The Basics of Selling Your Home
Like buying a new home, selling your home can be an emotional and complex process. You can use a real estate agent to help or you can try to sell it yourself which is called an FSBO — For Sale By Owner — transaction.
An FSBO transaction involves more of your personal time. You will have to show the home to prospective buyers and handle the entire marketing effort. An FSBO usually requires more than merely sprucing up your home and putting a ‘For Sale’ sign in the front yard. If you decide to sell on your own, consider doing the following:
- Order an appraisal of your home’s market value. You can find an appraiser through such organizations as the Appraisal Institute. A residential appraisal generally costs between $250 and $500.
- Circulate an ad flyer with a photo and description of your home’s attributes, address and phone number.
- Advertise in your local paper. A home that is being sold as a FSBO attracts buyers hoping for a lower price that comes with cutting out the real estate commission. Potential buyers will reason that, since you’re saving as much as 6% of the home sale price by selling your home yourself, you’re likely to be willing to negotiate a lower sale price.
Hard work, patience, and previous experience selling your own home may pay off. Other attributes certainly help, such as whether your home is located in a desirable neighborhood.
If you use a real estate agent or broker, your home usually is listed in a multiple listing service. An MLS listing helps to advertise your home to a wide audience. Agents also use an informal network of agents to pass along listings by word of mouth. (Note: You may have heard real estate agents referred to as ‘Realtors.’ ‘Realtor’ is a trademark-protected name and may only be used by agents that are licensed members of the National Association of Realtors).
A real estate agent provides many valuable services, including:
- Recommends a sale price that is based on comparable sales. Comparable-sales data are published in the newspaper and elsewhere, but a real estate agent is generally able to compile it quicker.
- Locates and pre-qualifies potential borrowers and introduces them to mortgage brokers and lenders.
- Handles all stages of negotiations between buyer and seller.
- Introduces you to appraisers or inspectors.
- Steers you through the loan-closing process
To find an agent, consider asking friends, family members, or acquaintances for referrals. An agent should demonstrate knowledge of the local real estate market and have an established record of selling homes. The agent should be able to tell you how long they have sold real estate, what credentials they have and whether they work full or part-time.
Once you select an agent, have them prepare a listing agreement. A listing agreement is usually good for three to six months. You may want to include a provision in the agreement that lets you cancel the agreement if you feel little effort has been made in selling your home.
Some agents may ask for an exclusive listing to sell your home, which means that only they can show your home. You should evaluate such a request carefully. Naturally, an exclusive listing gives an agent an added financial incentive to sell. However, an exclusive listing denies other agents the chance to sell your home at the same time.
An open listing is the opposite of an exclusive listing. An open listing adds your home to the multiple listing service and provides the most exposure to potential buyers. Ask your agent to explain other alternatives for listing your home. In general, the wider the exposure to all homebuyers, the better off you are.
Once you have found a buyer, you will prepare a sales contract. Depending on the state that you live in, drafting a sales contract may require a lawyer. Agents often help with this stage of the selling process by ensuring that all important terms and conditions are included in the contract.
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