For Sale By Owner (FSBO)

If you plan to sell your home yourself, Bentley Home Mortgage will support the sale with financing options.

These days, it’s easier than ever to sell your home yourself, or pay far less than the standard 6 percent commission to a real estate agent. Why? The Internet.

Knowledge is power

For years, real estate agents and their lobbying groups have done their best to block public access to the Multiple Listing Service (MLS). The MLS is a collection of information about virtually all the “listed” homes for sale in a given area, (usually to the exclusion of FSBOs). Home buyers have had to work with real estate agents in order to gain access to information on the MLS. To this day, real estate agents attempt to maintain strict control of the MLS.

The Internet provides an enormous amount of real estate market information to consumers—information which wasn't previously available. Today, you might just as easily sell your home and find your next home via the Internet instead of the MLS.

Advantages of selling as a FSBO

• Increase your profit margin or net cash from the sale.
• Escrow and Title companies can handle most of the transaction.
• Disclosure services are available to handle the required disclosures.
• The Internet has over 600,000 sites that contain FSBO-related information.
• Termite and home inspections will show the condition of the property and let you know what needs to be repaired.
• In a seller's market, you may get several offers within weeks after starting to advertise the property for sale
• There are a number of "For Sale By Owner" listing services where you can advertise.
• Many real estate agents and mortgage loan officers market their services to FSBOs.
• You still have the option list your home in the MLS.

Is a real estate sales commission always 6 percent?

Most real estate sales agents charge a 6 percent commission. Six percent of what—the sales price? If you owned your home free and clear of debt, the commission would be 6 percent of your equity. What if you had a mortgage on your home? Would you be paying a 6 percent commission? No! If your loan balance were 70 percent of the sales price, you would have 30 percent equity. In this case, the 6 percent sales commission, would be 20 percent of your equity! A FSBO sale would save all or most of the equity you'd otherwise pay to a real estate agent.

Open Listing. The MLS is the most powerful marketing tool in existence for the FSBO.

Companies exist which help you list in exactly the same MLS as if you had paid a traditional real estate agent to list your property. If you sell your property yourself, "By Owner", without a real estate agent involved, you'll pay no commission to anyone. If a real estate agent is representing the buyers of your property, you'll pay that agent 2 to 3 percent of the selling price. You will only sign an Open Listing Agreement (a non-exclusive listing agreement which is an authorization to place your property in the MLS), which may be canceled at any time. This is one way you can put the power of the MLS to work for you.

Professional Property Inspections

Unless your home is relatively new, consider getting a professional home inspection. Many buyers will order inspections if they suspect potential problems. A buyer will use any excuse to justify offering you less than you’d like. A professional inspection can help support your property value.

A professional inspector can accurately assess the condition of your property, and know when to call upon the expertise of others if required. An inspector should evaluate the condition of the exterior: roof, vent pipes, gutters, chimney, siding, masonry, foundation, exterior grounds, (structures, stairs, walkways, driveways, outbuildings, drainage, etc.) Interior inspections should be performed systematically from top to bottom: from the attic to the basement or crawl space. Functionality of doors, windows and storm sashes should be checked. Bio-hazards (lead-based paint, asbestos, etc.) should be noted. The home's infrastructure should be inspected and/or tested: electrical, plumbing, ventilation systems, heating and cooling, water pressure, etc. In the event a structural engineer's opinion may be required, a professional home inspector should recognize and alert you to that need. An engineer's advice might be sought when there are questions about physical conditions, which may potentially threaten the structure and the safety of occupants.

How to find a qualified Inspector:

Ask your escrow agent, title officer, real estate or mortgage agent for referrals. Ask the inspector for their professional credentials, experience, and names of a few satisfied customers. Are there complaints registered with the Better Business Bureau? Are they a member of a professional organization such as:

• National Academy of Building Inspection Engineers
• National Association of Certified Home Inspectors
• American Society of Home Inspectors
• National Association of Home Inspectors

Frequently Asked Questions

What is the difference between “pre-qualified” and “pre-approved?”
When one is pre-qualified, a mortgage professional has rendered an opinion regarding the home price the potential buyer can afford. Their opinion considered the potential buyer’s down payment, debts, income, credit rating, and a lender's underwriting guidelines. Being pre-qualified is only an opinion from a person who will not actually lend the money to purchase your home. If one is pre-approved, however, a lender has verified all the above and more. The lender's opinion is more valuable since it is the lender who will lend the money. When a potential buyer is pre-approved, the seller can be more confident the buyer can close the deal. A seller should always ask potential buyers to provide a pre-approval letter.

What closing costs might a buyer pay?
Closing costs are various charges paid to different entities associated with facilitating real estate transactions. Some of the closing costs a buyer might encounter include: application fee, appraisal fee, credit report, transfer tax, discount points, notary fee, documentation fee, title and escrow fees, loan fees, mortgage insurance, origination fee, title insurance premium and others. Closing costs are negotiable between the parties.

What is a point?
One point is equal to 1 percent of the loan amount. Depending on the context, it can have different interpretations. A discount point provides the borrower with a reduced, "discounted" note rate. An origination point is a fee for services rendered in connection for originating the loan. An FHA or VA offer may ask the seller to pay points.

What is earnest money?
When a buyer makes an offer to purchase your property, they will need to provide an earnest money deposit as a sign of good faith. The earnest money deposit becomes a part of the purchase price and is held, or deposited into a trust or escrow account until there is full acceptance of the offer and the transaction closes. Typically, the earnest money deposit is 3 to 5 percent of the offer amount. In a FSBO transaction, the buyer should make their earnest money check payable to the escrow company.

What is title insurance?
Title insurance protects the buyer and seller. It is and insurance policy issued by a title insurance company and specifies, among other things, what liens are recorded against the subject property. Public records can be incomplete and contain errors regarding the history of ownership of a property (chain of title). It's critical that an owner receive undisputed, marketable title to the property. Title insurance was developed to attest to the reliability of the chain of title, and compensate people in the event problems arise and someone contests the sale transaction. There are different levels of protection offered by different types of title insurance.

Is VA or FHA financing unfair to sellers?
FHA and VA loans provide purchasers the opportunity to buy homes with minimal cash investment and at lower interest rates. These loans require the lender or seller to pay for certain closing costs and loan fees that a buyer would normally pay with a conventional loan. VA and FHA also have stricter appraisal and home inspection requirements. All repair work must be done prior to closing the sale. Offering your home and allowing VA/FHA financing increases the number of buyers that may make an offer on your home. You always have the right to compare these offers to other offers with conventional financing.