With the rising popularity of selling homes by owner, have risen some misconceptions that should be straightened out to clarify the process. The first thing that we should look at is how financing works in the FSBO world. One thing that occurs more often than it should is when buyers think that "for sale by owner" means that the owner is also offering financing. Most of the time this is not the case. This error is usually seen when people with little or damaged credit feel that it is in their best interest to avoid mortgage brokers & realtors. This is a huge mistake as individuals such as mortgage brokers are experienced and trained to deal with these individuals and to help them repair their credit and obtain a favorable mortgage.
Its a good idea to seek out a mortgage company that is experienced, even specializes in the financing of FSBO sales. These companies differ from most mortgage companies in that their services are more comprehensive than most. They have expanded their offerings to include many things not usually covered by traditional mortgage companies such as closing contracts, title issues and inspections. The closing of a home contract is one of the more confusing aspects of the purchase process and should be handled by a trained professional. Also take into account that most mortgage companies rely on realtors to bring them the bulk of their business, therefore they are ill-equipped to provide educated FSBO financing. This is why its good to find a FSBO specialist mortgage company when dealing with someone who is selling their home themselves.
Another misconception deals with the fact that the buyer is saving money by dealing with an FSBO situation. The truth is that usually the seller is the one trying to save money on agent commissions. If they have subtracted the price of the agent from their asking price, it is possible to save some cash.But this is hardly ever the case. Most FSBO sellers are listing their homes at market value as if an agent was selling the home. Then they attempt to do everything themselves and pocket the cash that would normally go to the agent.
With any good piece of advice on house selling, there’s always some sort of evidence behind it that shows that it can work. “Spend two thousand dollars on gardening and you’ll increase your sale price by $15,000!" Sometimes you will. Other times you’ll just blow through $2,000 and still have to settle for below market rates on the sale. “I sold my house by auction and got $20,000 over asking!"; That person probably did just that, but did they mention what happens when the auction doesn’t fetch a high price?
The one piece of advice that we, as real estate professionals, always hear is “I’m going to try to sell it myself and save the realtor commission" – and sometimes, wouldn’t you know it, such a tactic actually works.
But other times, it doesn’t, and the homeowner is left watching the value of their home drop, while the mortgage ticks up.
So what’s the inside scoop – should you try to ‘sell by owner’? Is it worth it to save a 6% commission? The honest truth is, ‘sometimes’ - but there’s very little chance of actually figuring out when that ‘sometimes’ is going to happen.
Real estate agents do provide a valuable service for all the money they take off you. They’ll guide you through the sales process, tell you what the weaknesses in your property are, they’ll run ads for you online and in print, they’ll handle the paperwork, negotiate a price… there’s a reason they take as much cash for their time, and that’s that they’re good at what you’re not – the inside info.
Added to that, more than a few property owners have found their sale harpooned at the last moment because they didn’t have all the paperwork done, or the buyer hadn’t been properly checked out and backed out late, or the property inspection revealed something was wrong that would require big money to fix… At the same time, there are plenty of happy ‘sale by owner’ sellers for whom everything went great, but do you really want to take the chance on something going wrong… and do you really want to give all those thousands of dollars to a realtor driving a Lexus, while you’re getting by on a 14-year-old Toyota?
There is another way. More and more, home sellers who know they’re going to make a profit on their sale are deciding to forego the realtor route, as well as the ‘sale by owner’ option, and are choosing to sell instead to companies that buy properties fast, for a slightly lower price than a realtor would be looking for, and have money in your hand – today – instead of in six months time.
These companies like AsIsNow.com, look at what your property is worth – as is - give you that price for it, and then they spend the thousands of dollars and months of time, and weeks of labor and sweat, to bring the property up to its maximum value. For companies like these, they have the resources to sit on a property for months – of even years – waiting for the house to reach its potential; something that many home owners simply can’t afford to do.
So if your property price isn’t moving like you’d like it to be, and your house requires a lot of money spent to bring about a decent price in return, think about exploring that third option, and get the money you need today, so you can upgrade to a new home tomorrow.
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Both Kevin Bilberry & Kris Koonar are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.