For Sale By Owner

Thinking about selling your home on your own in Simi Valley, Moorpark, Thousand Oaks, Ventura, Camarillo, Oxnard or the San Fernando Valley?  Why would a Realtor provide information on this subject?  While I believe that there are certain people and certain instances that For Sale By Owner makes sense, I also wanted to provide information how this option on selling your home can work against you. I hope to shed some light on the reasons why For Sale By Owner can cost you Time & Money.

First and foremost, before looking at any of the savings on commissions, let’s look at some of the issues that are involved in selling your home on your own.  

1. Increased Liability of Litigation after the sale.
2. Buyer Quality
3. Increased Closing Costs
4. Marketing
5. Proper Pricing
6. Security and Personal Safety issues
7. Lost power in negotiation
8. Hidden costs

1. Increased liability of litigation after the sale.  California is the land of litigation. According to UCLA School of Law, the number of lawyers in California alone is higher than that in all 13 countries of the European Union combined. One of the reasons behind this is that many times lawsuits are settled before they go to trial.  Lawyers know this and will create lawsuits knowing these suits will end up in an easy payday (settlement). The simple fact is that money is to be made by civil litigation and everyone knows it.  Once you have been sued, you will have to pay something to get out before trial whether you are right or wrong.  You may be in the right, but may have a difficult time proving your case in a court of law. The gamble to go to trial is usually much higher than an early settlement. You should also note that you as the seller will be held to a higher accountability than that of the buyer, so the deck is stacked against you before you even get to court. Also, civil litigation has a mandatory settlement conference before the case can go to trial.  Even the Court wants you to settle the case before a hearing. What becomes difficult for those who sell their homes on their own is that there is no insurance coverage to protect these For Sale By Owners when a dispute arises after they have sold their property.  Without the insurance coverage any losses will come out of the seller’s pocket. 

I mention the litigation issue not to scare you, but to inform you on the liability issues that are involved in selling your home.  California has very tough disclosure laws for anyone selling their home and the mountain of paperwork used to address these laws is not provided by escrow and is outside scope of the duties of an escrow officer.  Escrow agents are impartial third party facilitators that hold and distribute the monies pertaining to a Real Estate transaction; they are not permitted to advise you on the sale of your property. A California Real Estate License is required for anyone advising on the sale of your property.  Lawyers of course are exempted.  This is important to understand because if you are successful in finding a buyer for your property and get into escrow, the escrow agent cannot tell you what forms you need to fulfill California Real Estate transfer laws. For example, the County of Los Angeles requires emergency earthquake shut off valves be installed for the gas meter prior to the close of escrow.  If you sold your house (in Los Angeles County) and did not comply with this requirement and that house burned down as a result of gas fire, you could be sued by the buyer and even prosecuted for manslaughter if anyone died in the fire.  There are many complex requirements that vary from County to County and if you don’t use the proper forms or leave any out, you will be left wide open for all kinds of litigation if a problem arises after the buyer takes possession of the property.  Please be aware that California is a pro consumer rights state;  this automatically puts the seller at a disadvantage in front of a judge if litigation were to arise.  Caveat Emptor or buyer beware is not a reliable defense when a buyer is putting his/her life savings into probably the largest purchase they will ever make.  

2.  Buyer Quality.  What kind of buyer is going to knock on your door?  The For Sale By Owner, Help You Sell or Save By Owner sign on your front law will attract some unwanted prospects.  First, buyers passing your home will automatically assume that your house will be 6% cheaper than any other house in the neighborhood.  They just know that 6% is the standard Real Estate Commission and also know you have opted not to use a Realtor; which cries out in flashing lights your home price will reflect a 6% discount.  Second, people will come up to your door unexpectedly assuming you will be ready to let them see your home.  Most showings occur during regular business hours, with additional showings in the early evening and weekends.  This will require you to be available on demand. If your schedule is not flexible, you may lose potential buyers because your availability is limited. Third, many buyers who have credit issues or income issues will assume you will be easier to work with than a bank and will try and convince you to sell your home, asking you to carry back the financing. They may also tie up your property in escrow only never able to obtain financing.  Fourth, you will receive many visits from investors looking for a good buy.  These investors are very shrewd business people and once they get your property tied up in escrow, they will know how to turn the tables in their favor which could cost you thousands in repairs costs or even get you to reduce the final sale price. Finally, other Real Estate Agents will view your For Sale By Owner Sign as a Help Wanted sign.  Many Real Estate Agents track the For Sale By Owner homes and after they have not sold, will visit those homes and ultimately list those homes.  90% of all homes that do not sell as For Sale By Owner are listed and sold with a traditional Real Estate Agent relationship. 

3. Increased Closing Costs.  Selling By Owner may have reduced your costs by eliminating commission, however, other closing cost may be higher as a result.  Realtors can get preferred pricing on Escrow, Title, Inspection and other fees because we work with these companies daily.  Because of the volume a good Realtor brings to these vendors, fees can be negotiated and when these companies are needed to perform, they work much faster for those who are sending them regular business.  What do you do if the Home Inspector does not show up?  Skip the inspection?  Have you protected yourself in a way that will keep you out of court?  What if the inspector gives you a list of unnecessary repairs and you agree to pay or reduce your selling price to cure the items outlined by the inspector?  Do you know how to organize all these parties in order to close your escrow in a timely manner?  Again only a licensed Real Estate agent or Attorney can advise you in this arena. Who are you going to turn to for help? 

4. Marketing.  What are your options in marketing your property?  A yard sign, newspaper advertisement, internet advertisement and word of mouth.  90% of all those who purchase a home do so represented by a Real Estate agent.  That means that 90% of all the potential buyers for your home will most likely never see your home or even know about it.  It is well known that the more exposure your home receives, the more offers you are likely to receive.  More offers mean higher prices and more quality buyers.  We all have to face the fact that Realtors use the MLS to search for recent listings when showing property to potential buyers and if your home is For Sale By Owner, your home will not be listed on the MLS.  However there are several For Sale By Owner companies that will list your home on the MLS for an additional fee (commission).  What you need to know is that these companies are operated by Real Estate Brokers and they will charge a 3% - 2.5% fee (commission) to list your home on the MLS.  They also will charge you a fee (commission) of 1% just to work with their company.  One company for example charges a flat fee of $4,950, for homes under $500,000.00, which is more than 1% if your home’s sale price is below the $500,000.00 mark.  The fee (commission) goes up on homes over $500,000.00.  So by the time you think you are avoiding using a realtor with one of these For Sale By Owner companies, you agree to pay commission to both the listing and selling offices, just to get on the MLS.  This is deceptive advertising and if these companies can’t be upfront with you on the fees, how can you expect them to be upfront with you through out the rest of the transaction.  Again, these companies lead you to believe that you will be eliminating the typical Realtor relationship while cleverly getting you to sign up for a traditional Broker/Seller contract.  Even though these companies will gain your property–limited exposure on the MLS, most agents will not show your properties.  These properties will be left off Agent showing lists because Agents are interested in being able to get their clients into houses that will close escrow.  Many times the For Sale By Owner companies will add into the MLS Broker comments that the agents needs to pay additional fees or carry out certain items of responsibility that belong to the Listing Broker.  Agents for the buyer already carry a tremendous amount of liability in each transaction and will avoid situations that could create a lawsuit for themselves or their clients. Buyer’s agents want to help get their clients in a home and they will avoid other Realtors and other companies that will create problems for their clients.  You can see directly some of the exposure I can offer on my Exposure in the Marketplace article.  This exposure is unmatched by For Sale By Owner Companies and the other Realtors in the Simi Valley, Moorpark, Thousand Oaks, Ventura, Camarillo, Oxnard and San Fernando areas.

5. Proper Pricing.  As a For Sale By Owner, how are you going to determine the highest and best value for your home?  Ask the neighbors?  Read the newspaper?  Search the internet?  Are you certain that approach is going to reflect a price that will support an appraisal?  You could hire an appraiser, but even the appraiser works directly with Real Estate Agents when determining the value of your home.  Appraisals are very dependent on recently closed sales.  Pending Sales and new listings have little to no effect on an appraisal that is acceptable to a lender.  Also once a home enters escrow, the information on that listing is no longer available on www.realtor.com or other public internet databases.  Those companies can only show active listings.  You will not be able to get the information on the closing sales price unless you work with a Realtor.   Many times homes are sold on Office Exclusives.  These Office Exclusives are usually never published on the MLS and if the appraiser is unaware of a sale like this in your neighborhood, your appraisal can come in thousands of dollars lower than what your home is really worth.  The national averages shows that the average home sold For Sale By Owner, sells for 15% below comparable homes.  The average Real Estate Commission is approximately 5%-6% which translates to For Sale By Owners loosing an additional 9%-10% in the sale price on their homes.  

6. Safety and Personal Security. When selling your home For Sale By Owner, your ability to screen the buyers for your property is nearly impossible.  Because you will get fewer showings, you will be more likely to talk to anyone who is interested in your home.  This could put you and your family alone with a stranger in your home. 

7. Lost power in negotiation. You will be dealing directly face to face with all prospective buyers who can be very direct and expect answers from you immediately.  You will have no time to think about your answers and could potential give away negotiating points you need to hang on to for later on in the transaction.  You may also give away too much information while showing your home giving the buyer leverage points to later gain an advantage.  Then there is the old business adage that says, even though you have the money to own a business, you might not be the right person to deal with the customers.  Your personality may not mesh with your potential buyer and it may not be your fault.  If this potential buyer were willing to pay you $10,000.00 more for your property than anyone else, you’d want someone representing you that could eliminate the clash of personalities and save you that $10,000.00. 

8. Hidden Fees. The phenomenon of For Sale By Owner Real Estate Companies has been interesting to watch.  They spend their entire time telling you how bad Realtors are and how to avoid using a Realtor, when they are just Realtors themselves.  What they ultimately accomplish is to get you to pay them all kinds of non-reimbursable fees to sell your home, while at the same time, they under—expose your home to the market.  While they claim to have lower fees, I was able to show you under  #4, Marketing, that their fees really are no savings in the first place. Where they turn around and get you again, is that they charge you for open houses, signs, flyers and advertisements.  These fees are due and payable whether they sell your house or not.  For instance one company charges $250.00 for each open house they run.  Also they will admit that in order to get better exposure, you should put your home on the Multiple Listing Service, but that you will have to agree to offer a 3 or 5 percent commission in order to do that.  The ½ % and 1% commission they advertise are just lost leaders, to get you to call.  

Commissions.  Commissions are negotiable.  That is about as simple as it gets.  These are three words that the For Sale By Owner companies don’t want you to know.  Some of them claim that the typical Real Estate Agent’s commission rate is 6%-7%.  While 6% commissions are still around they are generally negotiated for very particular properties.  7% commissions just don’t occur and to claim that this is typical is an out right lie. Most commissions that go out today are at 5% and for homes over $650,000.00 commission rates are in the 4.5%-5% range.  The old saying “You get what you pay for” is in order here.  If a Realtor wants to be paid 5% then they need to show you why, through marketing and the ability to put in the time necessary to service you.  They should be willing to go to your home and not ask you to go to their office. They should be able to help you solve issues related to selling your home and be available to help you when needed. Your home needs to be marketed and you can ask your Realtor how they might market your home.  Direct mail advertising and newspaper advertisements are expensive.  Direct mail is very important for open houses, but a typical open house direct mail piece can cost approximately $800.00 for each run.  The commission structure that is most common is 5% with 2.5% of the commission going to the Listing office and 2.5% to the selling office (the agent representing the buyer).  What is very important is that the Selling office is offered 2.5%.  Incentive needs to be given to get your house shown.  Real Estate Agents are very sensitive to this and the Selling Office Commission is published on the MLS.  Homes that are listed with 2.0% commission to the Selling Agent do not get the traffic that the other homes get, because 98% of all listings on the MLS are listed with a 2.5% commission.  If the Agent sees two like properties to show to their clients, they will show and try to sell the property that offers the higher commission.  This is why sometimes a 6% commission is not as bad as it is made out to be.  If you have a difficult property to sell and you really need to sell this property, then offering a higher commission will draw better results. 

In looking at the For Sale By Owner companies we know that they charge more than a 1% commission on homes listed below $500,000.00 and more than 1% commission for homes over $500,000.00.  To get your home listed on the MLS, they charge you another 2.5% plus any service fees they get you to agree to when you sign the contract.  Right off the top these companies make you think you are selling the house on your own, but in reality you are paying a minimum of 3.5% only if your home’s value is approximately $500,000.  Your buyer is going to be represented by a full service/non-discount Realtor whom you are paying 2.5% commission while the company you hired is making you do all the work and still charging you a commission. You are going to be stuck negotiating with the buyer’s agent who is dedicated to his client and very experienced which puts you at a huge disadvantage. Your For Sale By Owner company has just convinced you to pay yourself into a disadvantage that will put you on the short end of the negotiation stick. 

What does this all mean?   

Well the truth of it is that it will cost you money to sell your home.  How can you save money and stay out of trouble is a double-edged sword.  The more corners you cut, the worse shape you will be in if the transaction goes south.  A home is the biggest investment most people will ever make in their whole lives, yet they will gamble with this investment over the installation of a $16.00 smoke detector or  $300.00 seismic gas shut off valve.  There is a reason why surgeons don’t operate on themselves and attorneys do not represent themselves in court. They know better. There is a reason why the contracts and disclosures of a real estate transaction are so long and numerous and the reason is because they have been created to keep people out of civil litigation.  Real people have been sued so many times over these issues that special contracts and disclosures have been created to protect both the buyer and the seller. 

Keep in mind that selling by owner 

·     You are banking on the fact that you have the legal sense to properly fill out all mandatory contracts and disclosures.  If any of these contracts are missing or improperly filled out, you will be open for a lawsuit for many years down the road as your buyer’s time limit for filing suit is based on the date of discovery and not the day escrow closes.

·      If an agent represents your buyer, that agent will have you sign disclosures that only protect the buyer and not you the seller.  The buyer’s agent’s duty is not to you but to their client.

·        Buyers that come to For Sale By Owner homes, are generally not pre-qualified nor credit worthy.  The escrow will probably linger because of financing issues and they will be likely to come to you to carry back financing in order to assist them.

·       Pricing your home will be a gamble.  The national average shows that For Sale By Owner homes close 15% below the market and on the flip side, if you over price your home, it will be marked as unsellable and will quickly become old inventory that becomes overlooked. Without the MLS data and knowledge of the sales for the area that do not show up on the MLS, your pricing will become a guess, a big guess that will backfire.

·      Vendor Fees and service will cost more and will be harder to arrange.  Will you know how to determine which fee the buyer should pay and which fees you should pay?

·      Marketing your home will be up to you.  You will have to run all your open houses, manage all the leads and talk directly with buyers or their agents. 

·     Your pool of potential buyers will be the smallest segment of all buyers available as 90% of all buyers work with real estate agents.  Agents will be reluctant to show your home to their clients. 

 ·  For Sale By Owner companies have hidden Fees that are non reimbursable.  The costs of Open Houses, Flyers and Signs are not included in the Commission Agreement.

What can I do for you?

Service, no one can beat my service.

I come to your home.  While my office is impressive to most adults, it is not impressive to your children.  It takes time to properly go over contracts and disclosures. This process works much better when your children are at home and easy to watch.  Your children are much more comfortable with this arrangement as well.  It is a long standing American Family Tradition that family business is done at the kitchen table and what a better way to honor this tradition by working from the comfort of your own home.  Also for seniors and those unable to travel I gladly come to you.

 I prepare a Comparative Marketing Analysis that details the activity for the homes in your area along with other market trends to price your home at the highest possible value for the current market conditions.

 Walk you through the process of selling your home including escrow.

Present to you my signed 21 point Sellers Service Pledge.

Provide you with an estimate of costs to sell your home.

You will be provided with my cell phone, home phone and office phone which I can be reached 24 hours a day, 7 days a week.

Getting your home ready to sell.  I provide a 25 Point Home Preview Inspection. I will go through your home with you and show you some of the tips and tricks to make your home attractive to the widest range of buyers possible and will show you issues you can address before the buyers inspection.  Many tips and tricks will cost you nothing, but a small amount of time. This report will also help you avoid HIGH COST INSPECTION TRAPS that await the buyer's home impsector.

Maximize Your Property’s Exposure in the Marketplace. In most markets, finding qualified buyers will require more than the standard yard sign, classified ad and open house. In fact, according to The National Association of Realtors, 82% of real estate sales are the result of agent contacts through previous clients, referrals, friends, family and personal contacts. Since many sales involve out-of-town buyers, marketing a home requires exclusive connections and a strategic marketing plan.

CONTACT INFORMATION  
Keller Williams Realty
2585 Cochran Street
Simi Valley, CA 93065
(805) 432-7705 cell/text
(805) 830-0457 efax
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