Best Options For Selling Your House
A Practical Approach to Better Understand The Home Selling Avenues
Selling a home in today’s market can be challenging. The number of homes on the market has increased steadily over the past year meaning that Buyers have more choices in searching for a home – competition between homes favoring the buyers in some markets is the highest it has been in more than 5 years. While the inventory is nowhere near normal levels, it is sufficiently stocked for active buyers. These are the qualified consumers who are qualified and motivated to move now. These buyers are not hindered by the higher interest rates, they know what they want in a home and they know what they want to spend for it!
Because increased interest rates have sidelined many would-be buyers (& sellers who would have nowhere to go if they sold!) the current inventory gives buyers out there more choices… and often times sellers can wait several months up to 12 months or more to sell their house for a price they want to pay. While not a “Buyer’s Market”, they are in more control than recent years.
For home owners, there are essentially three avenues to sell their homes: Traditional real estate agency, for sale by owner (FSBO) and wholesale. And the biggest concern is pretty darn simple – How to get the highest return, in the shortest possible time, with the least possible stress.
Why We Created Home 1 Realty…
With more than 30 years of combined real estate experience, we set out to give consumers a clear picture of the options available to sell their homes. Each of the options has some unique merit, however, it really depends ultimately on your goals and what is most important to you and your family. Keep in mind that it is easy to declare you want it all – highest price, shortest time, least stress – but know that the path to get there will vary based on your home & situation.
This short guide will help to illuminate the different options for selling your home and their recent derivations help you determine which option is best for you. It will be important that you are open to the pros & cons of each solution and that you get out of your mindset as the proud homeowner to be an objective seller to understand the buyer’s mindset.
The 3 Options For Selling Your House
As we introduced, there are three common options for selling your house.
1) TRADITIONAL: List With A Real Estate Agent
Listing your home with a real estate agent is the most popular way to sell a house today. To date, working with an agent has been the method of choice for home sellers! Here is an overview of the process in working with a real estate agent:
- Contact a local agent to review your home condition and goals, as well as the current market conditions and comps to determine at what price it may sell for.
NOTE: you may call out a few agents to get 2 or 3 price opinions - You sign a listing agreement with the agent where they exclusively represent and sell your property – they become your agent representative.
- Your agent provides advice on preparing your home for the market, curb appeal & buyer perceptions, as well as showing protocols.
- Your Agent lists your property on the MLS, markets it thru their network & online, works with buyer agents, and takes prospective buyers through your house for showings.
- When the property receives an offer, the agent reviews the terms with you, negotiates your response to the agreement, manages the conditions such as inspections and appraisal, and manages the timeline with the lender & title to the successful closing of escrow.
- At closing, the agent collects their commission fee spelled out in your agency broker agreement at the time of listing.
Cost: Listing agent fees are typically 2-3% of the purchase price. The Buyer agent fee is also typically 2-3% of the purchase price. This is how we get to the typical commission of 5%-6% commission. Agency commission fees are negotiable and you can shop for an agent based on their desired total fee(s).
Timeline: Current time on market is averaging 45 days in most active markets. Historically, the time on market has been 3-9 months (with an average of 6 months in many markets).
Pros: Full-time local agents know the market well, have access to the agent network for the greatest exposure, extend marketing through social media and direct mail/email, show the property, perform open house, negotiate offer(s) and manage the documents & timeline. The better agent will be local, experienced, full-time, clear communicator, strong local network and they will not be afraid to be both clear & direct about home preparations affecting selling price.
Cons: There is a perception that this avenue can be expensive – that agent commission is too high, especially in higher-priced homes. Agents can come off as pushy in highlighting the importance of preparation and to shore up possible inspection issues in advance. And frankly, like any cross section of life, some agents are worth their fee. The most common complaint is the agent listed the home on the MLS, stuck a sign in the ground and disappeared.
Why Choose Agency: People who aren’t on a time crunch and can wait months if they had to before a sale, have room in the transaction to pay the agent fees, are looking for full market value and are willing to wait it out until a buyer comes along who is willing to pay that value.
2) Going It Alone – For Sale By Owner
Recently, it may seem that “For Sale By Owner” has become a more popular conversation. However, it is interesting to note that since 1981 the number of homes listed FSBO has not deviated from just ~10% of the market. With sites like forsalebyowner.com, craigslist.com, Zillow.com and others it has become easier to list a home online, place an FSBO sign for your yard, and hit the market taking control of the sale process for yourself.
An overview of the FSBO process may look something like this:
- You decide to price your home based on info found online, visiting a few open houses and perhaps getting a CMA from a local real estate agent. Pricing your home appropriately is, important if not vital, because your home will compete not only with other homes but with the agent listed homes that are being marketed. One option is paying for an appraisal that will give you both an accurate home value AND a good marketing piece to support your asking price.
- Prepare your home by de-cluttering and deep cleaning.
- Take bright pictures in landscape mode only, gather all of the details about the house (sq. footage, rooms, features, etc.), and create a listing on an FSBO website. Put an FSBO sign in your yard – it may be worth it to buy a nice sign online or at a local sign shop.
- Now comes the marketing. Start with alerting your friends and neighbors. Then, get social with it. Post on as many social media and neighborhood sites as possible. You may also print Flyers for posting at the local stores and restaurant bulletin boards… up to you.
- You take calls, occasional drive bys and schedule showings
- You handle offers, negotiations, and getting the contract & paperwork in to escrow.
- You and a buyer show up at the closing table and complete the purchase.
Cost: Selling FSBO has only a few direct costs that are different from listing your home with an agent. Marketing your home may include the For Sale yard sign, a property brochures & other printing, an appraisal (if ordered), listing on FSBO websites. You may also offer to pay a buyer agency commission of typically 2-3% commission and hire an attorney to review legal documents to protect your interests.
Timeline: FSBO homes typically stay on the market longer than with an agent. The exception is that a fair number of FSBO sales are completed with a familiar buyer – family, friends, neighbors, friends of neighbors – and can occur both quickly and without the marketing expense. Otherwise, agent listed homes sell more quickly based on their local sphere, agent network, marketing expertise and fielding of interest parties, both agent and direct buyers. You should expect an appropriately priced home to sell in 6-12 months in most markets.
Pros: You can save a chunk of money by not paying agent fees. And you have full control and responsibility over the entire process. Important to note that working with a good Title & Escrow agent familiar with FSBO transactions will help to alleviate the stress of managing the process.
NOTE: Services like Home1Realty.com offer MLS only listing services to place your property on the regional multiple listing service which will syndicate your listing to 1000s of broker and national media sites like Realtor.com, Zillow.com, Homes.com, Redfin.com and others for only $500-$1000 one time fee! Get the exposure you need to compete for one low flat rate.
Cons: It can be a lot of work and stressful to prepare, market, show and negotiate a contract. Many express that they are uncomfortable showing their home to strangers. Others take selling their house personally and have a hard time discussing the condition of their home with a buyer that is comparing their house to others on the market. Another drawback of FSBO is the amount of time it may take to sell. Most common is the most difficult can be negotiating the sales contract to protect themselves on price, terms, and legal concerns. These reasons are why 87% of all FSBO sales are conducted with an agent’s involvement.
Why Sell SFBO: Selling your own house is good option if you have a familiar buyer lined up, don’t need to sell too quickly and/or who have no urgency to move. If you are someone who is comfortable with marketing and negotiations, completing paperwork and managing a timeline this route may be good for you. There are also those who really don’t want to use an agent – they may feel the fee is not worth it, or they have heard of bad experiences, or been stung themselves. Another reason is purely market-driven – When inventory is extremely low, the probability of selling yourself for top dollar and with terms more favorable to you can increase.
3) Selling Wholesale: Investor or “iBuyer”
The third option for selling that has proliferated in recent years is wholesale investors. This segment of the market advertises heavily to buy homes directly for cash. While investors have been in every city across the country for decades where independent investors buy houses to fix -n-flip or hold to rent. But in recent years, large corporations have got in the market with companies like Zillow, OpenDoor, OfferPad and others.
An overview of selling wholesale may look something like this:
1) Respond to wholesale buyer websites, typically have a webform online.
2) Depending on the investor they may offer a price instantly based on your input online, request photos &/or schedule a time to view your home. The corporate iBuyers will typically proffer a NET purchase price with few conditions, while the local investor will evaluate the house to determine the condition, degree of upgrades/updates compared to market norms and make an offer based on their operating margins and risks.
3) You look at the offer and decide if it works for you.
4) If it’s a fit, closing happens at a title company that prepares the documents … the investor buys with all cash, so it’s a quick close.
Note that many websites probe to determine your goals, calculate the value of your needs for a quick sale and then make an offer that may or may not be NET to you. Be sure to understand who pays.
Cost: Commissions or fees and oftentimes the investor will actually pay for 100% of the closing costs as well. This immediately eliminates thousands in costs that you would have to pay when working with an agent or selling the FSBO route.
The main cost of working with a real estate investor is the fact that an investor can’t pay full retail value for a house. They usually look to buy houses at discounts that allow for them of course to turn a small profit on the deal … just like any other business. But, for many people, selling at a lower price makes sense in return for the elimination of commissions and fees – as well as the much faster timeline to sell their house.
Timeline: very quick. Since investors buy with all cash (they don’t use conventional banks which take more time), they can close quickly. Many times you can have an offer on your house in less than 48 hours … and can close in as little as 7 days from the time you accept it.
Pros: Less work & often very quick. The process can take from 7-30 days and can close within 7 days if needed. Most investors will offer a NET sale that pay all closing costs, will buy your house “as-is” and won’t require you to repair anything, clean anything up, or even remove everything in the house.
Cons: Just like with anything, there can be drawbacks. The main drawback may be that you are selling at an average ~18%-25% discount in return for the speed and convenience that a real estate investor is able to offer. If your home is in reasonably good condition, your clutter is being thinned out or packed away with the move anyway, and you are interested in getting full market value, then this is not the route for you.
Why Sell Wholesale: This approach is mainly for people who are willing to sacrifice the sale price (& their hard earned equity!) in exchange for a fast, convenient sale. If you have an urgent need to sell, are unable or unwilling to prepare the home for market, or you inherited the property & really don’t care about top dollar, then wholesale investor sale may be the route for you.
Summary of the Three Ways to Sell
Making Your Best Decision…
The truth is… there is no one-size-fits-all solution when it comes to selling a house quickly and for the most money. Circumstances and situations differ. And so do a seller’s goals.
Just like with anything, do your research, review real time comps, conduct an honest assessment of your property value and make an informed decision on the route you decide to take. For most, working with a reputable local agent is the best route. For others, going the FSBO route may work for good results. And, unless you have a need to dump and run – too much work to prepare for sale or facing foreclosure – working with an instant cash buyer (investor) should be a last resort.
Be aware of the “hooks” tossed at you when a wholesale buyer uses fear factors to persuade you to lean towards a wholesale offer. They will use words like hassle, stress, fear, repair costs, and even “carrying” costs associated with taking a few months to sell your home while they forget to take into account that you have to live somewhere and pay a mortgage/rent. So, yes, selling to an investor for less may make sense when the home is sitting vacant based on carrying costs but if you live in the home and are not in a foreclosure or dire cash situation, selling wholesale should be the last resort.
A key point of this conversation is understanding that you have options, that your home is the most valuable asset most of us will ever own, and that reviewing your options with a seasoned local real estate agent is the surest way to get the most accurate information available that will help you you make the decision(s) about your home that is right for your situation. Most often, a professional CMA is available at no charge as is the agent consultation. When in doubt, feel free to contact us with your questions. Chances are we can assist you immediately and refer you to a great local agent at no charge to you! Good Luck!