FSBO Selleing Tips
If you sell your home yourself, without the assistance of a real estate agent, you can save on commissions. However, make sure you know what you’re getting into first. Learn about what the process entails, whether it’s a good idea for your situation, and where to get help if you do decide to go it alone. Above all, get to know the market well enough that you don’t end up selling the home for less than it’s worth or list your home at a price where potential buyers will not even get in your door.
Are Real Estate Agents Required?
No law requires you to hire a real estate agent when you sell a house. The value of a real estate agent is primarily in handling the many details of the transaction and understanding the process from A to Z including the legal responsibilities of the seller. The closer you look, the more little tasks are revealed as crucial in preparing, marketing, and successfully selling your home. The most important tasks that a real estate agent will normally perform for you include:
- evaluating the local market and comparable home values
- suggesting an appropriate listing price
- advising you on how best to present your home, including providing referrals to painters, repair persons, and more
- helping coordinate preparation of disclosure and other needed forms and documents
- creating advertising materials, arranging for photographs, measuring square footage, and executing drawings and floor plans of your home
- placing ads on the Multiple Listing Service (MLS) and in other media, and sending out material to potentially interested buyers on the agent’s mailing list and presenting your property to the other agents in their office. (Hint – this is where most deals get done so it is to your advantage to use a realtor with a large firm for more exposure.)
- arranging for individual visits to the property — if you’re no longer living there, most likely by providing a lockbox for use by other realtors, and meeting with individuals who don’t yet have their own agent
- answering questions and providing documents such as disclosure packets to potentially interested buyers and their agents
- holding open houses, possibly including weekday open houses for other real estate brokers to visit and weekend open houses for the public (which itself involves many tasks, such as arranging for and putting out signs in advance, and providing food for the broker’s open houses, as is traditional in some areas)
- receiving offers to buy your house, whether via email/mail or in person if other agents wish to formally present their offers
- helping you evaluate the strength of each offer and strategize on issues like whether to accept or reject an offer outright or make a counteroffer, and whether to also look for or arrange a backup offer.
- negotiate with the buyer’s agent until the purchase contract is complete
- coordinate with the buyer’s agent throughout the escrow period, helping to make the house available for inspections and appraisals and make sure you’re doing your part to close the deal
- help you strategize over requests made while in escrow, such as for a reduction in purchase price due to repair issues revealed in the inspection, and negotiating such issues with the buyer’s agent
- attend the closing.
Sound like a lot? This is only a portion of the typical tasks involved in a real estate transaction that need to be addressed. Indeed, it can be a full-time, nights and weekends job in the days and weeks while your house is on the market. And, as any agent will tell you, it’s not all glamorous. Some have been known to get out a mop and give a house a last scrubbing before the open house (but don’t count on this!) or drag their own furniture over if it will make the house look better.
For Sale By Owner
Selling a house without an agent is called a FSBO (pronounced “fizzbo”) — For Sale By Owner. As you might have already guessed, people who try it usually develop some appreciation for how agents earn their commission. If you want to go it alone, be sure you have the time, energy, and ability to handle all the details. Before you dive in, you should also evaluate the market and your schedule. FSBOs are usually more feasible in sellers’ markets where there’s more competition for homes, or when you’re not in a hurry to sell.
What FSBO Sellers Need to Know About Real Estate Rules and Regulations
To sell your house by yourself, you must learn the legal rules that govern real estate transfers in North Carolina, such as who must sign the papers, who can conduct the actual transaction, and what to do if and when encumbrances are discovered that slow down the transfer of ownership. Try searching for information online, talking to friends with expertise (unless you already happen to be a lawyer or similarly informed professional), or hiring a lawyer for a few hours’ consultation. You also must find out if there are any state-mandated disclosures as to the physical condition of your house.
Let’s say you find a buyer who is willing to make an offer on your home. Who will write the contract? If the buyer is also unrepresented by a realtor, you should strongly consider hiring an attorney to draft the purchase and sale agreement. Drafting your own real estate contract, or relying on a contract template from the internet, may not be sufficient to adequately protect your interests. Even if the buyer is represented by an agent who drafts the contract, you will want to seek legal advice to insure that the contract is reviewed with the seller’s interests in mind.
A buyer has a right to a fair and complete understanding of the condition of the property they are interested in purchasing. While a buyer should always verify the property condition with a professional home inspection, they will expect the home seller to share the information they may have about the home with them. This is done through the Seller’s Disclosure Statement, a written document where the seller lists all pertinent issues that they know about the property. You should completely and truthfully fill in all that you know about your property. This is a place for factual information, not speculation. It takes just a few minutes to fill in. Keep a copy for yourself and present a copy to each prospective home seller as part of your contract paperwork.
Title Work and Survey
A seller will also be required to provide other property documents and records to the buyer (i.e. tax statements, HOA documents, etc). A FSBO seller should be certain to comply with the timeline designated to complete the title work, survey, and other items that may be requested by a seller. Failure to do so may result in a default under the contract, and the right of your buyer to walk away from the deal. FSBO sellers should carefully consider the legal ramifications of selling their home without the assistance of a Realtor. At a minimum, a real estate attorney should be hired to represent the seller during the entire process if not using a Realtor.
From Contract to Closing
Once the Contract has been fully agreed upon and written up, it needs to be reproduced in at least four (4) counterparts – one each for the buyer, seller, buyer’s lender, and the person holding the earnest money deposit. The buyer then is required to use his best faith effort to meet all of the conditions, such as financing and inspections. The mortgage loan process can take anywhere from one week to six weeks, depending on the property and the borrower, and it is possible that the buyer will not be able to qualify for the mortgage loan needed to close. Things that affect qualification are (but are not limited to) the actual credit report of the borrower, the value that an appraiser selected by the lender assigns to the property, and the available cash that a buyer has on hand to make up the difference between the purchase price and the loan amount.
During the due diligence period, the buyer will need to get all financing, inspections, and other closing details worked out, and the buyer and seller will need to resolve all issues arising from this due diligence. At some point between the contract signing and the closing date, the mortgage qualification process will be completed. If the buyer qualifies for the mortgage loan, a closing date will be set between buyer, lender and buyer’s closing attorney.
Closings in North Carolina are generally held at the office of a licensed attorney selected by the buyer and approved by the lender. In a FSBO sale, the seller and the buyer will appear at the office of the closing attorney on the closing date and sign all of the closing documents. The seller will be responsible for providing a warranty deed to the buyer and paying for North Carolina excise stamps and any other expenses which seller has agreed by contract to pay. Also, in order to close, the seller will need to be able to deliver to buyer “marketable title,” which means that a title search done by the closing attorney reveals that seller can deliver clear title to the buyer with “acceptable encumbrances” (such as restrictive covenants, general easements, etc.).
If the title search shows that the seller has an uncancelled mortgage, judgment, unpaid tax or other “unacceptable encumbrances” on the property, then the closing attorney will make arrangements with the seller, through closing, to pay off, satisfy or otherwise remove unacceptable encumbrances. Certain acceptable encumbrances, like taxes for the current year which are not yet payable, or mandatory assessments for a homeowners association, will be prorated between buyer and seller at closing, so that seller has paid seller’s share of the encumbrance, and buyer then assumes the encumbrance from the seller. All of these payoffs and adjustments will be reflected on a document known as the Closing Statement. The closing statement will itemize all of the buyer’s and seller’s expenses and credits, and come down to the net funds required by buyer and the net funds payable to seller when closing is complete. Both the buyer and the seller sign off and agree to the Closing Statement.
Once all of the documents are signed, then the closing attorney collects the closing funds from the buyer. The funds must be in the form of a bank wire, certified funds, cash, or other “cash-equivalent” funds as required by the North Carolina Good Funds Settlement Act. Once the closing attorney is satisfied that he has the correct amount and type of closing funds, and that all documents have been properly signed and notarized, the closing attorney will proceed to update title and record the documents at the county Register of Deeds (in the county where the property is situated). The closing attorney will not distribute the net sales proceeds to the seller until all of this is done. The FSBO seller will need to be sure to ask the closing attorney when seller can reasonably expect to receive seller’s net proceeds check.