Selling My First Home
Yes, I suppose I'm stingy. I like to get the best deals on everything. Perhaps it's a little unhealthy. I feel sorry for my wife who has to deal with me! Recently, we sold our house and I was equally anxious to get a good deal on the sale of our home as I am with my other financial transactions. Here is my experience for your enjoyment...
We had been getting some interest in our home from friends-of-our-friends, so we (my wife and I) thought we would try to sell our home "For Sale By Owner" to avoid having to pay those expensive realtor commissions. Commissions typically run 6% of the sales price (3% for buyer's agent plus 3% for the listing/sellers agent). The commissions are almost always paid for by the seller. If we sold our house for 180k then that would be a commission of $10,800. That's not small, and many homes are sold for much higher and therefore those commission numbers go even higher up.
We thought we would try saving ourselves some money and our future buyers some money by listing it without any agents at a slightly lower price then market value.
Here are the steps I took to sell my home:
Step #1: Determine the value of your home.
This may be the most important step.
You can do this in a couple of different ways. You can get an appraisal for $200-$400 that will give you an idea of what your home is worth. The nice thing about doing this is that it will include upgrades your home might have. The other nice thing about this is that you can use this appraisal to validate your pricing for your potential buyers (and it will give you confidence in your asking price).
However, in the end, it may not matter what the appraisal says. What matters most is what the current real estate market is saying. So the preferred way of determining your home value is by getting a Comparative Market Analysis (CMA).
You can research this yourself by looking up comparable homes near you and seeing what similar homes have sold for and what the asking price is of similar homes currently on the market are. You can use websites like Zillow.com and Realtor.com to find out some of this information.
The more accurate way of getting a CMA is to have a real estate agent do one for you. They have access to more accurate and up-to-date information than what you have access to. Almost all agents will do this for you for free. Just google "Free CMA in....(your area)" and you'll probably come across some websites that will get you started or contact an agent to get one done for you. It would be a good idea to get 2-4 CMA's from different people to make sure they are accurate.
Now when you request a CMA from an agent they will most likely want your business. Don't feel pressured into that if you don't want their business. You can be up-front with them and say that you are shopping around and trying to figure out the market value of your home. They are happy to help you out.
Another, important step in figuring out an asking price is assessing what the market is like. Is it a sellers market? If so, you might ask for a higher price. Is it a buyers market? If so, you might want to price it a little lower.
How quickly you want to sell it is also important. If you need to sell the home ASAP, then you might want to price it a little lower. If you have more time, then you can price it more aggressively. It is important to try and price your home right, cause you don't really want it sitting on the market for long periods of time. That usually doesn't look good to potential buyers.
What did I price my home?
In Phoenix its a sellers market right now. Homes are selling fast. I got a few CMA's that were showing a price around $175k. I decided to list my home on my own (zillow, craigslist, facebook) and I set an asking price of $179,500. I priced it thinking I wouldn't get that price after negotiations and counter offers were made. I would recommend having an asking price slightly higher than the CMA price...unless it is really hard to sell a home in your areas.
For 2 days, the only response I was getting was from real estate agents looking to get my business. One person, left a message with me saying she would list my home, handle all the paper work, and represent me for only 0.5% commission and list the home on MLS with a buyers commission of 2.5%. I thought this was too good to be true. If I sold my house on my own, I was planning on getting a real estate lawyer to help me process all the paper work. Having her (Karyn) would eliminate that need and the commission was so low.
I went for it! Here is her website: www.adoreaz.com
The only stipulation for having such a low 0.5% commission was that we would take our own pictures of the house, we would be the point of contact when people called to see our home, and we would schedule those visits to see our home....Not a big deal at all for us and actually it was kind of fun to see everyone come look at our house.
Step #2 - List your home on MLS
I found that this is very important. You have to expose your home to as many potential buyers as possible. The downside to this is that you will have to pay a buyers commission of 2-3%. I think you can set what the commission is. If the commission is too low, you might not get as many agents wanting to show your home. If you can sell your home directly to someone, that's awesome. However, I found that to get a really good amount of exposure, you need to have an MLS listing. You can do this on your own if you are "For Sale By Owner" (it will cost $300-$500) to do this. Otherwise, your listing agent will do this for you (no extra fees of course)...in my case it was the above mentioned Karyn.
Step #3 - Show your home
Right when I listed my home on MLS, we got calls and scheduled appointments to see our home. In 3 days, we had about 15 people come look at our house and 2 offers. The better offer was for 174k, cash offer, and they were not asking for any closing costs. We decided to counter with a price of 177k and they accepted!
Looking back, we probably could have keep showing the home to more people and waited for more offers to get a little higher price. But in the end we were really happy about the price and how easy it was to sell.
Step #4 - Paper work, inspection, Appraisal
Your agent will help you with all the paper work and signing. The buyers will have a certain amount of time to do an inspection and an appraisal if needed. You don't have to pay for any of this and will get a copy of the inspection and appraisal. An appraisal wasn't done in my case because it was going to be paid with cash and no lender was involved that would require one.
The inspection came back with several things that could be fixed (there will almost always be something unless it's a brand new home). The buyers requested about six items be fixed before purchase. We responded saying we were not going to fix anything. They responded back saying they wanted $2000 off the home if nothing was going to be fixed or they would not purchase the home (they could have been bluffing). We responded back with taking $1000 off the home price and they accepted that.
So there you have it. The final selling price was $176k.
Total selling fees we had to pay:
-Commissions (0.5% and 2.5%): $5,280
-Title Insurance (seller is required to pay this): $1,096
-Escrow fees: $504
Note: I did not include prorated taxes, interest, etc. because these are things I would have had to pay for whether I sold my home or not.
I included a screen shot of the "Final Settlement Statement" if you wanted to peak at that.
I hope that was helpful for anyone thinking about selling there home in the future. I think it's nice to get a glance at what to expect. Of course, this was done in Arizona and the whole process might be slightly different in other states.
I'm in the process of buying a home in Texas, so I'll let you know how that all works in a month or two. Sign up HERE if you want to receive monthly newsletters with my monthly income and expense statements.