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gpab.net
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Since November 20, 1999
Last Updated: November 03, 2007
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One Strategy for Selling a F.S.B.O.
In Canada we are very fortunate to have an orderly, structured real estate
market. Without an orderly market F.S.B.O. would be too risky for most
people.
Our Multiple Listing Service (MLS) realtors give us this orderly
market. When they sell a house that information is made available to appraisers
who then use it to provide information, to other people, on the current market value of
similar properties.
While not necessary, an estimate of value from a certified appraiser will
greatly speed up your sale, help ensure you get a fair price, the buyer
a reasonable deal, and that a mortgage can be obtained for the property.
(It happens--a buyer agrees to pay over market value, then both parties are
frustrated when the banks won't provide a mortgage!)
The appraiser does not set the value of the property--the appraiser only
reports what the market says it is worth, based on the sale of comparable
properties. This value is adjusted based on the condition of your neighborhood,
paint, roof, maintenance, rugs, purpose of the appraisal, market conditions, etc. The "Appraised Value" comes
in at a specific dollar amount, but really it is only a reasonable value--from
within a
range of values.
One Strategy for Selling by F.S.B.O.
- Obtain an appraisal (one firm is helping sponsor this web site, you can
check them out by clicking the advertisement at the top of the page).
A residential appraisal will usually cost about $175 to $200.
- Set your price--remember if you set it too high and an unwise buyer
agrees, the deal may fall apart when the bank requires an appraisal and the
buyer finds out the price was too high.
(Of course the seller may have an existing mortgage that the buyer can take
over--but there are some legalities that might come back to haunt the
seller. Its rare, but it can happen.)
Brace yourself--in all likelihood you will end up getting about 3.5% below
appraised value. Remember the buyer is not being driven around, not
receiving knowledgeable advice, and is trying to follow the market while not
getting too confused over which houses have already been seen.
Why is the buyer going through all this trouble--it's not because the
Realtors don't have enough properties to show! Its because the
Buyer is hoping to pocket the Realtor's commission!
But if you are going to give away the full 7% commission, why go F.S.B.O?
Call a Realtor, it's much easier for you and you won't mess up the
real estate market.
- Think ahead before advertising your home. The really serious F.S.B.O.
buyers follow the advertisements closely, so you can expect a flurry of
meaningful inquiries during the first week's) that you advertise. If your price
is too high, those buyers will probably not call back!
So, if you are a motivated seller with a deadline, don't set your price too
high! Consider using the appraised value and be prepared to dicker
down about 3 1/2 percent.
If you are not overly concerned or have a lot of time, you might try over
appraised value. After all it is only an estimate, and you are not in
a hurry.
If you don't ask for over appraised value, show the appraisal to potential
buyers.
- Advertise in the "For Sale By Owner" section of the
classifieds, consider listing with "For Sale by Owner" (538-1475)
and of course list with this WEB site--it's free! Tell all your friends and
co-workers that your home is for sale! Don't be shy.
- When you get an offer, remember price is not everything. Sure it may
be a few thousand lower than you expected--but if the buyer offers a date
that means you won't have to move early, put your stuff into storage, rent a
home, lose that rental damage deposit, and finally move a second time into
your new place. Well, that is worth something!
Those appliances and drapes were not included in the appraised value.
Buyers often want them, and you may not want to move them.
But, don't give 'em away!
Incidentally when you get one offer it is appropriate to complete negotiations
on it (successfully or not) before taking other offers. Having said
that, everyone has the fantasy of a bidding war over their property.
Just be careful you don't have two counter offers out at the same
time! There are legalities involved.
- When you accept an offer:
- write up a temporary contract immediately--so both parties know
what has been agreed to (be sure to show the price, appliances etc.
included, and a date the
sale will be completed.) (An informal contract can be found
on this web site.)
- Take an initial deposit immediately. $1,000 to $5,000 is often
used, but warn your buyer that lawyers will likely want more when the
contract is prepared.
- Don't cash the deposit--the lawyer will hold it.
- Agree on a lawyer you can both see within a week to write up a formal
binding contract. One option is to share the lawyer to save on
disbursements (legal expenses). The down side is if the deal goes
bad--you will both probably end up looking for your own lawyers.
Don't even think of doing a real estate deal without a lawyer! The
lawyer will set out the fees for both parties. The buyer usually
pays more since there is a mortgage to be registered.
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