3 Ways To Sell Your Home
It’s finally time to sell…
You have come to the conclusion that it is time to sell your home. That can be an overwhelming decision to make! Sometimes this decision is accompanied by feelings of excitement as you and your family look forward to new adventures in a new home, maybe even in a new city. New jobs, growing families, adventure, all of these things can kick off a family’s first thought of, “Maybe it’s time to sell.”
However, not everyone chooses to sell their home because of happy reasons. You may be facing losing your job, health issues, disability, death of a family member, inheriting an unwanted house, or any number of less exciting situations. Those are not ideal situations or fun times, but nonetheless sometimes selling your home to avoid a financial catastrophe during these times can be the right decision to make.
Whether you landed here because of a happy or sad time in your journey, Olive Tree is here to help you determine the best way to sell your home. We will discuss the three main approaches along with their pro’s and con’s, leaving you with the information you need to move forward with the real relief of moving on to whatever is next for you!
The three ways to sell
While there is really an infinite number of ways to structure and negotiate the sale of your house, there are really three main avenues you can choose to travel down when listing your home. We will discuss them briefly here and cover them more in-depth in the remaining portion of this blog. They are as follows:
Sell through a real estate Agent - Selecting a LICENSED professional who will represent you in the sale of your home
Sell FOR SALE BY OWNER or FSBO - listing your home on your own and negotiating and managing yourself
Sell to a professional home buyer (Like Olive Tree) - working with an investor who regularly buys homes with cash
Just like everything in life, the path you choose comes with its own benefits and drawbacks. What is important for you to understand is which of these best fits your unique situation, because every sale is truly unique.
Working with an Agent - The traditional Route
When most people say they are going to sell their home the first question they are asked is usually, “Do you have an agent?” Usually, this is asked because…
a.) The person asking knows an agent they would like to introduce you to
b.) Most everyone assumes when you buy or sell a house, you use an agent
And most of the time these people are right! Real Estate agents are an amazing resource when it comes to buying or selling your home. They are licensed professionals who must stick to strict ethical guidelines when working with you and selling your house. Good agents will be professional and able to guide you through your home selling process. They have access to tools that most people who go the FSBO route do not. This enables them to get your home out quickly to other Real Estate Agents and a broader market.
The Typical agent process
Generally, when you work with an agent you are going to walk through a process similar to this:
Pick an Agent you Trust - You will need to do research to find an agent you connect with and that you trust to sell your home. This could be through word of mouth, or by going to a local broker such as 21st Century or Remax, Keller Williams, etc. Generally you will meet with a few different agents, they will walk the home, and give you a feel for what they think they could sell it for and how quickly they think it will sell.
Sign a Listing Agreement - After you select an agent and you both agree to list the house, you will sign a listing agreement giving them the exclusive right to sell your property for a certain amount of time. The terms of this agreement can vary, but generally it is there to protect the agent from doing the work of listing your house and having you sell it to someone they brought to the table. It would effectively cost the agent their pay for the work they did. It’s not fair for the agent, and it is a bad way to do business as a seller. There are a lot of negotiation points in the listing agreement, but they are outside of the scope of this blog.
Market the Property - Next the agent will normally take professional photographs of your house. They may do it themselves or hire it out, but it is an important part of the process in today’s real estate market. This will require you to clean and stage your home to show it in the best possible light. Your agent will then put it on the Multiple Listing Service (MLS) and begin taking showings. During this time it is important to keep your house clean and tidy. Buyers don’t want to think about you and your family living in their potential home. They want to imagine themselves living in the property, not you. The number of showings you have to endure can vary wildly depending on your city, the housing market, your home’s price point, and desirability, etc. You may have one showing to get a good offer or you may have fifteen. It all depends.
Sell the Home - If you get a good offer and decide to sign, your agent will manage all of the paperwork, inspections, appraisals, additional negotiation that may occur, closing schedule and more. And for all this they deserve to get paid. The fee for this transaction is decided on in the listing agreement, but it is generally 6% of your home price which is split with the buyer’s agent if they have one (3% for your agent, and 3% for the buyer’s agent. Again, this is negotiable in the listing agreement).
Pros and Cons of working with an agent
As stated earlier, any decision comes with certain benefits and drawbacks. Here are a few when working with a real estate agent:
PROS: Agents generally know the market very well and can tell you with reasonable accuracy what your home is worth. They also have access to the MLS which will broaden your marketing for the home to many other agents who have clients that are looking to buy a property. Since they are getting paid for the transaction they will handle all of the loose ends that come with selling a house: marketing, paperwork, scheduling showings and answering questions. They help make the transaction portion of the deal go very smoothly. After all, that is their job!
CONS: There are three main drawbacks to working with a real estate agent: Timeline, Cost, and Buyers. While the timeline can certainly vary, it isn’t unusual for a home sale to take months, sometimes 6 months or more depending on the quality and price of the home you are trying to sell. This isn’t a knock on the real estate agent, it is a drawback of FSBO sales as well. It can sometimes just be hard to find the right buyer for properties and this takes time. The second thing is cost. When you sell with a real estate agent you will be paying 6% in commission. That is $6,000 for every $100,000 you sell for.
Your realtor may recommend investing in your home prior to the sale to improve how the home shows and you will also be asked by many buyers to make repairs after inspection. At closing many buyers will request you to pay a portion of the closing fees.
This leads us to the last drawback: Buyers. Most always when working with Real Estate Agents you are going to be focusing on “Retail” buyers or “Owner-Occupied” buyers. These are people who want to buy the home so they can live in it. In most cases, buyers will expect the property to be move-in ready with no major needs. They will want the house clean and updated at your expense. Lastly, some of these buyers can make an offer on your home and due to financing issues, inspection concerns, or low appraisals, not even buy the house!
What type of seller is a real estate agent best for?
Real estate agents are a fantastic resource for people who want to get top dollar for their property and are willing to deal with some hassle to get it. To their credit, the best real estate agents will eliminate much of this hassle for you through their experience and professionalism. If you have 3-12 months to wait before needing to sell, have equity or cash to cover the cost of the transaction, and are willing to pay someone to help you manage the sale of the property then this could be a great option for you!
For sale by owner - The frugal route
Since the advent of the internet, it has become easier and easier for people to connect with others and access information. This has also led to a surge in DIY home sales, for For Sale By Owner (FSBO). In fact there are many websites dedicated solely to people who are listing their home this way, similar to an MLS for FSBO’s. People often look to sell their homes on their own during hot seller’s markets. Often they feel there are so many buyers out there it will be easy to find one and save the money they would have paid in commission. Let’s read on about what to expect when using FSBO and determine if it is right for you.
The typical fsbo process
Set Your Sale Price - Going this route, you save yourselves a couple steps of selecting an agent but you still have to decide on the value of your home. This can be a difficult thing to pin down because there are so many variables and the housing market is very fluid. There are also sales dynamics to consider. Price your house too high and it sits on the market. The longer it sits, the fewer people who are interested… “I wonder why no one has bought that house. Maybe there is something wrong with it.” Price your home too low and you leave money on the table. You would have been money ahead selecting a real estate agent and paying commission because they would have sold your house for the right price and maybe put more money in your pocket! Generally it makes sense to pay for an appraisal or tool to help you make this determination.
Get Your House Ready to Show - All the work the real estate agent was going to do? It’s up to you now! You will need to be sure to take quality photos and put together an attractive listing detailing all of the information a buyer will want to know. You may also need to make updates to paint and cosmetics, make any repairs that are needed and stage the home prior to taking photos so it is attractive to potential buyers.
Market the Home - While marketing a home has never been as easy as it is today, there is still a lot of work involved. You are going to be busy creating accounts on FSBO websites and loading all the photos and details, contacting newspapers, and posting the home on social media sites. Often you will still have fees to pay to use these services. These days, many owners are even building websites to list their homes. If your home can’t be found, it can’t be bought, so it is important to get exposure!
Find the Right Offer - Without an agent, it is up to you to schedule all of the showings, answer any questions buyers might have, review the offers that come in and finally draw up the contract for the sale of the home.
Manage the Closing - Since most buyers will still need financing, you aren’t off the hook for inspections, appraisals, and financing contingencies. It will be up to you and your buyer to manage the title company, the underwriting process and the final negotiations once the inspection comes back. If you were a great negotiator and got more than the home is worth, your buyer may not be able to get a loan due to the appraisal. Or, if your buyer is so excited to own your house that they go borrow money for a new living room suite. Then they discover they are unable to get financed because new loan affected their underwriting. No matter the cause, it is up to you to navigate the pitfalls leading to the closing table.
Pros and cons of FSBO
PROS: If you are a strong negotiator, have the time and energy to get your house together, know how to market the house well, and are familiar with real estate transactions this route can save you a lot of money. You will save yourself commissions and keep a higher percentage of the dollars you sold the house for.
CONS: You will limit your buyer pool if you don’t offer a buyer’s agent commission. You also still have to pay to list this property on FSBO sites or on the MLS for a flat fee. These costs, depending on your home can still add up to thousands of dollars. You also will have to do a lot of work yourself. All the scheduling and paperwork that the real estate agent helped you with is now on you. If you lack experience with the real estate process, are not sure how to properly determine the value of your property, or you are unable to market the house well, your dream of selling your house may just become a nightmare.
What type of Seller is FSBO Best For?
Sellers who are savvy and have the flexibility and resources to transact the entire deal themselves are ideal candidates for the FSBO model. If you are comfortable with technology, handling legal paperwork, enjoy negotiations, and have time to find the right buyer, this could be a great way for you to sell your home and save some money. Plus you may get some great experience from the process and end up in the real estate world yourself!
SelL to a professional home buyer - the speedy route
This last option may leave you a bit skeptical… You may be thinking “I see those ‘We Buy Ugly Houses’ signs, but are these people legit?” The answer to the question is, “Yes!” Every single day people in this country are closing deals with professional home buyers. The situations vary, along with the type of home (every investor/home buyer is a bit different), but these transactions are more common than you might imagine! Let’s explore the process of selling to a professional home buyer a bit more and see if it is right for your situation.
The Typical Investor process
Contact Investor - You might connect with an investor after receiving a letter in the mail, after clicking on an advertisement on social media, through word-of-mouth, or your own Google search. No matter how you connect, your first step is getting in touch! You will generally be asked some questions about your home and your current situation
Home Evaluation - After gathering some general information for you, the real estate investor will determine the “After Repair Value” of your property, estimate any repairs and updates that need to be made and begin filling out their financial model on the property.
Craft the Offer - Once the investor has an idea of what the home is worth and the repairs that are needed, it is time to work together to find a solution that works for both of you. A benefit to working with an investor is there is almost always a great Win-Win situation to be had, and because you both are working together for the best outcome it can usually be found!
Offer Acceptance - If the offer works for you, the real estate investor will set up closing and work with the title company to finalize all the required documents. Closing can occur quickly because the investor is buying with cash, but if you need more time to get ready to move closing can be scheduled at your convenience. That’s it, your done! No need to clean the house, make repairs, schedule showings, etc.
Pros and cons of working with a professional home buyer
Working with a real estate investor or professional home buyer isn’t going to be ideal for everyone. Below we will detail some of the benefits and drawbacks to selling your home quickly to an investor.
PROS: The biggest advantages of working with an investor are the speed and flexibility of the process. There are literally hundreds of ways to structure the deal. The options are as limitless as your creativity and needs. Additionally, you will have no cash out of pocket with many real estate investors. Many of these buyers will pay for all the closing costs, and filing fees. Because of this, and the commission you save, you are able to sell a home without spending your own money! You will also reduce your holding costs on the property which can be important if you have an expensive mortgage or high ongoing expenses. If it takes 6 months to sell your home FSBO or with an agent you have to continue paying those high costs. Another attractive benefit is the speed of the transaction. Normally, banks slow the process of a home sale down because of their need to evaluate the borrower, appraise and inspect the house, process the loan, etc. Because an investor already has the cash for the property, they can bypass all of this red tape. Many investors can close in as little as 7 days if need be! Lastly, is the assurance of sale. Most investors have very few “contingencies” (loopholes that allow them to back out of a deal). Retail buyers have to include contingencies on financing and other situations to be sure they can get out of the contract if the bank can’t finance them for some reason.
CONS: It should be no surprise, but the biggest drawback to working with an investor is that you will not get full retail price for your home. This is the trade-off for the speed and convenience of working with an investor. Another potential drawback is that there are fewer investors than there are real estate agents, so it is possible that one may be harder to find. But if you are reading this, you can always reach out to Olive Tree Properties by phone or email.
what type of seller is a professional Home buyer best for?
Professional Home Buyers are best for sellers that want to minimize the hassle and time it takes to sell their home. These may be buyers that have extensive repairs, have impending financial obligations they can’t meet, inherited a house they do not want, need to move quickly, have tenants they don’t want to deal with, or any other myriad of reasons. Sellers who value flexibility, speed, and convenience and are willing to trade some profit to get it are going to be the best candidates to go this route. Have you traded a car in to save yourself a headache instead of getting top dollar selling it yourself? Then you could be a great seller for this route!
RECAP - 3 different ways
Like all things in life, there isn’t a perfect solution for everyone. But let’s quickly recap these 3 routes based on Cost, Time, and Sale Price