Selling Your Home On Your Own: How and When To Start
Selling your home on your own has some big advantages, the biggest of which is saving yourself huge amounts of cash by eliminating commission fees. But selling on your own can make some sellers nervous. This is normal -- the nerves come from venturing into uncharted waters.
The fact is that most of what gets done in a conventional real estate transaction is done by the owners anyway. Sure, realtors play an important role in certain parts of the transaction, like disclosures, pricing strategy, negotiations, or managing paperwork, but the majority of time and effort that goes into selling a home, such as preparing the home for sale or showing a home, are often well within an owner's wheelhouse.
And what about timing? Other considerations which affect home values, such interest rates, unemployment rates, and the Federal Government's new CARES Act which includes provisions and obligations for home owners, may affect the timing of putting your home up for sale. So where's the sweet spot and what's your optimal timing?
Selling Your Home On Your Own
In Money Under 30, Kevin Mercadante writes:
"The single most obvious reason to sell your house yourself– is to avoid having to pay the real estate commission.
In most markets, the typical real estate commission is six percent of the sale price. That means that if you are selling a house for $400,000, you will have to pay a commission of $24,000 ($400,000 times six percent).
That may not seem like a lot of money on a $400,000 sale. But this is where it’s important to remember that though the commission is based on the sale price of the property, it’s actually paid out of your home equity.
For example, let’s say that although your home may be worth $400,000, you have a $250,000 mortgage on it. That means that you have net equity of $150,000. But if you’re paying a real estate commission, you’ll have to reduce that by $24,000. That will give you a net of $126,000 at the closing table.
It’s likely that there will also be other seller paid closing costs. Collectively, they may reduce your net equity further, down to $120,000 or less.
That’s why home sellers often attempt to sell their homes without a real estate agent. It’s simply a matter of cost."
And the market is following suit. Discount brokerages that charge lower flat fees are commonplace and For Sale By Owner signs are visible now more than ever. So, if you're selling your home in 2020, the chances are you're at least thinking of saving big bucks. Here are the five most important considerations when selling your home on your own.
1) Preparing your home for sale includes repairing broken items and taking a fresh look at your paint colors. Have you de-cluttered and depersonalized your home? Is your home staging right, including sights, sounds and smells? Have you added new value to your home wherever possible and optimized your curb appeal?
2) Pricing your home from the beginning is extremely important. Have you looked realistically at comps in your neighborhood and adjusted properly for your specific property? Don't get caught chasing a spiraling market for months or years. It could cost you a lot of time and money.
3) Is your marketing in place, including professional photos, videos and matterports being broadcast properly? Is your home on the MLS and other real estate websites? How are you showing your home and how is it described on your flyers? Are you taking the right safety precautions?
4) What's the best way to manage the easy but important legal and paperwork aspects of your transaction? Are you ready to manage and negotiate the offers you're going to get? Do you have your contingency timelines, documentation and closing company ready?
5) What are your obligations at the closing of the transaction? What's the proper etiquette and what are your next steps?
What Are Mortgage Rates Doing?
On April 6, 2020, Bankrate’s latest survey of the nation’s largest mortgage lenders, demonstrated that:
"the benchmark 30-year fixed mortgage rate is 3.790 percent with an APR of 3.930 percent. The average 15-year fixed mortgage rate is 3.200 percent with an APR of 3.360 percent. The 5/1 adjustable-rate mortgage (ARM) rate is 3.510 percent with an APR of 3.950 percent."
Although The Federal Reserve’s interest rate decisions don’t directly impact mortgage rates, long-term rates like 30-year fixed-rate mortgages may adjust with the 10-year Treasury yield. According to Greg McBride, CFA, Bankrate's chief financial analyst, “While not directly related to a Fed cut, the two are sort of a reflection of the same concern: the expectation that the economy is going to slow,” If you’re concerned mortgage rates will rise in the future, considering locking in your rate.
In 2020, selling your home on your own is easier than ever. But, it is important to make the smaller investments up front to ensure you sell your home properly, professionally, and for the most money possible. Resources like Nexus Home Sales, which gives sellers all the tools, education, and personal guidance they need without paying any commission or higher flat fees, are giving sellers new ways to sell their home.
Forbearance & Repayment. When Is The Right Time?
California Gov. Gavin Newsom wrote in a Twitter Q&A that the State's Employment Development Department is getting an average of 111,000 unemployment claims a day — 44 times the previous daily average and that the demand has “overwhelmed the system.”
Further, while the CARES Act provides some short-term mortgage relief for the unemployed, at the end of the forbearance period, what happens? The federal government offers answers but at this time, homeowners would do well to completely understand their obligations for a payback plan, particularly in the context of California's unemployment numbers.
As these numbers continue to evolve, homeowners must look honestly at their personal financial needs, how best to protect the equity in their homes, and contemplate how and when to most efficiently sell while protecting that ever increasingly valuable cash.
