Welcome to the “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.
Today’s question is about real estate; specifically, whether it’s possible for an average person to sell his or her own home.
Watch the following video, and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.
You also can learn how to send in a question of your own below.
For more information, check out “11 Tips for Pricing Your Home So It Sells for Top Dollar” and “12 Ways to Blow Your Home Sale.” You can also go to the search at the top of this page, put in the words “real estate” or “selling your home” and find plenty of information on just about everything relating to this topic.
Got a question of your own to ask? Scroll down past the transcript.
Don’t want to watch? Here’s what I said in the video
Hello, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this answer is brought to you by Money Talks News, serving up the best in personal finance news and advice since 1991.
Today’s question comes from Katherine:
“How hard or easy is it to sell one’s own home or condo? In my case, a condo in Wilmington, North Carolina.”
I like this question, because if there’s one thing I hate, it’s paying a bunch of commissions to a real estate agent. Sell a $300,000 house, and you’re paying $18,000 in commissions. I think that’s way too high. So, I encourage you, Katherine, to try to sell your own home, or at least explore ways to reduce the cost.
The term for selling one’s home is FSBO, which stands for “For Sale by Owner.” It’s not something I’ve done personally, because I’ve spent most of my life being too busy; selling a home takes time. But if I had the time — say, after I retire — I’d definitely give it a go.
Before you go down this road, however, there are a few things to think about.
How hot is the market?
First, the difficulty of selling your home will be tied to the state of your local market: The hotter the market, the easier the sale.
You’ve probably heard of some areas where homes sell in 10 minutes and buyers get in bidding wars. If you’re in one of those hot markets, selling an FSBO is going to be a lot easier.
Side note: One of the most important things when selling a home is finding the Goldilocks price: not so high you don’t sell and not so low you leave money on the table. How do you find that price? Either pay a few hundred bucks for a professional appraisal, or look at enough neighborhood houses to get a good feel for the market.
Paying the help
If you expect to bring in your own buyers, plan on creating a flyer and paying for some advertising. You can advertise on sites like Zillow, Craigslist, eBay, Facebook and plenty of others. Do an online search for “Advertising my FSBO,” and you’ll see what I mean.
But to expose your home to the maximum number of people, you may need to put your house into the MLS, or Multiple Listing Service. That’s the huge database real estate agents use to find houses. The problem? If you use agents to bring in buyers, you’ll have to pay them.
The way a real estate transaction works, 6% is a common commission. The seller — you — is paying that 6%. Half goes to your agent, the listing agent. The other half goes to the buyer’s agent. So, while you can certainly save the listing commission by doing it yourself, if you want agents to bring in buyers, you’ll need to pay them their 3%.
In other words, using the Multiple Listing Service will reduce your take of the commission by half, but can also reduce your workload.
There are lots of discounted services you can use to get your house into the MLS. Again, do a web search.
What about the paperwork?
One of the reasons people think real estate agents are necessary is that the knowledge required to put together a contract, put a deal in escrow and properly execute the closing documents is over sellers’ heads. This is absolutely true.
What people don’t realize, however, is that these technical details are also over the heads of many agents.
The people who know how to dot the i’s and cross the t’s aren’t agents, they’re people working at a title and/or escrow company. So if you’re going it alone, whether buying or selling, call one of these people early on in the process. Simply explain that you’re planning on selling by yourself and would appreciate their assistance.
You’ll be amazed at all the friendly, free help you’ll get in exchange for using the title or escrow company when you’re ready to do a deal. They’ll often furnish you with free documents (like a fill-in-the-blanks contract) and free advice. It’s these people who are the administrative brains behind real estate deals, and they work extremely inexpensively, especially when compared with the outrageous fees that real estate agents charge.
Bottom line? Yes, you can sell your own home. But you’ve got a lot more reading to do. Do some of it by getting books from the library or reading online at places like my website, Money Talks News.
OK, I hope that answers your question, Katherine. Now, if you’re watching me on YouTube, click the subscribe button below. If you’re watching me at Money Talks News, sign up for my free, awesome newsletter: Click the “newsletter” button in the nav bar above. I’m Stacy Johnson, and I’ll see you all next time!
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The questions I’m likeliest to answer are those that come from our members. You can learn how to become one here. Also, questions should be of interest to other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.
I founded Money Talks News in 1991. I’m a CPA, and I’ve also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.
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