Caveat emptor” used to be commonplace in real estate transactions….it was up to the buyer to discover what they could about a property with little or no recourse against sellers who knew of problems with their home, but did not disclose. Laws are in effect now that provide protections to buyers against such unscrupulous sellers. In Illinois, we have two mandated disclosures (Property Disclosures for all dwellings for sale, and Lead Paint Disclosures for all dwellings for sale built prior to 1978). In addition, with the current climate on Mold, Mold Disclosures are becoming increasingly commonplace in real estate transactions. FYI….all of these disclosures are designed to enable the seller to disclose issues OF WHICH THEY ARE AWARE. Sellers are NOT required to do in depth inspections of their home to find issues of which they were otherwise unaware.
What if the buyer has their own agent?
- Do I have to pay the agent?
- How much would I have to pay?
- What about negotiating? What kinds of things would be “OK” to talk about with an agent, versus what would not be in my best interest?
NOTE: When selling By Owner, the objective is to “keep” as much of the proceeds from the sale of your home as possible. Most sellers, when they price their home, “buffer” their anticipated selling price with some amount of negotiating room. On the other hand, most serious buyers are actively looking for a home with the assistance of an agent. Excluding those buyers from your potential pool of prospects would likely have a serious impact on your ability to sell in the timeframe you desire. So, if you decide you don’t want to exclude those buyers, and you are willing to compensate their broker, how much should you expect to pay? Just as an FYI, if that agent were to sell a home listed in the MLS (Multiple Listing Service), they would be offered a certain percentage compensation. You should find out what the average CoOperating Broker fee is in your area. If you offer less than that amount, the agent would need to accept doing the work they normally must do to service their buyer for a reduction in earnings, AND, because there are often things that must be done on the SELLER SIDE of the transaction, that agent often winds up picking up additional tasks. This in NO WAY means they would be “representing” the seller, only that they, in the service to their buyer, might have additional seller side tasks to perform. How much additional work would YOU, in YOUR job, be willing to perform…and be required to accept LESS pay for doing it?
More and more around the country and here in Chicagoland, buyers actively looking to purchase a home have agreements with the agents representing them that, when they purchase, their agent will get paid. This applies to listed properties, new construction, as well as For Sale by Owners. That payment is generally made in one of two ways….either by the buyer writing a check to their broker at closing, or by the broker being paid out of proceeds from closing, which is by far more frequent.
Who should be home for showing the home?
NOTE: I hate to sound like a sexist here, but the fact is that you don’t know WHO is coming into your home! Think of it this way…if your home were NOT for sale, and if there were not a pretty large amount of money at stake, how likely would you be to invite a total stranger into your home? But since you will want to have prospective buyers see your home, my suggestion would be to have an adult male home for showings. If that is not possible, two adult females should be there.
What about the actual “showing”?
NOTE: Most sellers who choose to go “FSBO” do so because they plan to “save” the commission that would otherwise be paid to a real estate broker. Most real estate brokers, when they list a home, ask that their sellers NOT be home at all during showings. The reason is quite simple. When a buyer likes you home, they tend to become quite chatty. Yes, they may be friendly, but they are also on a “hunting expedition” (many conscious, sometimes even unconscious) to find out information about you or your move that they can use to justify paying a lower amount. It happens all the time…..buyers will look for months to find the “right home”…and when they find it, will work diligently to find justification for PAYING LESS FOR IT! And one of their BIGGEST justifications for paying less is they ALSO expect you’ll take less because you are not paying a broker! As a matter of fact, many buyers specifically target By Owners because they are hunting for “a deal!”
As a By Owner seller, ask lots of questions of the buyer, answer all questions about the HOUSE that the buyer asks (or about schools, shopping, etc.)….and then SHUT UP!!!! Remember, “saving the commission” is only SAVING anything if it improves your “net to seller” at closing!
What about safety?
NOTE: This is (or should be) a major concern for you. I’ve already mentioned who I’d recommend be home for showings….and I made that recommendation for safety reasons. Here are a few other ideas.
- CONFIRM all showings. If someone calls on the phone to see your home, check your caller ID if you have it…AND WRITE DOWN THE NUMBER!!!! While talking with the prospect, ask them for their phone number and also for their name. Ask where they currently live (you can ask this more casually, as if an afterthought). If they are serious buyers, they should not be reluctant to give you either. After you’ve made the appointment, CALL THEM BACK….you can say you just wanted to confirm that you’d written down the right time, or whatever. At least you’ll know the phone number is good.
- If someone comes to your door and wants to view your home AT THAT TIME, tell them you’d love to show it to them, but are unable to do so at the moment. Try again to get a name and phone number, and schedule your appointment. This gives you time to arrange to have someone with you when you show the home. Remember, you don’t know who you are letting in your home. Chances are it’s someone who is looking to buy a home…but you only have to listen to the evening news to know there is sufficient cause to exercise caution! And, an added benefit to having someone with you while you show the home is that you have one more person to assist you in keeping your prospects together…avoiding stragglers who might wander away for WHATEVER purpose.
- Keep a Guest Register (and pen) by your front door, and ask the people who come to view your home to sign it when they come in. Again, if they are serious buyers, they should not object to filling it out! After all, they are asking you to let them walk through your home….they should not be offended if you’d like to know WHO you let in! If you need something to use, I’ll be happy to provide it for you. Is it possible they might fill in phony information? Yes…maybe….but using it is still better than not using it!
- Try to stay close to the prospect…that’s harder if the prospect is a “couple”, a family, a group. If there is more than one person that you’d be showing the home to, kindly ask that “we all stay together while going through the home”….so you can be sure to answer any of their questions and point out the special features of the home. This can sometimes be a challenge, but it is important. If someone is trying to case a home, they often travel in pairs or small groups…one to keep the owner “occupied”, the other(s) to have privacy in checking out the house.
- NEVER leave valuables out in the open. I’d suggest putting them out of the house altogether while it’s on the market…perhaps your bank’s safety deposit box!
- Check your medicine cabinet, too! Oddly enough, some of the thefts are about the drugs in the home! Suggestion…find an alternate place to store your prescription medications!
What about Open Houses?
- Who should (and should not) be home during an open house
- What about valuables
- Who’s going through my home?
- What information should I require
- How can I promote my open house?
NOTE: Certainly the Safety suggestions above apply even more so here. Also, best not to have small children around during an open house. Not only is this a safety matter, it’s also distracting to the owner as well as the prospective buyer.
What if someone wants to make an offer? What paperwork is required?
NOTE: Most real estate transactions in the Chicagoland area are conducted with the assistance of real estate attorneys. As a “By Owner” seller, that’s even more important. When you decide to sell By Owner, connect with a good real estate attorney right away…the attorney can then guide you as to what paperwork should be used in the event someone wishes to write an offer on your home. If you don’t know who to contact, I’d be happy to recommend a couple of excellent real estate attorneys.
How do I know how qualified my buyer is?
NOTE: This is a really important question. It doesn’t matter how much a buyer offers for your home IF HE CAN’T PAY IT!!! Over the years I’ve found that a great many sellers who ORIGINALLY put their home on the market By Owner because they were in no real hurry to get it sold, felt they would wait to buy until they had a contract on their home (which is a very prudent decision), then accepted a contract with a buyer (sounds good so far, right???), put a contract on a home to purchase (sometimes not building in protections for themselves…because they felt secure that their buyer was solid), then the sale of their own home fell apart!!!! THIS is when they finally hire an agent….when they are “under the gun”, having a very limited amount of time in which to sell, and really pressed as to how much they can “net” from the sale of their home.
What about specific “terms” in a sales contract? What should I know about…
- Price (I guess that’s pretty obvious!)
- Concessions or “give-backs”
- Contract Date (the date is the VERY LAST item filled in…it is AFTER everything in the contract has been agreed IN WRITING to by all parties)
- Mortgage Commitment date
- Personal property to be transferred at closing
- Closing date
- Any contingencies (sale or close of home, kickouts, inspections, attorney reviews, other-party approval, radon inspection, post closing possession, etc.)
- What if the buyer wants to move in to my home before I can move into my next one?
- Earnest money (who will hold it?)
- Maximum interest rate (and what if the rates go up?)
- Lock ins
- Special assessments (do I have any on my property…and, if so, who pays?)
NOTE: Contracts can come in a whole host of shapes and sizes. Our region’s “standard” contract was designed by an array of attorneys specializing in local real estate with the INTENT of providing a balance of protection to both the buyer and the seller, while also providing a means by which BOTH would have a clear understanding of their agreement. NOT ALL REAL ESTATE CONTRACTS are built that way!!!! Ask your attorney which “form” he/she would like you to use in your sale.
What if they have a home to sell or close on? What about contingencies? If their home is for sale, how do I protect myself in case their home doesn’t sell? What if their home is overpriced, in hard to sell area, condition, odors, etc.?
NOTE: This can be challenging for sometimes, even for an experienced agent. If the home is not yet “for sale”, there are certainly big questions there as to whether you even want to consider such a buyer. For example, are they going to sell by owner as well? What is the likelihood their home will sell in the time needed? What is the price to be? What about their condition? Location? Even if they are going to “list” their home…is it with a skilled agent? Is it a “MLS only” service? How will their home be marketed? Will it be priced appropriately for the market conditions? Will you still be able to entertain OTHER offers?
Even if their home has a contract on it, what is the status of that contract? Who is the lender for their buyer? Where in the process is THAT loan? How solid is their transaction?
What about earnest money?
NOTE: Earnest money is a part of a buyer’s downpayment and is designed to protect the seller against a buyer’s default. When you’re the seller, more is better. Think of it this way, “If someone is buying a home in the price range of my home, how much money would they likely NOT be willing to walk away from?” The Earnest Money, however, is NOT your money…not unless buyer DOES default (not perform in accordance to the contact and/or any subsequent agreements legally and officially made during attorney review, etc.) AND both buyer and seller agree to release the earnest money to the Seller.
How much will I actually put in my pocket when I sell
NOTE: If you haven’t already done so, you should prepare an estimate of net proceeds. Items on the list of things you’ll need to pay at closing include:
- Final pay off of your first mortgage
- Final pay off of any additional mortgages, liens, equity lines, equity loans, etc.
- Attorney fees
- Title charges
- Proration of the real estate taxes for the prior year and the current year up through and including the day of closing…Remember, in Illinois, we pay taxes in arrears
- Proration of any homeowner association dues up through and including the day of closing
- Credits to buyer for repairs of items discovered through buyer’s home inspection
- Brokerage fees (even when you’re selling by owner, the likelihood is that your BUYER has an agent and their fee would be paid out of the transaction)
- Any special assessments outstanding on the property
- Recording fees
- State transfer tax
- County transfer tax
- Local transfer stamps (if applicable)