Selling your home is rewarding and can be difficult. But our tips for selling your home will simplify the process. Once you’ve received a ratified purchase contract, start with negotiating commission and then focus on resolving contingencies in a timely manner. The process is complex, but if necessary you can hire an agent with “a la carte” services to help out. Be aware that in some states, you also may need an attorney to handle certain documents.
Tips Selling Your Own Home
Selling a home is not an easy task, especially if you’re selling your own home without an agent. Known as For Sale By Owner, FSBO is the route you can take to sell your home without the representation of a broker. Although listing agents bring value to the transaction, many sellers choose to sell without representation for several reasons.
First, without a listing agent, you can save upwards of 3-5% on your final purchase price by only paying a commission to the buyer’s agent. You also potentially understand the nuances of your home and neighborhood better than a local agent so you may be better suited to marketing your home. Lastly, despite all the complexities surrounding real estate, you do not need a real estate license, nor do you have to hire a real estate agent, in order to sell your own home.
Although nearly 90% of home sellers choose to work with a real estate agent, it is possible to have a successful FSBO transaction. One of the most difficult aspects of an FSBO transaction is negotiating the offer. To help you at the negotiating table, we put together a few quick tips on how to handle an offer negotiation with the buyer’s agent.
Understanding the Buyer’s Offer
Depending on market conditions, the potential buyer will come pre-approved for the mortgage, with an earnest money deposit, and an offer to purchase with agent representation. Due to regional legal complexities, offer letters will vary by state, including the language used in the purchase contract. In order to read an offer letter accurately, it’s strongly suggested you hire a real estate agent or attorney just to review and provide counsel on each offer.
For Sale By Owner Tip: Entering mutual acceptance does not guarantee a close, as this is not the final stage in the home buying process. Don’t feel pressured to continue negotiating.
If you like the buyer’s terms and accept the offer, you and the buyer enter into mutual acceptance: you will receive a ratified offer (often referred to as the ‘Purchase and Sale’ agreement), escrow will open so earnest money can be deposited, a preliminary title report will be ordered, and title research to uncover liens will begin. All contingency periods start now.
The buyer will also have access to your disclosure packet as well as the buyer’s independent inspection report. This is the opportunity for you and the buyer’s agent to negotiate based on the inspection findings, within the timelines of the buyer’s contingencies.
Tips for Negotiating with the Buyer’s Agent
Settle on commission first. Your first plan of action should be to agree to the buyer’s agent commission or finder’s fee. You should be willing to pay the buyer’s agent for his services representing the buyer. In a traditional scenario, the listing agent will negotiate the commission split, and usually, the buyer’s agent will take 60% of the determined commission percentage. Without a listing agent, typically you will pay 2.5% to 3% to the buyer’s agent.
Limit your contract period. When you accept an offer, ensure all normal contingencies are in place. For example, the financial contingency should only grant the buyer a limited amount of time to secure a pre-approval on a loan. In addition, make sure the buyer’s agent is actively representing a buyer. You don’t want a situation where the buyer’s agent and you are tied into a contract allowing the agent to find new buyers if the current ones back out.
Ask questions. Always keep the buyer’s agent on top of their client’s status. You and the buyer’s agent have a contractual obligation to ensure all contingencies are met on time. Even before accepting an offer, you should ask each potential buyer’s agent how their client plans on paying for your home when they are looking to move in, and why they are specifically interested in your house. It is very important you remain diligent during this process. If a certain contingency is not resolved by its agreed due date, the buyer can legally back out of the deal with their earnest money returned in full.
Leverage a real estate attorney. Even if your state does not require an attorney to handle real estate contracts, once you’ve received the ratified purchase contract, have an attorney review each document and offer counsel. In addition, it’s advantageous to sign in the presence of a lawyer or a neutral 3rd party witness.
You don’t need a full-service agent. Most brokers offer “a la carte” seller’s packages. You can hire an agent to represent your side of the transaction just for negotiating and reading offers. This de facto listing agent will negotiate with the buyer’s agent on price and any immediate repairs or contingencies they request on your behalf.
Due diligence. When negotiating with a buyer’s agent, make sure you stay on top of every contingency, resolving each in a timely manner (or else the buyer can safely back out of the deal). The most challenging contingencies will be related to the inspection report, so it’s a good idea to hire an inspector and make the necessary repairs before fielding offers.
Although you will save on commissions, you might want to leave this stage of the home selling process to the professionals. Real estate is a complex industry with legal and logistic hurdles. Selling a home is not an easy task, especially if you’re selling your own home without an agent. Although there is no law requiring you to use an agent or hold a real estate license to sell your own home, many sellers hire an agent to handle contracts at the very least. (Keep in mind that you may need an attorney to handle certain documents based on what state the home is in.) Remember, if you feel you need the help, you can hire an agent with “a la carte” services.