If you have bought or sold real estate in America, then you have almost certainly used a realtor. Traditionally in America, there are 2 realtors in each transaction, a realtor representing the seller (seller’s agent), and a realtor representing the buyer (buyer’s agent).
The realtor in every transaction is based on realtor access to the Multiple Listing Service (MLS). The MLS started in the 1800s, and is the standard for where all residential real estate for sale is listed. The purpose of the MLS is to bring buyers to sellers, and was key in the pre-internet days for sellers to find a buyer for their home.
Broker setup in most industries has been crushed by the internet, but not in real estate. Real estate broker/agent commissions are as high as ever, at about 5% – 6% on every transaction. This commission is split between the buyer and seller. The median home price for homes sold is currently $283,900 which means that the realtor commission is $14k – $17k on the median home sold. This split between the buyer’s agent and seller’s agent, so each agent receives $7k – $8.5k.
The cost of the realtor commissions is paid by the seller.
Why are realtors still involved in most real estate transactions? The reason is that almost all buyers look in the MLS for homes. The MLS is available for free online, but if you want to sell your home, then you must use a realtor to list in the MLS. A number of discount brokers exist to get you into the MLS, but I have personally used one who was then banned from the MLS just months after he helped me sell my property. The realtor associations ensure through control and political lobbying, that the only way to get your home listed on the MLS, is by using a realtor who will charge you a large commission!
This step by step guide is how to sell a home without a realtor. To purchase a home without a realtor, see Save Fortune Purchasing Home without a Buyer’s Agent
1) Declutter and Fix Home
The first step to selling a home is to;
- Declutter – Remove all your visible clutter in your home. You want your home to look empty and clean, with just furniture. Potential buyer’s want to visualize what they would look like in the home, and your personal effects left in a mess make it more difficult. Buyer’s will also look into your closets, leave closets half full and neat. If you have too much stuff, get a month to month storage locker nearby, to store your excess belongings. The $100 per month fee is easily offset by potentially making thousands more.
- Clean Home – Your home should be spotless. Potential buyers will be put off if they see areas that have not been cleaned. If you are not great at cleaning, then use a service like Cleanify to hire a professional.
- Paint – Paint any room that is not a standard off-white color, or that has cracking/peeling paint. Buyer’s can be put off by bold colors, and any buyers that love bold colors will expect to paint anyway.
- Fix any cheap items that are broken – A leaking faucet, replace it. Running toilet, fix it. Anything that is small and broken, then fix it. A seller can be put off by a $100 break, which sounds crazy on a $300k purchase, but best to placate everyone.
- Replace light bulbs with maximum brightness – Brighter homes look more attractive. Remember with newer bulbs, the brightness is now measured in Lumens. Watts amount does not show how bright the light is. It is best to replace all lights with at least 1000 Lumens like this affordable Luxrite 23w 1600 lumens.
- Make educated choice on upgrades – Some upgrades can help the value of your home. If your kitchen cabinets or countertop are worn, then a cheap fix is to purchase Rustoleum Transformations to repaint and refinish. This will make your kitchen look almost new, for under $200. Refinishing tile in the bathroom can also add value if your bathroom is looking tired. There are specialists in all cities, google search tile re-glazing to find out prices in your area. This can be far cheaper than rehabbing the bathroom. A bathtub can be reglazed to look brand new for around $300. Another great upgrade if your bathtub is not white, or looking old and dated. If you overspend on renovations before selling, you are unlikely to get that money back.
2) Photograph Home
Photos make a home advertisement. Everyone will look at the pictures of your home before any description, so it is important to get the photographs correct;
- Ensure lighting is as bright as possible. The brighter the scene you are photographing, the better the picture quality will be.
- Use the best quality camera you can find (borrow). An SLR camera will take far nicer pictures than a smaller pocket camera. Do not use your phone to take pictures. Look online for the sensor size of the camera you are using. You want it to at least be a 1 inch sensor (megapixels don’t mean much anymore).
- Take great pictures of the kitchen and all bathrooms. Kitchens sell homes, closely followed by bathrooms.
- Ensure all pictures are both in focus (no blurring), and no flares (ie when light through a window blocks out items around it).
- Take pictures of all rooms, as well as the front and rear of the home if it is a house.
3) Write description of your home
You want the description that appears on advertisements to highlight all the advantages of your home. What do you love about the home? Remember that the number of bedrooms and bathrooms will be listed elsewhere in the advertisement, so you want to highlight the location (great school district), and items like oversized garage, hardwood floors, gourmet kitchen, rehabbed bathroom, etc. Highlight all aspects that will sell your home.
Even if you are not using a seller’s agent to sell your home, do not use the words FSBO or For Sale By Owner. These will cause some buyer’s agents to blacklist showing your home. Once a buyer has been through your home and wants to purchase it, the buyer’s agent will write up the offer. But before they get to see the home, the agent can talk them out of being interested. There is a perception amongst some realtors that FSBO homes are more difficult transactions, and more work for the realtor.
4) Calculate your Home’s Selling Price
Calculating your home’s selling price is not the rocket science that many realtors make it out to be. Your home’s value is based on recent sales in your area. The steps to value the home are;
- Identify any sales in the same area of your home in the past 6 months. The more recent the better, but appraisers would typically only consider the past 6 months. Redfin is a great resource for searching recent sales. You perform a regular search, then click filter. On the filter, select in the bottom right as in the picture.
- Ensure the similar homes are similar in number of bedrooms, number of bathrooms, square footage, garage space, and age of building / renovations.
- Calculate the average and median prices of the similar sales.
- Look at the competition! As well as redfin, you can use Realtor.com to see what is currently for sale.
- If a similar or nicer home is for sale in your neighborhood, then it will likely either sell first, or you will need to price your home under that list price.
- Work out if your market is hot or not. If a real estate market is hot, which means there are lots of buyers, then there will be plenty of stories in newspapers detailing this phenomenon.
- In a hot market, your competition may not matter so much. You may be able to price similarly, and as the competition will sell quickly, your home may quickly become the best value available. In a slower or buyer’s market, you will have to price your home competitively to ensure it sells.
- Remember that spring time is the best time to sell. If you are selling in early winter, don’t look at spring prices, as prices now may be lower.
- In a hot or seller’s market, it can be better to price your home at the lower end of what you feel it is worth. That may attract multiple buyers, which can drive the sales price far above what you were asking for. In a slow / buyer’s market, it can be better to list for slightly above ($1k – $3k) the market value of your home, as multiple bidders are unlikely, and buyers will likely offer a little less than you are asking for. Be sure not to overprice the home by too far, or you will scare off any offers.
- Based on the information and factors above, set your home price.
5) List home on MLS and Zillow/Trulia
The top location buyer’s will find a home is on the MLS. Sites like realtor.com will take their feeds from the MLS. The only way to get on the MLS is through a licensed Realtor.
The typical method to sell real estate is to hire a realtor, who will charge 5% to 6% commission. When you calculate how much 6% of your home price, this is thousands of dollars. $18,000 on a $300k home. There are a number of licensed realtors who will list your home on the MLS for as little as $100, depending on your state. You will still need to pay the buyer’s agent portion of the commission, or no realtors will bring their buyers to your home. You can put 3% buyer’s agent commission in your MLS advertisement.
Using this method of selling your home will cost you 3% of your sales price (for the buyer’s agent) + $100-$300 listing fees depending on your state. On a $300k home, this is a $8,700 saving vs hiring a full service seller’s realtor.
Below are a list of companies that will sell your home for under $500. The only service you require is to get the home onto the MLS, and not have it mention that the home is FSBO (since this can cause some realtor’s to blacklist showing the home to their buyers). Each of these is a website that you pay, who refers to you a licensed broker. Many local realtors hate flat fee listing services, and will eventually ban any realtors offering that service. Therefore these websites are continually updating their broker lists that you will be referred to. After all, these brokers are severely undercutting the traditional 3% model;
- flatfeemls99 – The website looks terrible, but I have used this firm to sell a couple of properties.
These services you pay online, and then a local real estate agent will reach out to you for your pictures, and home details for the MLS. Your contact details (phone and email) will often be put down for showings.
Realtors will contact you to schedule showings of your home. You don’t need to accept showings with 1 hour’s notice, but equally you should try to be flexible. Do not leave small valuables and cash laying around your home. Thefts during showings are rare, but you don’t want to tempt fate.
You can purchase a key lockbox with a code, to enable buyer’s agents to enter your home without you being home. You do not have to offer this, but being flexible with showings will contribute to getting a sale. When buyers are viewing your home, it is best to not be in the house. Buyer’s like to look around, and feel like they can be honest in their judgements, without the seller overhearing their criticism. Even if it is just jumping in your car and driving around the block, this will help buyers feel comfortable and start to picture the home as theirs.
7) Find Title Company
Before you find a buyer, you should choose a title company. This is the firm that does most of the work from when you have a buyer, to the point when the sale closes. Look locally at different title firms, and call them providing your approximate sales price. They will give you a quote on costs for title insurance, and other closing costs. Most title companies I have utilized had similar charges.
Ask the title company if they can hold the earnest money, and if there is any charge for holding the earnest money. This is the safest place for the buyer’s earnest money check. I personally have always chosen nationally recognized title companies. This gives you and the buyer some comfort that the title company is reliable, since you will be trusting them with a lot of money.
8) Price Reductions
The longer a home is listed on the MLS, the more buyers think there may be an issue with the home. If you are not getting many people through your home, then it may be over priced. It is best to reduce the price after 30-45 days if you are not getting offers on the home.
Once a home has been listed for more than 100 days, it becomes very difficult to sell at market rates. This is why it is best to typically price the home a little lower, rather than higher. A stale listing (ie been on the market a long time) can sometimes be better to remove the listing for 90 days, and then re-list.
9) Negotiating Offer
When you receive an offer, you must decide if you want to accept or counter the offer. Key points to look at;
- Cash is better than a financed offer.
- You can request proof of funds for a cash offer.
- You can request proof of financing for a pre-approved mortgage.
- The higher the deposit on a mortgage (especially if it is over 20%), the more likely the loan will be approved.
- A mortgage pre-approval just means that the bank may provide the buyer a mortgage. It is not a guarantee.
- If you get multiple offers, then you should set a deadline, and ask for everyone’s highest and best.
- Contracts are typically standard for each state. Only accept a contract on the state’s standard contract. If a buyer has used their own contract, ask that their realtor re-writes the offer on the standard offer contract for your state.
- Do not sign to accept an offer, until you have it reviewed by your real estate attorney. You should hire a real estate attorney (for $400 – $600), to ensure you understand the contract structure.
- Ensure the earnest money is at least 1% – 2% of the purchase price, and inform the buyer it should be made out to the title company.
- Inform your flat fee broker to update the status on the MLS once you are under contract (have signed the contract, and the title company has received the earnest money).
10) Accepting Offer to Closing
Once you have accepted the offer, you need to send the contract and earnest money check to the title company. In some states, you have an attorney review period, for your attorney to sign off on the contract first.
In most states, you will need to complete a seller’s disclosure. This form lets the buyer know of any issues that you are aware of. Your listing broker can provide this form, or your state’s version will be available online. Be honest with what you know on the seller’s disclosure. If an issue was found later that you knew about, then you may be liable for leaving items off the seller’s disclosure. Do not speculate on the form, if you don’t know about an item, then state that you don’t know.
Depending on your state, you may have other forms to provide the buyer, including;
- Water Source Disclosure
- Square Foot Disclosure
- HOA Documents (typically meeting minutes, and all related information about the HOA. If you have a HOA, they can let you know what they provide for new buyers).
You will need to provide access to your home for the buyer’s inspection, and the buyer’s bank’s appraiser. If the buyer’s inspection finds issues (and they almost always find something to validate their value), then the buyer may try to negotiate a price reduction / credit. It is up to you if you would like to provide this credit. Remember that if you have to relist the property, then there is a high risk the next buyer offers less money. Many buyers view a home that has been re-listed, as having issues.
On closing day, you will work with the title company. Have your attorney review all documents that you are to sign. This protects your interests. Many people mistakenly believe their realtor helps with the contracts, but most documents are legally binding, so a real estate attorney is best placed to protect your interests.
These are the steps to follow if you want to sell without a seller’s agent. If you still feel strongly that utilizing an agent is right for you, see Realtor.com to identify a suitable agent.