This month, I’m sharing some of the things we’ve learned in the course of selling two homes—both of them in less than 15 days. Click on the links below to read the other posts in this series:
So, I’ve told you about the things that we did to prepare to sell our homes, from treating them like investments from the day we moved in to making sure the houses were staged to show off their best assets. Those are really important aspects of getting a home sold, and things that are fully within your control as an owner. Today, I’m going to talk to you about marketing the home you’ve prepared to sell, and by marketing I mean deciding which tools and helpers you are going to use to find a buyer for your home.
Basically, all those tools and helpers fall into two categories that I’m familiar with: you can choose to market your home with a real estate agent, or you can choose to sell your home yourself, a.k.a. “by owner”. We’ve done both, and we had sound reasons for doing so. Let me tell you a little bit more about both methods and why/how/where we used them, and then I’ll give you a few tips we learned about each method.
Selling with a Real Estate Agent. This is the method that most people think of when it’s time to sell their home. Realtors spend their careers buying and selling property—or at least representing the buyers and sellers of property. Ideally, they are trained in assessing property values, reading and writing contracts, negotiating, and advertising property. They hold a state license to be able to do so professionally. Realtors charge a fee for their services, generally a percentage of the sale price—so you don’t have to pay if they don’t sell your house. No two realtors offer the exact same services, but their services typically include an advertising package, getting your home included in the Multiple Listing Service (MLS), recommendations for home inspections and contractors if repairs are needed, managing all showings, sale negotiations, and dealing with most of the paperwork required to complete a sale.
Selling Without a Real Estate Agent. You’ll associate this method with the signs that say “For Sale By Owner.” It means that the seller has not engaged the services of a realtor. Selling without a realtor has the potential benefit of saving you the money that you would have spent on realtor fees. On the flip side, it means that you are solely responsible for everything when it comes to marketing, negotiating, and handling the legalities of a sale. It can be a challenging and risky process if you aren’t adequately prepared, but there are quite a few services available to aid an owner/seller if that’s the route you choose.
Like I said, we’ve closed on sales both with and without realtors. We’ve been on both the buying and selling sides of both types. I have plenty of advice to share on why, when, and how to go with either option.
Our Personal Experience with Selling By Owner. We purchased our first home in a brisk, East Coast market in 2002. We got a pretty good deal on the house due to its dated condition and the fact that the owners’ children were trying to unload it for their elderly parents. Though dated, the little Cape Cod cottage had a lot of charm and potential, was in a reputable school district, and sat on a gorgeous hillside property surrounded by million dollar homes. We spent the next three years putting a ton of sweat equity into the house with some well executed updates, and saw the values of homes in our area rise—a lot. We lived in Connecticut, and at that time state law required buyers and sellers of property to each retain a lawyer to review the contract and attend the home closing, even if they had a realtor. It seemed to us that once the property was found and initial negotiations were over, our realtor’s responsibility pretty much ended.
So, in 2005, living in a really hot housing market (not many homes were available and there were lots of potenial buyers), we felt confident that we could handle the marketing and negotiations ourselves as long as we had a good lawyer for the legalities. We selected a highly recommended attorney who specialized in real estate law and met with him prior to putting the house on the market. He had a set fee of $600 for handling the for-sale-by-owner process, which included reviewing offers, drawing a contract of sale, and attending the closing.
We had been keeping an eye on the market and had some idea of the prices homes like ours were selling for. Before we determined a price, we met with three realtors to get their market analyses of our home. Of the three, two gave us estimates of our home’s value that were within 5% of each other. We decided to list our home for the average between those two estimates.
Along with the realtor’s fee, we spent an additional $500 to purchase premium online advertising (with lots of pictures) on two for sale by owner websites that were well known with buyers in our area. We spent another $100 on for sale signs for our property and nearby intersections to help people find our property. So the total amount we spent on legal services and marketing was $1200—which was just 10% of the $12,000+ we would have spent if we had hired a realtor. (At that time, typical realtor fees in our area were 6% of the final sale price.)
Obviously, our decision to sell by ourselves paid off. However, we didn’t account for what it would be like to handle showing the home ourselves. We had to field a lot of phone calls. We had people who would show up on our doorstep after seeing the sign as they drove by and insist on seeing the house immediately. (That got weird, a couple times.) Negotiating in person with buyers was a little tough, and we only had ourselves to blame if the negotiations didn’t bring about the desired outcome. The day we sold the home, Bionic Man was on a business trip. Someone came to see the house and made an offer on the spot, and I ended up handling the entire negotiation myself. (Something I’d planned on handing over to my MBA husband, when the time came.) Still, we made a 50% profit on the home and saved a bundle on realtor fees, so we definitely felt like the minor hassle was well worthwhile!
Our Personal Experience with Selling with a Realtor. When we moved to Indiana, we noticed that there were many fewer homes being sold by owner than there were in Connecticut. In general, people we encountered seemed quite distrustful of by-owner sales, and were quite surprised we’d been able to sale our last home that way. What we discovered is that the available housing inventory in Indiana was—and still is—completely saturated with homes. Getting anyone to even look at your home was nearly impossible without getting a realtor involved.
Even though we’d had a great experience selling on our own in Connecticut, we recognized that in Indiana, we had a totally different market to work with. Not only was there a high housing inventory and a stigma about non-realtor sales, but the economy changed quite a bit between 2005 and 2012. The slow moving Indiana market was even slower when Bionic Man got a job offer in California. We knew that even with a realtor, it could be tough to find a buyer for our home, but without one, it was probably going to be impossible. As much as we knew we’d be spending on a realtor, we knew we’d spend more if our house stayed on the market long enough that we had to start paying a sky-high California rent payment along with a monthly Indiana mortgage payment…plus the additional insurance costs if our home sat empty. It was simply within our financial interest to hire a real estate expert to help us make a quick sale a possibility.
And, as it turns out, that’s exactly how it panned out for us: our realtor gave us excellent marketing advice, helped us pick the right price, and found our buyer. But that’s a post for another day. Stay tuned to find out how we selected such a terrific realtor.