Many people are under the mistaken impression that all one has to do to sell a property is find a buyer who is ready, willing and able to buy. Finding the buyer for a property in today’s market is only half of the battle. Once a buyer is found, the job is far from over. The other half of the battle is making sure that the deal does not fall apart due to unforeseen circumstances before it gets to the closing table. Sometimes that is not as easy to do as it sounds.
All over the country, there are home owners who are “underwater,” meaning that they owe more on the mortgage than the home is currently worth. Even if the property still has equity in it, the falling prices on real estate have eaten up much of the profit that the seller expected to enjoy when selling his home. Because of this, many sellers decide to try the “for sale by owner” (FSBO) route. Though saving money is at the root of this decision, there are many issues to consider. In a buyer’s market, where the inventory of houses exceeds the demand — and that is the vast majority of markets right now — it pays to have a real estate agent.
If the seller’s home is “underwater,” there are remedies that may be available. Many sellers are unaware that some lenders, in certain circumstances, accept a “short sale.” That is where the bank agrees to take less for the property than the seller owes for it. The bank also agrees on a commission fee for the agent. While many homes are currently being sold by short sale, it is a time consuming process and not for all buyers. The process is tedious and the lender approval can take up to several months to obtain. If the seller needs to make a short sale, an agent who is experienced in short sales can save the seller a lot of frustration. A short sale can be so aggravating that even some agents do not want to do them, though the commission offered by the lender is usually decent. An agent who is experienced in short sales — and there are many who are trained in this area — can help the seller through the process.
Sellers who are selling their properties by owner need to be concerned about at least some of the laws that govern the sale and purchase of real estate, along with liability. Most sellers are not familiar with the laws and procedures that will help to protect them from future lawsuits. The seller also has to involve himself with security, advertising, contracts, negotiation, tails, the lender and the title company or closing agent.
Where Are the Buyers?
Many sellers put the “for sale by owner” sign in the yard and just sit back and wait for them to line up at the door. Letting potential buyers know the property is for sale is essential to actually getting an offer. The most recent survey conducted by the National Association of Realtorsat 85% of the buyers start their search for property on the internet. That figure has been rising yearly. What is the seller’s plan to reach those buyers? Without a clear cut plan, the seller may want to rethink his decision.
The potential exposure that the property gets on websites like Realtor.com (the official consumer website of the National Association of Realtors) is fantastic. Every buyer, no matter where he is in the world, has access to your Multiple Listing Service (MLS) © listing if he is looking for property in your area and in your price range. In addition to Realtor.com, most real estate brokerage firms — and many agents — also have a website offering MLS search access so that buyers may find the seller’s listing. In effect, by using a Realtor ©, the listing ends up being accessible on thousands of websites all over the country.
In Pinellas County, Florida — and probably many more areas across the country — our local association, Pinellas Realtor Organization (PRO) has a wonderful service for its agents to utilize called Listingbook. Almost every real estate agent in the county has a pool of buyers who are looking for properties with certain features and price ranges. Each time a new property comes on the market that matches what their buyers are looking for, the buyers automatically get a Listingbook report emailed to them featuring those new listings. This gives the seller’s property immediate exposure to the only large targeted group listing of high potential buyers available. Check to see if your local Realtor has something like this to offer.
Buyers Knocking at the Door — Literally
Security is a major concern for everyone today. Remember, the buyer has to actually come into the home before making a decision to purchase. How does the seller plan to qualify that his potential buyer is legitimate when calling to make an appointment? Even professional real estate agents have been fooled — and have been assaulted and even murdered by robbers masquerading as buyers. A good security plan is essential for the homeowner allowing strangers in to view his property.
A “for sale by owner” sign in the yard is like a personal invitation for the buyer to knock on the door. An eager seller answers, happy to have a potential buyer at the door. A professional real estate sign, on the other hand, essentially tells the potential buyer to contact the brokerage firm or real estate agent if he wants to see the property. For homeowners who have teenage children at home alone after school or in the evenings, this is a big decision to make.
It is difficult to control a group of people who come to view the property. A seller is wise to check all windows and doors after the group has left to make sure they remain locked. All valuables should be out of sight and prescription medicines should be stowed safely away. In today’s litigious society, imagine the seller’s liability if prescription medicine were stolen by the teen of a potential buyer or even worse, a weapon. At all times, the seller needs to think of liability and security issues when selling his property, whether the seller attempts to sell the home himself or uses a licensed real estate professional.
A seller can get into hot water by allowing showings only to certain people. The owner has to be prepared to accept potential buyers of all races, color, national origin, religion, sex, family status, or disabilities to view his home upon request. To decline is to violate the Fair Housing laws that govern our country, setting the seller up for a potential lawsuit.
Is Your Home Open for the Business of Selling It?
What about the availability of the property to be shown? Many homeowners work, leaving the business of selling their home “closed” for a large majority of the weekday. While sellers may think that showing homes is a weekend activity, many buyers are out looking every day of the week. Do you want to pass up potential buyers? By using a licensed professional to market your home, the business of selling your home is open for business. If the home is not available when the buyer is, the seller has lost a potential buyer.
New electronic key boxes, like the ones used by real estate agents in Pinellas County, Florida have built-in security features. The box is accessible by using an electronic key issued only to registered and licensed Realtors in the area. The key box can send data to the agent that lets him know who has accessed the box and the date and time of the entry. These boxes can also be programmed to allow access only after or during certain hours, protecting the privacy of the homeowner. Many Realtor associations across the country are using these types of key boxes today.
Navigating the Shark Infested Waters
Non-disclosure is other major lawsuit waiting to happen. Professional agents are required to have the seller fill out a comprehensive form that covers every aspect of the property. The seller signs this property disclosure to attest that the form is true to the best of his knowledge. Disclosing any problems with the property such as that the toilet backs up and especially, that there ever been a water leak are imperative for the seller to disclose. Potential mold, or the knowledge of actual mold, has become an issue in many sales transactions — and the basis for many lawsuits.
Only the property owners that are listed on the title may sell the home without a licensed professional. Offering a neighbor or grown child money to help with the sale violates the laws in most (and probably all) states. This is called “acting as a real estate agent without a license.” There are actual penalties, both financial and penal, for this offense. If the sellers must rely on others to help with the sale, a call to a licensed professional may be in order. For those who think that prosecution is for the big guys, there is plenty of evidence to prove otherwise.
Accepting the Offer — Did You Choose Wisely?
Does the seller really know how to ascertain whether the offer and/or the buyer is a good one? Making an “acceptable” purchase offer is much more than about the money the buyer agrees to pay for the property. The down payment, the financing, lender approval, closing date, repair provisions and other “contingencies,” (exceptions to the contract such as the buyer selling his own property) can be just as important. All of these items must be weighed together to determine whether the buyer is a good one.
What type of contract does the seller plan to use? This question needs to be answered long before the first buyer knocks at the door. Professional real estate contracts, developed by the state association boards of Realtors have been tried and tested. These contracts do protect the interests of both the buyer and the seller. They outline the duties and the responsibilities of both parties. A good contract is essential to the successful sale of real property
Contract negotiations can be very harrowing when the seller is left to deal with it himself. Even with agents, many sellers make the mistake of refusing to counter “ridiculous” lowball offers. The reason is that the seller has an emotional and financial stake in those negotiations. To successfully negotiate, feelings and emotions need to be far removed from the table. Often, the beloved property is disparaged and picked apart to justify purchase offers and can be hurtful to the proud property owner. Can the seller overcome his emotional stake in the property in order to come to a successful agreement? It is vital to a smooth sale that negotiations are handled calmly and rationally
The Fun is Just Beginning
Once the purchase offer has been agreed upon and signed by both parties, the offer then becomes a legal and binding contract. A real estate contract has a specific beginning and ending period. The contract contains certain deadlines that must be met in order for the contract to remain valid, unless written agreement is made between both parties that then become part of the contract. A seller who is uncomfortable or unfamiliar with contracts should always contact an experienced professional.
How is the deposit, also called escrow or earnest money, to be handled? Many lawsuits are filed over earnest money deposits. Of course, the law is very clear on how the money is handled when using a licensed real estate sales agent. The terms of the contract must dictate how the money is supposed to be dispersed in the event that the sale does not go through. Many lawsuits are filed over the deposit.
Those Pesky Details
Most real estate contracts contain contingencies. Contingencies are certain clauses of the contract which allow either party to withdraw if certain conditions are not met. Due to problems that arise with contingencies, the seller and the buyer often have to renegotiate — sometimes several times during the contract period — in order to move forward with the sale. These issues can be stressful for both the buyer and the seller.
During the contract period, the real estate agent is busy working for the seller attending home and termite inspections and often the appraisal. By keeping track of the fine details of the contract, the agent helps to keep the sale on track, resulting in the successful sale of the seller’s property. The agent keeps in contact with the buyer or buyer’s agent and keeps in contact with the buyer’s lender to make sure his financing is on track. The financing contingency is usually valid until the closing, or sale date, making attention to this particular detail a must. The agent also makes sure that all other paperwork has been taken care of like delivery of condo documents, if applicable, property survey arranged or completed, possibly arranging repairs and estimates for the homeowner, and coordinating with the title company for the closing, which the agent attends. Occasionally there are conflicts at the closing that arise which require the agent’s presence and negotiating skills.
Still Up for the Challenge?
There is a lot more to selling a house than finding a buyer. Of course, there are a few sellers that are up for the challenge. Still, most sellers soon give up after finding out just how difficult it is to sell property on their own. Using a professional licensed real estate agent is only smart business sense. If you are selling, consider a call to your local Realtor today. You will be glad you did.