You bought your home ten years ago for $200,000, and today, it shows your home is worth $350,000 on real estate listings sites. That means you’ve made $150,000 over just ten years. Pretty impressive, right?
Well, regardless of how accurate your preferred listing site might be, and they can indeed be pretty darn accurate, it’s not always quite so easy. There are a lot of costs that come with choosing to sell your home, which can quickly turn what you expect to be a $150,000 profit into something much less.
As you might expect, some of these costs cannot be avoided. Nobody should expect their “net profit” to equal the exact growth in home value, regardless of how long they have lived there or which valuation source they rely on. As a very, very general rule of thumb, if your home increased in value by about $150,000, you can expect the net profit to be around $100,000, give or take a few boxes of ziti.
However, there is no denying that you can potentially avoid some major costs during the home-selling process. One of the costs you could avoid is working with a realtor, which is usually upwards of five percent of the value of your home (aka $20,000 for a $400,000 property). Unsurprisingly, about 36 percent of all people looking to sell their home will try the “for sale by owner” route, though just 11 percent actually succeed.
If you are looking to sell your home as the owner, keep in mind, you will be facing an uphill challenge. However, you should also not dismiss the possibility of success. In this brief guide, we will discuss the most important things to keep in mind whenever you are hoping to sell your home on your own.
Start By Finding What Your Home is Worth
Once you have decided you want to sell your home, you should think about how much you want to sell it for. It is very easy to look at a single online estimate and consider that your “baseline” price. But keep in mind that none of these free estimates online are exceptionally accurate, and each might be 10 percent over or under what your home is actually worth (or even more). And when we talk about real estate values, 10 percent can equate to tens of thousands of dollars.
Looking at many different home estimate sites will certainly help you get a workable, ballpark estimate. But even that won’t be enough. Most of the estimates are made using pre-determined algorithms that could be skewed by outliers (i.e., a single property in the area that sells far above or far below the general neighborhood value).
In other words, pricing your home should be a truly comprehensive process. In addition to looking at these baseline estimates, you should also consider the general state of the housing market, the prices comparable homes have sold at, the school district, and your home’s location, among many other factors. You should also think about the details specific to your property. Online algorithms probably won’t know about your new pool, the add-on garage, and the other capital expenditures you’ve taken on, but these improvements have a significant impact on your home value. So be sure to factor that into whatever estimate you get after researching online.
Make Sure the Home is Ready to Sell
Now that you have a somewhat rough estimate of your home’s value, the next step is to ensure that your home is ready to sell. And though we know your current decorating scheme, etc., is totally awesome, the people considering buying your home might not necessarily feel the same way, especially if you are selling your home directly as the current owner.
So, what does it mean for your home to be ready to sell?
While it might sound cliché, this literally means ensuring your home is actually sellable. That means you need to start by making the minor (or, in some cases, major) repairs that will make your home appealing to a much wider audience. For some homes, this might mean making changes as simple as repainting the walls and front door. In other cases, this might mean making significantly greater investments, such as investing in a new roof, redoing your sewer lateral, or other pipelines.
In other words, making your home “ready to sell” can cost as little as a few dozen bucks to upwards of ten thousand dollars. Ultimately, the total cost depends on the current state and functionality of the place you live, which, as you might guess, will vary significantly based on the property itself. Nevertheless, it will always be a good idea to ask yourself, “what kind of home would I want to buy?” You should assume that most people are not looking for a true fixer-upper—you’ve lived there for (presumably) a few years, so you know the best what should be changed first.
Market the Home to a Wide Audience
Once your home is actually in a condition where it is ready to sell, the next step you will need to take is to find people you can sell to. In most cases, this means you will need to broaden your marketing efforts—hoping that your real estate agent will simply find a buyer will usually not be enough.
So, what does it mean to “effectively” market your current property?
In most cases, this means extending your digital marketing efforts to the greatest extent you possibly can. Currently, there are many different digital platforms that can be used to market prospective homes, including Zillow, Redfin, Realtor, RealtyHop, and many others. At the very least, all home sellers should ensure they have a presence on these platforms (which have millions of views per day). But furthermore, you should also market yourself across the most popular social media platforms, including Facebook, Instagram, Twitter, and Tiktok. As more and more people have begun looking for homes to buy online, hiring a professional photographer and even investing in professional staging is more crucial than ever. A small (few hundred dollars) investment in photography can often be what ends up sealing the deal.
Be Ready to Handle Negotiations
Just because a prospective homebuyer is willing to give an offer to you doesn’t necessarily mean they are ready to close. Typically, any home on the market will necessitate a back-and-forth negotiation process that can cost the seller a few dollars to a few thousand dollars.
What does this negotiation process typically entail? In most cases, the prospective buyers will list a few things they’d like to change in their future homes. This can include components of the home ranging from basic structural fixes to a new roof, enhancements of existing features (floors, walls, etc.), and everything in between.
When there is a general “buyers’ market,” the buyer will be more likely to get everything they ask for. When it’s “seller’s market,” the seller will have the negotiating power and, therefore, will likely be able to skip out on many buyers’ requests.
Nevertheless, regardless of the state of the market, negotiations will be inevitable. It is essential for anyone hoping to sell as an owner to pre-define what they are willing and unwilling to offer their interested buyers.
Know How to Close on Your Home
Hopefully, you have found a qualified buyer who is sincerely interested in purchasing your home by this point. However, that alone will not be enough. Even once you have found a qualified buyer, you will still need to find someone who will actually close on the home. Keep in mind that, of all qualified buyers, only about 80 percent of people engaged in the closing process end up buying.
In most cases, even if you are “selling as an owner,” it will make a lot of sense to work with a real estate agent or someone else within the mortgage industry. The closing process involves a lot of legal paperwork, and if you don’t handle it correctly, your deal might fall through, or you might end up owing fines to various agencies. Generally, your mortgage contract will also require you to meet specific terms at the time of closing, so, at the very least, you need to make sure each of these conditions has been “materially” satisfied. About 1 in 6 mortgage contracts will fall through on signing day, so this is a process you need to take seriously.
Depending on the state you’re in, you might also need to work with a real estate attorney. While the attorney’s fee could range from a couple of hundred to a few thousand dollars, your attorney will be able to guide you through the closing process smoothly. Sometimes, they can even help with the negotiation.
We’ll be honest with you—selling a home as an owner is not going to be easy, which is why only about 1 in 9 home sellers ends up doing so. Still, this is something that remains within your reach. Just be sure you are ready to handle the paperwork, processes, and other components involved along the way.