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October 16, 2017

How We Saved $27,000 Selling Our House

As we've previously reported, we moved several months ago. That involved buying a new house and selling our old one. For the purchase of our new house, we used a realtor. We didn't necessarily want to, but as the buyer, there's not much incentive not to use one*. However, for the sale of our home, there was potentially lots to gain (or save, really) by not using a realtor, so we decided to go it alone and sell the house ourselves. Read on to learn how that went.

There are some drawbacks to a For Sale by Owner, like having to do "all the work" yourself (there isn't actually much to do) and realtors like to say your house will sell faster and for more money if you use a realtor, but that claim is highly questionable. Honestly, the worst part of selling the house ourselves was having to deal with all the sleazy realtors** that contacted us.

Did we really save over $27,000?
I'm sure many of you are questioning if we actually saved that much money, and the answer truly is yes, we did.

In our area, the standard commission for realtors is 5% of the purchase price (2.5% for the listing agent and 2.5% for the buyer's agent). We had no listing agent and we negotiated the buyer's agent down to 2%, so we saved 3%. Our house sold for over $900,000 and 3% of that is $27,000.

Selling the house ourselves was a little stressful, but it wasn't really very hard. It was definitely worth the effort, and was honestly the easiest $27,000 I've ever made.

So, how did we sell our house ourselves?
We Got Lucky
I'd like to tell you we are real estate geniuses, but the truth is we got lucky. We were lucky we happened to be in the market for a house in 2012 when prices pretty much bottomed out and we were lucky to be selling recently, in a red-hot market where prices are high. It didn't take a whole lot of real estate mastery to sell for a nice profit. Had we been in a cooler market, who knows how things would have gone and if a realtor would have been helpful.

We Bought a Good House
We were very particular when we bought our house. It had to be in a good location, on a good sized lot, and it had to have a good floor plan. These are things that made living in the house more pleasant but also made it a lot easier to sell.

Our house wasn't perfect, but most of it's problems were relatively easy to fix. The items listed above are very difficult or even impossible to fix, so it's important to pick your house wisely.

We Fixed It Up
One of most important things we did to sell our house was fix it up. In the almost five years we owned the house we completed literally hundreds of home improvement projects (almost all ourselves), making it much more desirable. We spent about $40,000 on all our projects, but we definitely got our money back when we sold.

Here's a few examples of projects we completed:
New Fence

New Paint

New Roof

New Skylights

Refinished All Interior Doors

Refinished Front Doors

Solar Panels

Upgraded Guest Bath

Upgraded Master Bath

Renovated Kitchen

We Educated Ourselves
Before trying to sell our house, we made sure we had a good understanding of the whole process. That understanding came from multiple sources. First, we paid close attention when we bought the house, and our realtor at that time was awesome about walking us through everything to make sure we knew exactly what we were doing. It wasn't difficult to basically repeat that process ourselves when selling.

Second, Chrissy worked for several years in a mortgage broker's office, so not only did she have some first-hand experience with the loan/inspection/appraisal process, she also had multiple contacts in the industry to bounce questions off of when we couldn't find the answers elsewhere.

The third source was the internet, however, we weren't able to find any one website that was super helpful. That's partially why we created this post

Finally, we bought the electronic version of this book, which had more information that we knew what to do with.

We Photographed It
Unlike a lot of realtors, we knew that providing a sufficient number of high-quality photos in our listing would generate more interest in our house. Therefore, we had my coworker, who is a photography enthusiast, come take pictures of the house using his fancy camera, lenses, and lighting. It was a great decision because he was able to produce wonderful photos that made our listing look fantastic.

Here's a comparison between a cell phone photo I took of our bedroom (quite a while ago) and the quality photo my coworker took for our listing:

We Listed It
So the stars aligned and we were in a hot market with a great house that was lovingly updated. How did we actually sell it?

We used a flat fee listing service*** that charged $300 and posted our house to the realtor-only Multiple Listing Service (MLS). All the other realty websites like Zillow, Trulia, Redfin, etc., pull their listings from MLS, so that got our house all over the internet. All we had to do was pay the company and fill out a long form with lots of information about our house. We had some questions, but the listing company was really helpful and got us answers for everything.

We also created a professional looking flyer and printed a bunch in color to hand out to people who toured the house and even more in black and white to keep out front in a flyer box. On the flyer we included the price in big bold print because we hate it when realtors don't include the price on their flyers. We also included a floor plan of the house so people would know what it was like.

Finally, we bought a tasteful "For Sale By Owner" sign to put in our front yard. The stand that came with the sign was pretty chintzy, so we bought a nicer one to go with it. On that sign we mounted the flyer box, and made sure to keep it stocked.

One of the hardest things we had to do when listing our house was decide on a price. We did a lot of research on comparable homes in the area and ultimately decided to price it a little high in light of the quality of our house and the hot market we were in. This proved to be a good decision.

We Showed It
When we listed the house in MLS we were able to include dates for open houses. Those dates were picked up by all the other websites, so we barely had to do anything as far as advertising. We did buy some "Open House" signs and post them on the day of our open houses. Between those and the internet listings, we got quite a bit of traffic, despite the fact that our first open house was during LA's biggest rainstorm in recent memory.

One helpful thing we did was have longer hours than the standard open house. We noticed that most open houses are from 1-4 PM, which seemed pretty restricting to us, so we did ours from 10 AM to 4 PM.

One final piece of open house advice we stumbled upon is to turn on every light during the open house. It doesn't matter if it's bright and sunny outside, turn the lights on. Having them on makes the house look brighter and more inviting, which will make people more inclined to buy it. Trust us; it works.

We Got Offers
After getting good traffic in our open house we received multiple offers above the asking price in the following days. The offers were generally emailed to us along with a phone call from the realtor.

We Negotiated
Since we had multiple offers, we asked each buyer to come back with their "best and final offer." This isn't something we really liked doing, because we know that's not a fun situation for the buyer, but this transaction would have a big impact on our financial future, so we had to be a little dispassionate and get the most we could.

We Accepted an Offer
When we got everyone's best offer we did the logical thing and accepted the highest one.

We Completed Lots of Forms
As you would expect, there is a significant amount of paperwork required to sell a home, especially in California. We personally believe lots of it is unnecessary, and only perpetuated by the real estate industry to try to justify their existence.

One form that is reasonable is the seller's disclosure document. That is basically a form where we listed all the problems with the house. We believed it was important to be honest and listed every issue with the house that we could think of, even if they were relatively minor. That is in stark contrast to when we bought the house and they listed nothing whatsoever on the disclosure form, even though there were far more problems back then.

While there are a number of legally required documents, the exact format of most of them doesn't matter, but the realtors we worked with basically demanded the official California Association of Realtors (CAR) forms. We aren't realtors, so we don't have access to those forms. However, the company that listed our house on MLS was happy to provide them for us.

We Opened Escrow
Once we had all the necessary paperwork ready, we opened escrow. We wanted to be agreeable so we let the buyer's agent select the escrow company (they often receive a kickback if they can steer business to the escrow company). We did, however, negotiate a 10% discount on the escrow fees.

We Got a Pest Inspection
A pest inspection is legally required in California, and it is customary for the seller to pay to repair any issues found. Our inspectors found a decent amount of damage from before we owned the house (the previous owners fumigated the house when we bought it, but their shady pest company didn't bother pointing out or repairing any of the damage the termites did). We paid for the termite damage to be repaired and I replaced an exterior door that had water damage.

The Buyers Got a Home Inspection
We had the pleasure of getting the world's most critical home inspector, but the inspection report wasn't actually too bad. There were a number of issues identified, but most of them were relatively minor and things we already knew about. The buyers still freaked out a little and asked us to give them about $15,000 for repairs that weren't really necessary (I will again contrast that to when we bought the house and it was in much worse condition, we asked for nothing).

There's a somewhat long and complicated backstory that I won't go into, but according to real estate norms, the buyers really shouldn't have asked for any money at this point. I don't blame the buyers because this was their first house, so they didn't know any better, but their realtor did, and he still had the nerve to ask us for an unreasonable amount of money for repairs. This was one of many times that realtors acted outside the norm to try to take advantage of us. Luckily, we knew what we were doing so we didn't stand for any of it. However, if you try to sell your house, make sure you understand the process so no shady realtors can take advantage of you. There are way too many realtors that will try to pull something on you as an FSBO.

We eventually agreed to give them about a fifth of what they were asking for. We didn't really want to give them anything, but we decided to show a little goodwill to avoid blowing up the deal at the last minute.

The Buyers Got an Appraisal
"It will never appraise; it will never appraise." This is what the buyer's agent said about our house, in reference to the price his clients agreed to pay for it. I'm happy to report, it did appraise for the full value of their offer, further proving real estate "professionals" don't always know what they're talking about.

We were a little nervous about it appraising for enough, so we created an information sheet for the appraiser that listed all the things we did to improve the house along with some of the intangible things that made our house better than a lot of the "comps," like the great floor plan, large lot, and great location. We can't be sure if that sheet made any difference, but it certainly didn't hurt.

We Closed
Once the buyers locked down their financing, we finished up all the paperwork with the escrow company. After that, the buyers gave the money to escrow and ownership was transferred.

We Got Paid
This is the most critical step. Once the escrow company had the buyer's money, they took their fee and paid anyone else who had a claim (including the buyer's agent, unfortunately) and gave us the rest.

In Conclusion
We sold our house ourselves for above the asking price. We saved over $27,000 by not using a realtor and it wasn't very hard or even a lot of work.

We highly recommend trying a For Sale By Owner if you're selling your house, especially if you're in a hot market. The worst thing that can happen is you don't sell it and have to get a realtor.

Let me know if you've got any questions about the "For Sale By Owner" process, or have a good story about a home sale in the comments.

*Since the seller pays the realtors involved in the sale of a house, there's little reason not to use one as the buyer, unless you are buying from an extremely reasonable seller (a rarity) who would be willing to drop the price in exchange for you not using a realtor.
**This post may come off a little negative toward realtors, but we know a number of great, honest people who are realtors and would never take advantage of anyone, however, not all realtors are created equal, and some are truly smarmy.
***We used They worked out great, but I'm sure most of the others out there are fine.

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