FSBO: Weighing the Pros and Cons

You're about to list your home for sale, and you want to keep as much money in your pocket as possible once the transaction is done. Often, home sellers come to the conclusion that selling their homes themselves -- For Sale By Owner -- is the best way to go.

Sometimes, going the FSBO route can work out well. But for many home sellers, it's often fraught with some surprising challenges. We frequently work with home sellers who attempted FSBO and then decided to list their home with a Realtor when their homes didn't sell. And we've heard from others who sold their homes as FSBO but weren't completely happy with the end result.

Here are the lessons we've learned, about the pros and cons of going FSBO.

Selling your home as a FSBO might make sense for you when you have...

• a lot of time. Selling a home takes time -- from staging, to showings, to open houses, to answering follow-up questions from potential buyers and showing agents, etc.
• a thorough understanding of the real estate market. What does current market data suggest about the fair market value of your home? Choosing a reasonable listing price requires examining a whole host of data -- you need to know where to find it, how to interpret it, and how to use it when making the case with buyers that your home is worth that value.
• top-notch writing, photography, and marketing skills. You want your home's photos and description to shine -- these are the first things most buyers see, and it's essential that your marketing materials make a strong first impression!
• a wide network, and a willingness to use it. Selling a home requires more than posting an online ad and plopping a for-sale sign in the yard. You need to actively recruit potential buyers. Do you have the time, interest, and ability to network with your friends, neighbors and co-workers, to generate interested foot traffic?
• strong negotiation skills. Getting top dollar for your property requires knowing how to negotiate with buyers. And knowing what buyers will pay a premium for requires a depth of knowledge about the real estate market in your city and neighborhood!

If you read the list above and think, "check, check, check!", then congrats! Selling your home as a FSBO might be a good option. But for many people, going FSBO soon leaves them feeling like their in over their heads. If that describes you, here's why working with a Realtor might be a good idea.

Listing your home with a Realtor...

...saves you time. A lot of sellers are surprised by the amount of research, preparation, and constant communication involved in listing a home. An experienced Realtor can make it look simple, but the truth is, there are a lot of moving parts involved! If you don't have the time to manage them all, it might make sense to list your home with a professional.

...saves you peace of mind. Your Realtor handles the hassles -- the phone calls, the emails, the back and forth with other agents. And your Realtor handles the checklist of legal documents and deadlines that come along with selling a home -- so you never need to worry about missing paperwork, missed deadlines, or other slip-ups that can derail an otherwise solid sale.

...instantly widens your network. We're constantly in communication with other Realtors, networking our listings to see if they match the needs of other buyers. This is the kind of highly customized exposure that an online ad and yard sign will simply never be able to attract.

...makes you more money. The most common reason sellers choose FSBO is to save commission fees. But an examination of local real estate data shows that FSBO sellers often walk away with less money than their homes are worth -- sometimes up to 13% less money! That's significantly more than they would have paid a professional Realtor in the first place. It's shocking and sad to see how much money FSBO sellers can leave on the table simply because they don't know any better.

...gets the job done right. Why do Realtors make you more money? Because a good Realtor knows the market inside and out. She can use her knowledge and experience to suggest the best possible listing price for your home, to market your home successfully and aggressively -- and to negotiate at top dollar.

And finally, an important note about contracts and negotiations...

Many FSBO sellers don't have a complete grasp of the contracts used to execute a sale. This can result in oversight regarding their contractual rights and obligations. This can mean wasted time, less profit, and unforeseen expenses, as well as missed opportunities for re-negotiations.

Most buyers and sellers aren't experts in the ever-changing world of lending and mortgages. Without the help of a professional, they don't always ask the right questions or require the proper documentation from the other party. One of the most common complaints we've heard from homeowners who've tried selling FSBO is that their deal fell apart because of buyer financing issues. Most of these scenarios could have been avoided with proper due diligence up front.

On a similar note, many sellers typically don't understand the implications of various loan programs, which can lead to deals falling apart far too often. Some loan programs simply do not match with some types of properties -- this is critical information for every buyer and seller to know.

So -- at the end of the day, is selling your home as a FSBO the right choice for you? It's smart to weigh the true pros and cons before making such a big decision. We'd be happy to answer any of your questions as you decide the best path for you, your family, and your home!

For Sale By Owner: What I'd Do Differently

My husband and I had just tied the knot. My domestic urges must have been in overdrive, because within days of the wedding, I found a house on a Madison "for sale by owner" website that seemed so perfectly us.

I had been combing the Madison WI MLS as a matter of habit -- but I had gone to only a handful of open houses, and I really hadn’t moved from curious to serious. We loved the Schenk-Atwood neighborhood, where we were renting an apartment. However, we also wanted to keep our mortgage affordable and not sacrifice our lifestyle in order to pay our housing costs.

Unfortunately, everything in our ideal area that even came close to our comfortable price point needed an incredible amount of work! We’d seen The Money Pit  -- and we had been warned of the ways a fixer-upper can take over your life (for better or worse), so we were focused on our first home being as move-in ready as possible.

In the end, this two-bedroom house a little further beyond our ideal area held all of the charm we were looking for -- plus a kitchen and bathroom that were both generously sized and updated. As seasoned apartment dwellers, we thought two bedrooms seemed like more than enough space, and we were willing to overlook the lack of garage for the large basement and walk-up attic. One fast month later, it was ours, and we were moving in! A happy ending!

Now, I'm armed with 6+ years of life experience and a real estate license. I can look back and offer the following kernels of wisdom to “first-time-homebuyer me” and others.

Lessons I've learned:

1. Know your priorities. We sacrificed on location to get the house we wanted for our price. Was this a good decision for us? Probably. We’ve been able to comfortably roll with life’s punches (several job changes, new babies, travel opportunities) thanks to a very affordable monthly payment. However, location is the one thing you can never change about your house, and this will absolutely top our criteria for our next purchase. We really miss being in a more walkable area, and have some new family-related neighborhood priorities. I also think my husband will insist on a garage next time around! There will always be trade-offs; it’s about weighing them and making the best choice for you and your lifestyle. Make a prioritized list of your wants and needs at the start of your search and use it to keep yourself honest.

2. Hire a "Wisconsin Registered" Home Inspector. We asked a family member who is a licensed professional home contractor to look at the house for us. He helped us go into the purchase with our eyes open about some of the home's potential issues. But, even if he had pointed out every defect that a home inspector would have found, we wouldn’t have been able to use his findings to negotiate with the sellers, per the state-approved Offer to Purchase contract. This basically meant we bought our home "as-is." When we go to sell our home, chances are the buyer will want a formal inspection, and we’ll be on the hook for issues that may have been present in the home when we purchased it. The money spent on a qualified home inspector pays off up front in negotiations and down the road in peace of mind. A professional home inspection and report is in the best interest of every buyer.

3. Work with a buyer’s agent. We bought the home on our own, from a seller who was selling it on their own. While I don’t have a horror story to accompany this scenario, I do wish we had used a professional buyer’s agent to guide us through the process and help us pay attention to the details we overlooked. Sellers pay the buyer’s agent commission 99% of the time, so it makes sense to employ a seasoned buyer’s agent who can advocate for you and manage the paperwork and other details of buying a home, which can otherwise be pretty stressful. While we felt like we purchased the home for a fair price, now I know how much information should be used when determining market value, and we didn’t consider all of the pieces in the puzzle. When we go to sell our home, we will be subject to the market conditions and recent comparable sales when choosing a listing price and negotiating with a buyer, so it pays off to work with someone who knows this data when you buy.

I’m looking forward to finding our next home in the coming year or two and applying what I’ve learned to advocate for my family in the process. Our home has treated us well over the years, so I also look forward to giving it new life with its next owners!

Want to learn more? I welcome your questions and would love to apply my experience and professional knowledge to help make your next home-buying experience a positive one!

Madison WI Real Estate: Winter Update

As I'm sure many of you know, the Madison WI real estate market is still going strong, despite the bitter cold! According to Property Trax, active listing inventory in Dane County hasn't been this low since 2006 (when comparing inventory on the 31st day of December, from 2006-2013):

http://host.madison.com/wsj/business/real-estate/property-trax-home-sellers-benefit-as-dane-county-inventory-hits/article_eed273b0-78a8-11e3-a70c-0019bb2963f4.html

Since we've been talking to a lot of home sellers on the near west side of Madison lately, I decided to pull a few quick numbers to share with them. The data is encouraging, and based on my experience, I assume this trend does not stop at the borders of the near west side. It's exciting to see the numbers holding strong, during what's known to be the slowest season in the year.

Sub Areas W13 & W14 http://www.scwmls.com/pdf/MLSmap.pdf

Accepted Offers since Jan. 1st= 15 and counting

Homes sold in 2013= 217

Current Active= 37

Months supply of inventory continues to dwindle in January, and is down to 2.46 , meaning it's still a seller's market. Months of inventory= # of homes currently active divided by the number of homes selling each month, based on a 12 month average.

If you're interested in obtaining more in depth market information about your neighborhood, or you're considering selling your home this year, give us a call--this is the time to start strategizing for your 2014 sale.

Mid-Century Modern Homes in Madison

We get a lot of calls from home buyers who are looking for unique or mid-century modern homes in Madison. And we understand why! We love unique properties -- homes with extra charm, mid-century modern lines, and other special details that make them truly stand out.

Often, homes like this don't regularly show up in the MLS property search. But we're not deterred! We take matters into our own hands, turning into Madison real estate sleuths, working hard to track down the unique, mid-century modern homes in Madison that meet our buyers' needs.

Part of this involves turning to you. If you, or someone you know, owns a unique, mid-century modern home, and you're contemplating a move, we'd love to talk. We know you need a listing agent who understands your home's uniqueness, and who knows how to market its features properly to secure the best possible offer. That's where we come in. We know the Madison real estate market inside and out -- and our passion for vintage, unique, and mid-century modern homes means we're perfectly suited to help.

Here are a few tips for selling your unique or mid century modern home for the highest dollar possible:

1. 1950s and 60s home decor trends are back in a big way. We can work with you to turn your home’s “dated” features into today's trends that appeal to the buyers who are looking for something unique and vintage. (Here's an example of how to do that with dated bathroom tiles.)

2. Leverage your color palette! Let's identify the colors that work best with your home’s original features, then use that color palette to determine complementary wall and accessory colors that buyers will love.

3. For an instant facelift, consider painting your brick or stone fireplace.

4. Wood paneling can date a home and make a space feel heavy and dark. Refresh your space with paint and/or punchy wall art.

5. Vintage wallpaper can be beautiful! But it's very taste-specific. Consider toning it down with the neutral drapes and contemporary accessories.

6. Educate your buyers. If your home is unique, tell them how and why! From the type of materials used, to the history of your home’s design, or the credentials of it’s architect -- don’t leave anything out when selling buyers on your home's charm. 

7. Make sure that your Realtor “gets it”, too. Your ideal Realtor will not only appreciate all that your home has to offer, but will be able to articulate its value to potential buyers. While it’s unlikely that every original feature in your home will be a mid-century gem worth saving, your Realtor should have an eye for vintage chic, and be able to help your home for sale reach the appropriate audience.

Just remember -- buyers are craving unique and mid-century modern homes. But not only do you need to know how to market your home to them, you need to show them why your home is special.