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For Sale by Owner: How to Do It Successfully
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Rules of Disclosure
There are property defects that must be disclosed or you can be held liable. Liability can stem from intentional misrepresentation, concealment, negligent misrepresentation or non-disclosure. The majority of cases that go against the seller involve failure to disclose or misrepresentation of the following:
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No building permit
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Leaks, even those which are fixed
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Boundary lines
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Pet urine contamination
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Excessive settling
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Lead-based paint
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Asbestos
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Buried toxic waste
ant to make several thousand dollars extra the next time you sell your house? Do it yourself.
This isn't advice that real estate brokers will embrace, but you can sell your house for less and still make a bigger profit if you sell it yourself. A typical real estate broker charges a 6 percent to 8 percent commission, which equals $12,000 to $16,000 on a $200,000 home. Split the difference with your would-be buyer and both of you come out ahead.
Be forewarned. Doing a For Sale By Owner (FSBO, pronounced Fisbo) isn't easy. There are reasons that brokers get their commissions. Brokers bring a lot to the table. They save you time, get you leads and keep emotional distance between you and the transaction.
If you think you can handle it, here is a step-by-step guide for what you need to do.
Prepare your home for "showing"
Create a set-up, which describes the property in detail and lays out some of the basics: taxes, asking price and person to contact. It should include a floor plan with complete dimensions, information on easements and a press kit on your neighborhood. Many set-ups also include illustrations of the home, but not actual photos.
Make a decision as to the hours you will show the home, and provide a key to someone you trust who can show it for you in a pinch. Gather appliance warranties. Know the average yearly utility costs. Have a checklist of what personal property stays and goes with a price for each item you're willing to sell. Have in mind what you're willing to fix or how much of a discount you'll offer in lieu of repair.
Before you set a price, check out the prices of other homes in your neighborhood. You can do it right on the Web through ConsumerInfo.com, which allows you to request the reports online. Or you can save yourself the small fee by going to your local county courthouse and looking up the transactions yourself.
Pretend to be a buyer looking for similar property. Read the advertisements they would read. Go into at least three real estate offices and see what they have listed that is similar to your property. For unusual properties, get a paid appraisal from a member of the National Association of Real Estate Appraisers.
How to sell
You'll need to advertise. Yes, you need a sign in the front of the yard with a phone number. You'll also need to advertise either in your region's largest newspaper (Saturdays and Sundays are the best) and/or some of the local real estate property publications. Keep your description short, listing number of bedrooms, baths and any special qualities the home may have (such as hardwood floors, a kitchen with an island or a vaulted ceiling). Typically, you should include your opening price. And don't forget the Web.
Most sellers spend their precious few moments with lookers, telling them about the property or else standing stone still while the lookers peer into their closets.
Here's a better idea. As you walk through the house with a looker, make the journey intimate. Tell about how you've used various parts of the house.
Find out what they want, why they need to buy, when they need to close and if they need financing. Pretend that you're their agent, with their best interests in mind. What's their hot button? If you're truly interested, you can show them how your property meets their needs.
You can make a lot of extra money by referring uninterested lookers to another owner/seller, or a broker that will be grateful for the referral. Every looker is a lead for someone else. If you're sure that they won't buy your property, ask permission to have another seller call them. Make a business arrangement with brokers and competitors as soon as you start to see lookers.
Hold an open house the right way
Instead of having a traditional open house where brokers, voyeurs and real buyers all traipse in and out, hold an "appointment only" open house. Start early and end late. Schedule an appointment every 20 minutes. Use the 20 minutes to interview the prospects and show the house. Have family members participate.
Set it up as you would a formal house tour. Select a traffic pattern designed to show off the best "flow" of the space. Save the best part of the house for last. That's what they'll remember.
Give each potential buyer a period of time, about two hours, when you will be in the next day to answer questions and accept bids. Be prepared to help with financing.
Three types of arrangements work best for sellers:
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You could offer a "purchase money mortgage." In essence, you're the loan officer. This tool allows buyers who may not qualify or may be low on the cash needed for a down payment to buy your home. Offer this alternative for the amount that will still yield you the cash you hoped to get out of the sale. If your property is hard to sell but you need the cash, structure the mortgage so that you can resell the mortgage at a discount in the secondary market. The key is to be sure the buyers pay the going rate or better, and that they have at least 20 percent of their own money in the deal.
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Offer to pay the closing costs. Many buyers, particularly first-time buyers who don't have a lot of cash, can't make that big lump-sum payment at closing. As the seller, you can pay the points, attorney's fees and other closing costs. You can deduct those costs on your taxes and you typically can insist on a price higher than your minimum.
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Offer a "wrap." A wraparound mortgage allows you to keep an existing low interest rate loan, and take back a higher-rate loan that equals the outstanding amount plus more. For example, if you still owe $50,000 at 6 percent on a home you sell for $150,000, take back a mortgage of $100,000 at 8 percent. Pocket the $50,000 and get payments on the rest at a rate 2 percentage points higher than you're paying.
Be sure that the buyer pays incidentals such as taxes and insurance and the amount is held in escrow to cover the cost each year.
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Consider a lease with option to purchase. If you can't find a buyer, rent and apply a percentage of the monthly payment to the purchase price. Lock in the price at the date of the lease. Give the renter a limited lease and a definite option period. After that, the right to buy at that price expires, as does the price reduction.
Negotiating the deal
Never be insulted by an offer. Inexperienced buyers may not know what's too low. Know your final price and stay with it unless you're under severe pressure. But don't go down to your final price without a minimum of three " rounds." Your asking price, the buyer's first offer and your counter offer equals one round.
Be sure you have already done a credit check on bidders, or you may be wasting your time. After the price is settled, agree on a closing date, what items stay in the home, number of days to get out of the contract without penalty after an inspection and the financing clause. Everything is negotiable. In a seller's market, you may require the buyer to inspect without a contract, and take the property as is.
Pay attention to the contract
You should always receive a copy of the contract before the closing. Read it carefully. Sellers typically don't have to hire lawyers. If you don't hire one, the burden is on you to make sure everything in the contract is accurate and any last-minute expenses do not surprise you. Otherwise, you could end up paying for the buyer's homeowner's insurance, or agreeing to closing costs that you didn't anticipate.
Don't stop selling until it's sold
A buyer can always back out. Some may be willing to lose a down payment or earnest money, but you lose too. You lost the sale. Even after a contract is signed, take backup offers. Drop any expensive advertising, but retain all other avenues. Continue to show the house to enthusiastic lookers who know the contract is signed.
Finally, keep your buyers happy. Don't drop the smile as soon as they sign a contract. Give them reasonable access to your home to prepare for the move, and offer advice and tips. 
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