Lessons Learned From Selling For Sale By Owner

Posted August 22, 2006 by Chuck Posted in: Real Estate

With the outrageous price of hiring a full-service real estate agent to sell our home we decided to sell our townhouse for sale by owner. How hard can it be right?

I’ll preface it by giving a little more information on the townhouse. It was 1480 sqft, 3 bedrooms, 1/2 baths in one of the more desirable townhome communities in the area. There are only 3 types of townhomes in the community so it was pretty easy to guage how much ours was worth based on the selling prices for identical units (ours was actually in the best condition of any we had seen so we decided to list it higher than any other). We bought it a little over 2 years ago, and the reason for selling was to upgrade to a bigger home. The only real estate experience I had was the purchase of this home.

So, at a selling price of approximately $195k, here is what I figured we had to save:

Full Service / Full Price Broker – 6% Commission – $11,700
Discount Broker – 3% Commission – $5850

Quite a chunk of change, so I decided to check into my options.

The first thing I knew I would like is advertise an open house in the local newspaper. That’s where I did a lot of my browsing so I figured hey, other people must be doing it too. I found it a little expensive – $150 for a weekend ad (fri, sat, sun) – but figured it was worth the investment.

There is a local ‘for sale by owner’ website / magazine which for starting at $375 will post your house on the website and put it in their magazine for 6 weeks. I decided not to go this route as it did not get our house up on the MLS (or multiple listing service) which is where all the real estate sites link from.

So I then looked into a so called flat fee MLS listing service. After browsing the various sites, I decided on housepad.com. For $299 you got a 4 picture listing on the local MLS, as well as a for sale sign. Prices for these services vary by state, and even by county within states (there are some for $99 in Florida that I was very jealous of), so its important to make sure the site offers coverage in your area. One of the big catches with this service is that if a broker (buyers agent) refers someone to your property you have to pay them a commission which is recommended to be 2.5% – so in our case this would have been $4875.

I then purchased some for sale / open house signs from the local Home Depot for about $25 and was on my way.

Mistake #1:
I was hoping to get my MLS listing up about a week before my open house to build up some interest from anyone searching on those websites / getting automated emails from an agent. I thought once I purchased the MLS package my listing would be up and running that day or the next so I signed up about a week beforehand. Well, after filling out what seemed like 50 pages worth of paperwork, faxing it, refaxing it, fixing some things, and refaxing it, it was now Thursday and my open house was on Sunday. Then I wondered, when would my listing be posted? Well, in the fine print I neglected to read thoroughly it said it could take up to 3 business days to post which would be the Monday after my open house! I wrote a very nice email to them asking if they could speed up the process at all and received back a reply stating “We will do our very best to have you on the MLS by close of business tomorrow” but unfortunately they did not, and we had our open house with only the traffic from the ad in the paper and a free ad I posted on Craigslist.

Despite this the open house went very well. Preparing for the open house we did all the stuff we thought we were supposed to. Remove any clutter from the house, clean clean clean, put nice smelling candles around, yada yada yada. We had a considerable amount of traffic in and by the end of the day had 3 couples we thought were going to put offers in on the house. Anyone who I asked I gave generic offer sheets but told them they should consult an attorney since it was a legal document.

So after a few days we did get 3 offers in… one a complete lowball at over 20k under our asking price with a buyers agent! The other 2 were full price offers with no agents. After discussing it with our attorney we decided to go with one over the other as they were more flexible with their closing date, and were putting more money down.

I would add, definitely get a real estate attorney. Ours was $500, but I would have gotten one anyways even if we had listed with a full service agent. I figure with the amount of money involved it is a worthwhile investment, and they handled a lot of the paperwork.

So my next problem came trying to get the listing off the MLS, as agents were ringing the phone off the hook trying to setup appointments (also giving me nasty comments since the flat fee listing company had put their phone number on the MLS rather than ours and there was some automated hell they had to go through to get to me). I faxed, refaxed, fixed, and refaxed endless paperwork and finally about 5 days later the status was finally changed to indicate it was under contract and not being shown.

Mistake #2:
Everything else seemed to be going smoothly until we got close to closing, and the buyers lawyer brought up the fact that they had never received / signed a NY State Property Disclosure. I was aware of this form, and we had filled it out and had it available to anyone who requested it. What I was not aware of that it was New York State law that this form must be provided to the buyer and must be signed and returned to the seller prior to the offer being accepted otherwise the buyer was entitled to $500 at closing. Begrudgingly I had to give in to this, I partially blamed myself and partially my real estate attorney for not informing me of this. Yeah, I know I just went on ranting how I would recommend a real estate attorney, then blame mine for a mistake. I’m sure any real estate agent would have caught this.

So the total cost to sell our home was (not counting the lawyer as I would have gotten one regardless):

$150 – newspaper ad
$299 – flat fee MLS listing
$25 – signs
$500 – property disclosure mistake
= $974

For a savings of at least $4876.

Was it a lot of hassle? Yeah. I’m not sure if all flat fee MLS places are like that but I definitely did not have a great experience with them. What’s funny is the offer we accepted actually came through our Craigslist ad which was free, so we could have sold the house for nothing had I not signed up for the other services. But also definitely would not have had the same traffic or number of offers and maybe that would have affected their offer – who knows. Would I do it again to save almost 5k? Yeah.

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