FSBO Resource eGuide
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How to Maximize Your Equity
Selling by Owner
Table of Contents
I. What to Expect on the FSBO Market
II. Current Scams and Shady Practices to Look Out For
III. Getting the Most Out of Your Home Appraisal
IV. What is a Pre-Inspection and Why You Should Get One
V. Real Estate Attorney -- Do You Need One?
VI. Photography Tips and Tricks
VII. When to Enlist an Agent
VIII. Creating Your Listing
IX. Different Types of Offers
X. A Warning on Wholesalers
What To Expect on the FSBO Market
The biggest difference between the FSBO market and the market using real estate agents, is the type of buyer you are likely to encounter. FSBO buyers generally make more cash offers, and have quicker closes.
Investors are common, whether they intend to fix and flip the house or purchase it and rent it out to prospective tenants. There are also more creative financing offers on the FSBO market. Be prepared to receive offers to "rent to own" or "owner carry" offers. If you receive either of these kinds of offers and intend to move forward, make sure that you fully understand the fine print!
Another common call you will receive on the FSBO market are calls from real estate agents attempting to list your house. Often time these are new agents who are promising you the world with minimal experience to back it up.
Current Scams and Shady Practices to Look Out For
Real estate fraud happens when scammers use real estate as a cover to steal your money, or even your house. According to the FBI, more than 13,600 people were victims of real estate fraud last year alone!
Wire Fraud Scam
There are two main types of wire fraud that can occur in real estate scams: escrow wire fraud and mortgage wire fraud. Both typically happen when a scammer poses as a real estate agent or an escrow company, and tricks you into wiring the funds for your closing costs to a fraudulent account.
Real estate scams can be hard to spot because scammers often use special software that mimics actual escrow companies email address or phone number. And unfortunately, once you wire money, it’s nearly impossible to ever get those funds back. As a home seller, you can protect yourself by understanding what your closing process will look like from the start. And always call to confirm wire transfer requests before sending money! Never wire any money without speaking with your title company directly via phone first!
Title or Deed Fraud
Sometimes called deed fraud or title theft, house stealing happens when a criminal uses forged documents to fraudulently transfer someone’s property deed into their name. In theory, the scammer could then sell the property to an unsuspecting third party, pocketing the profits.
House stealing isn’t the only way identity thieves could try to tap into the value of your home. There’s also home equity fraud, a type of mortgage fraud in which a scammer uses identity theft to take out a home equity line of credit in your name.
Scammers will make a full price offer or near full price then get the paperwork started. Once the scammer has your info they can use it many different ways to transfer your title into their name or sell your home, without you even realizing it's been sold. If you feel someone you may be giving you a fake offer, we can look at the offer or connect you with a top Real Estate attorney in your area.
Getting the Most Out of Your Home
Appraisal
Provide Your Own Comparables
Provide your appraiser with at least three solid and well-priced comparable properties. You will save them some work, and insure that she is getting price information from homes that really are similar to yours.
Make Sure the Appraiser Knows Your Neighborhood
Is the appraiser from within a 10-mile radius of your property? If they're not, make sure you address this issue. You want an appraiser that is familiar with the specific highlights and assets that your properties location has.
An appraiser that is unfamiliar with the benefits that come with living in your neighborhood is an appraiser that may not realize the full value of your home.
Know What Adds the Most Value
If you're going to do renovations, start with your kitchen and bathrooms. Wood floors, landscaping and an enclosed garage can also drive up appraisals. Make sure to properly utilize and spend your budget when making improvements that are likely to yield you the highest return on investment.
Carefully weigh the benefits and drawbacks on investing in renovations or fixes before listing your house. In some cases it may be better to adjust the listing prices accordingly and allow the new buyer to make the renovations. In others, it makes sense to fix them before listing to fetch a top market offer. Look at other comparable home sales in you area to see which may be best for your situation!
Document Your Fix-Ups
If you've put money into the house, prove it. Before-and-after photos along with a well-defined spreadsheet of what was spent on each renovation can persuade the appraiser to turn in a number that far exceeds what he or she first called out.
Don't forget to highlight all-important structural improvements to electrical systems, heating and cooling systems - which are harder to see, but can dramatically boost an appraisal. Show receipts if possible!
Distinguish Between Upstairs and Downstairs
Many homeowners covet that refinished basement, but that doesn't mean appraisers look at it the same way. Typically, improvements and additions made below grade, such as a finished basement, do not add to the overall square footage of your house. As such they may not add nearly as much value as improvements made above grade.
"According to Remodeling magazine, a basement renovation that cost $63,000 in 2011-12 will recoup roughly 66 percent of that in added home value. That's not as good as an attic bedroom, which will recoup 73 percent of its cost. Even similar bedrooms typically count for more if they are upstairs instead of downstairs."
Make sure you're improving and investing on the right levels of your house!
Clean Up
Even picky appraisers can be swayed by a good looking yard. Tree trimming, mowing the lawn, and cleaning up the flower beds in front of the house can make a huge difference. Same with the inside! Making sure all clothes and belongings are properly put in place and that the kitchen is in sparkling condition will help make sure that your house has its' best foot forward during the appraisal!
Give the Appraiser Some Space
"Don't follow the appraiser around like a puppy. It's a major red flag there is a problem with the home. And while you're at it, make the appraiser's job as pleasant as possible by giving your home a pleasant smell. At a minimum, clean out the litter box. Baking some fresh cookies and offering him one or two probably won't sway your appraisal, nor should it. But it couldn't hurt."
What Is a Pre-Inspection and Why You Should Get One
A pre-inspection is no different that normal home inspection, except instead of the buyer or lender requiring it, the seller actually gets their own inspection before even receiving an offer.
A pre-inspection can not only make your house more desirable to potential buyers, it can also make sure that there are no surprises on the way to the closing table. This could end up saving a lot of heartache down the road, and even potentially save deals from falling out of contract.
Often times a seller does not want tot take the time or pay the small expense to get a pre- inspection, not realizing that when the buyer has an inspection done at the end of the transaction, it can put you in a terrible situation.
If anything arises on the buyers inspection, it gives the buyer the power to renegotiate the agreement or worse back out of the transaction. Leaving you without a buyer and even possibly loosing out the next home you need to purchase.
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Photography Tips and Tricks
A huge determining factor in offers received and attention garnered on the FSBO market begins with the photography. If you are doing your own photography, make sure to take the photos in the daylight. The same photographs taken in daylight versus nighttime can have a drastically different appearance.
Make sure to put your house's best foot forward by cleaning up before taking your photographs, and make sure that you are taking them in the horizontal orientation. Start your listing with an exterior photo of the house front, then move into photos of the kitchen, followed by common areas, and finished with bedrooms.
If the property has a back yard, patio, garage, or other outside features, add these after your bedroom photography. Consider creating a virtual tour, by taking a point of view video walk-through of the house starting from the front door. Do not stop and narrate the tour. Try to stay at a consistent pace, pan at a slow speed, and always keep the video moving.
Remember, your photos will allow the buyer to see the still highlights of the room. The tour is designed to help them get an understanding of the layout, not show them all the details of each room! If you feel you need a professional, we can connect you to an affordable and local real estate photographer.
Real Estate Attorney-- Do you need one?
Real estate transactions that are handled in an improper or sloppy fashion can lead to legal and financial implications down the road. FSBO sellers consider engaging an experienced real estate attorney to assist in navigating a residential real estate transaction. An experienced real estate lawyer can help protect their client’s legal and financial interests in the sale of their property.
Typically, your lawyer will not assist you in setting the price to list your home or pressure you into selling at a certain time of year. Instead, their main priority should be to assist in avoiding legal pitfalls and maximize your legal protection when you sell the property. As a result, you remain primarily in control of your transaction. When you decide to list your home as FSBO, one thing you may want to consider to help you with the paperwork is a real estate attorney that will provide you with the assistance you need in the housing transaction.
Without the assistance of an agent, FSBO need assistance with contracts, title, survey and closing matters. Though a lawyer can make sure your transaction is legal, they typically do not assist with marketing, pricing, and negotiating, those services are provided by a real estate agent.
A lawyer may be the right choice for you if you do not need help with any part of the sale except the legal part of the transaction. If you need help finding a reputable, affordable real estate lawyer in your area, FSBOResource.org can recommend the best in your area at no cost to you.
When to Enlist an Agent
Timing your sale right is very important to most sellers, and it could be the difference between a full-price sale and a below-market offer. It's important to stay in touch with local market trends when selling your house by owner. For example if rates go up, or other houses for sale in the neighborhood start to reduce in price, it may be time to enlist an agent.
Agents have a far larger pool of buyers to pull from, and a good agent can sell you house for enough to cover their costs. According to Zillow a good agent will sale a house for 30% more than a standard FSBO.
If you feel it is time to enlist an agent, it is important to choose a top agent as opposed to a discount agent. A discount agent can be as dangerous as whole seller, locking your house up for 30 or 60 days and doing nothing to sell it.
A top agent has many tools that can help you sell your house for more from marketing plans, to repair men, to drones, and even possibly already have a buyer that would buy your home. If you do need to choose a reputable top agent, FSBOResource.org can recommend the best in your area at no cost to you.
Creating Your Listing
Don't Overprice
An overpriced home is difficult to sell without a real estate agent, and even more difficult to sell in a buyers market. You can determine the appropriate price by researching recent comparable home sales in your area and seeing what they sold for. Keep in mind location, home size, and home quality when determining what can be considered a comp.
Put Together a High Quality Listing Description with Great Photography
Many times, a listing is your home’s first impression with buyers. If it has poor (or worse, no) pictures and/or a lacking description, you’re going to lose prospects right off the bat. Really take the time to perfect your listing so that you’re not sabotaging your sale from the get-go. Hiring a real estate stager to do a "Walk Through Staging" this is affordable and they can let you know what to do to make your house look great often with something as simple as rearranging the furniture.
Hire a professional photographer to take photos of your home for you a professional photographer can capture light and make rooms look bigger, cleaner, and newer. Put a ton of detail into your listing: many agents hire professional copyrighters to write ads about the houses they are selling and that is what you are competing with, writing an in depth detailed ad can help you stand out amongst the sea of homes for sale. Have a friend take a look at it to point out any typos or areas that need more information.
Spend the Money on the Pre-Inspection
Spend the money on a pre-inspection early on, this can save you many heartaches in the later in the process, as you have already read about here.
Be Completely Honest in Your Disclosures
If the house is going to need a new plumbing system or there’s water damage under the carpet in the basement, you need to disclose these to potential buyers—even if you don’t want to. Sellers are required by law to reveal any known defects in the property, and a failure to do so could get you into some serious legal trouble later on.
Don't Turn Down a Showing!
Say “yes” to every single showing request. Availability is just as important as marketing, since a buyer may not be willing to wait around. With FSBO, you need to jump on every opportunity that you get, which means planning your schedule around showings and not the other way around. It may not always be convenient for you, but it’s a big part of getting your home to contract.
Different Types of Offers
Cash Offers
Cash offers are offers made from a prospective buyer to purchase your property in all cash. These offers are great because they often close quicker than alternative offers, but are also often lower than other offer types. Make sure to weigh your priorities before taking a cash offer.
Rent to Own
Rent to own offers are when the prospective buyer proposes to rent the property for a predetermined amount of time, with the intent or right to purchase the property after that time has elapsed. While there are situations where this arrangement may make sense, these offers generally aren't ideal for an owner who is looking for an outright sale of their property. Once you allow a tenant within the property, it can be hard to remove them if they default on purchasing the property as previously agreed.
Conventional Financing
These are offers in which the buyer utilizes a bank or lending partner to purchase the house. They are often the most secure, highest value, and most common offer type on the real estate agent market. When they occur on the FSBO market, be aware that said lending partner or bank will likely require an appraisal to be done of the property. Make sure you are present at the appraisal to properly demonstrate and highlight your properties value. A low appraisal from the lender can disallow even the most motivated buyer to move forward with their offer
Regardless of the type of offer itself, make sure you secure earnest money that is nonrefundable to the buyer. This will help you avoid wasting time going under contract and having the buyer default with no consequence. When weighing the different types of offers above, make sure you know what is most important to you in the offer itself. Do you want the highest offer? Do you want the offer that will close the quickest? Be sure to carefully read and consider each offer you receive.
If you have an offer you're unsure of, FSBO Resource.org can review it for free and look for any common red flags.
A Warning on Wholesalers
There is a new real estate investing trend called real estate wholesaling. These buyers will make you cash offers-- without ever having the cash at all or even the intent to purchase your house.
The premise of the wholesaler is simple. They make you a cash offer for less than your house is worth, get you under contract with them, and then go out and try to find the actual cash buyer that is willing to pay more than the price that you and the wholesaler have agreed upon.
If successful in finding a buyer, they sell the contract they have with you to the actual end buyer, and profit off the middle. This can hurt your bottom line by losing an undisclosed and not agreed upon amount to a middle man for selling your house. It is not uncommon for an unsuspecting home seller to lose $25,000+ to a wholesaler.
For example. You list your house for $500,000.00. You receive a cash offer for $490,000.00 that promises to close in 30 days. You accept and sign the contract. The wholesaler then goes and attempts to assign this contract to an end buyer, taking a substantial fee in the middle.
They essentially "fix and flip" your house to a higher paying end buyer, without doing any actual improvement or ever even owning the house at all. The wholesaler sells your contract to the end buyer for $515,000.00, making $25,000.00 and you only receive the initial $490,000.00 from the original contract.
They profit off of home sellers not knowing what their house is worth, or smooth-talking home owners into a low-ball offer. Another risk of wholesalers is that they often fail to find the end buyer. When you are under contract with a wholesaler, you are unable to sell your house or accept other offers. If they fail to find an end buyer, and default out of their pre-designed no consequence contract, then you have lost time and potential offers for nothing in return.
How to Tell If You're Dealing with a Wholesaler
There a few key signs that you are dealing with a wholesaler:
Refundable Earnest Money- a wholesaler will often write an offer with the fine print stating that the earnest money is automatically refunded to the buyer upon termination. This should not be the case in a serious offer. The earnest money is designed to show that the buyer is serious about purchasing the property. Wholesalers utilize refundable earnest money so in the case that they fail to find the actual buyer, they do not lose any money, and you in turn gain nothing for your wasted time.
Open Ended Inspection Clauses- if their inspection clause allows them to terminate their contract up until the day of closing, that is likely a red flag that you are dealing with a wholesaler. They do this to extend the amount of time they have to find an end buyer, and if they fail, they can terminate the contract all the way up til the day of closing. You are then notified on the day that you believed to be selling your house, that the buyer has terminated the contract and you are back at square zero.
Assignable Contracts- if the contract has a clause that states it is to be assignable (the contract's exclusive right to buy is able to be transferred to another party), this is a good predictor that you are working with a wholesaler. Typical offers do not have a clause outlining that they are assignable to another party to purchase, as the one who wrote the offer is the intended end buyer.
Wholesaler tend to prey on FSBO Home Sellers, if you think that you might be dealing with a wholesaler, we can help!