David’s Real Estate Blog
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In real estate, closing the deal has two meanings. The first is actually getting a buyer to sign on the dotted line. The second is closing the transaction, and getting title to change hands. Let’s see how that is accomplished.

You’re selling "by owner" and have found a purchaser ready, willing, and able to buy your home. You go to a real estate agent or attorney who draws up a sales agreement and everyone signs off. Now what?

There are 5 more steps that a "by owner" seller must go through in order to close the deal. Since there’s no agent involved, it’s up to you to do these.

• Open Escrow
• Follow the buyer’s progress in securing financing
• Clear title
• Deal with disclosures and inspections
• Sign the deed and close escrow

It’s not necessary to follow these in exact order, although the first obvious thing to do is to open the escrow. This starts the process of searching the title to be sure there isn’t a hidden lien somewhere. (A lien is typically a loan or other debt that encumbers or prevents the title from being cleared–these rarely turn up, but when they do, it’s up to you to go back to the lender and get them cleared.) Escrow can be opened simply by bringing the sales agreement to an escrow officer.

You’ll also want to keep track (by phone calls) of the buyer’s progress in getting financing. Presumably the buyer gave you a pre-approval letter showing that financing was available. Now, the buyer has to perform, and get the lender to make the loan. Any hitch or breakdown along the way means that the buyer might not be able to get the mortgage necessary to make the purchase, and that could break the deal. If the deal can’t be made, you’ll want to find out as quickly as possible and get the house back on the market.

Of course, you’ll need to disclose to the buyer (as required by your state or the purchase contract) defects in your property, and deal with the buyer’s professional inspection as well as a termite and pest inspection (and other reports that may be required). If serious problems turn up, you might have to make repairs, or even renegotiate the price or terms of the deal.

It may sound like a lot to do, and in some transactions it can be, but it usually goes fast. A typical closing today lasts only about three or four weeks. (The reason is that lenders can quickly make decisions and fund loans electronically.)

Soon the escrow company will call and say they are ready to close the deal. The down payment and closing costs from the buyer are in escrow and the lender is ready to fund. All that remains is for you to sign the deed. You go down to escrow, see your closing statements and learn the actual amount of money you’ll get out of the sale, then sign the deed. A few days later escrow closes and you get your check.

TIP

Don’t get so involved in closing the deal that you forget to make plans for your own move. If you’re buying another home, its closing should be tied to that of your old house so they close simultaneously. You’ll need to arrange for utility turn- offs and -ons as well as movers. Moving is the other side of closing!

As soon as you put your home up for sale "by owner," you can expect to start getting some traffic through it. If no one else, your neighbors will want to come by to see what you’ve done to fix up your house -they’ll be comparing it to theirs and judging how much they can get when they sell!

Chances are you’ll also get some real estate agents who may come by. They may say they’ve got buyers looking for a home in your area and, if they bring a buyer by, would you pay them a "selling agent’s commission." This is usually half a regular commission, so if you’d regularly pay 6 percent, they’re asking for 3 percent. I usually suggest agreeing since it can make for a quick sale and you’ll still be saving half the commission.

Finally, hopefully, you’ll get some actual buyers who come by to see your home. They may have seen your sign, or your advertisement, or your listing on the Internet. They’ve called to say they want to see your home, and now they’re here.

GET BUYERS TO SIGN IN

While it may seem so obvious that it’s hardly worth mentioning, one of the biggest mistakes that people selling by owner make, is to overlook the "sign in" register. It’s very important that you get everyone who comes to your house to sign in. You should have a notebook or register near the front door so that as people come in, they can list their names, addresses, and phone numbers and, very importantly, the date. You want to say something such as, "Have you signed in, yet?" If you ask as they enter, almost always people will sign your register. If you wait until after they’ve seen your house, they may simply leave.

One big reason to get lookers signed in, is so that you can call them back. Buyers rarely purchase on their first visit. And sometimes all that it takes to peak their interest and get them to come back (and hopefully make an offer), is a phone call. Call them up, ask them if they have any questions, and start a conversation. It could lead to a sale. But, you can’t do it if you don’t know who came by and if you don’t have their phone number. Be sure to call neighbors, too. While they may not be interested themselves, they may have friends who are. And you can compose a list of agents from your register, in case you want to list later on.

EXCLUDING BUYERS

A second big reason to sign people in, is that if you do later list with an agent, you can use the names from your register to exclude buyers. You can say you’ll pay the agent a commission for buyers he or she brings by. But, if the buyers first saw the home while you were selling "by owner," they’re your buyers, you’ll deal with them directly, and no commission is due. This is why it’s important to get as much information on the buyers as possible, including the date they saw your home.

TIP

Keep your sign-in register until you sell your home and escrow closes, or for at least six months if it doesn’t sell. It can be a great resource that you can refer to, sometimes calling potential buyers back at 1 or 2 month intervals to see if they’ve changed their minds and would like to reconsider and see your home again

"Co-broking" is a term that has special meaning for those selling "by owner".

First off, it is "co-broking," not co-brokering. As those in the field know, this refers to agents sharing a listing. For example, an office with a listing will "co-broke" with another office, which may have a buyer. If there’s a sale, the agents will split the commission.

When it comes to selling "by owner", it is possible, even desirable, for you as the seller to co-broke your own property.

But, you may be wondering, how can I do this when I’m not an agent? The answer is that when you’re selling "by owner", you’re performing the functions of the listing agent (or, at least, you should be!). You’ve put a sign in front, you’re advertising, you’re taking phone calls, you’re showing the property and on and on. Therefore, you can claim the equivalent of half the commission.

In a typical real estate sale where there’s a 6 percent commission, the listing office gets half the commission (3%). The other half (the other 3%) goes to the selling office, the agency that produces the buyers. Your half is the same as the listing office’s half, when you deal with an agent while selling "by owner". Here’s how it works:

WHEN A BROKER HAS A BUYER

Often, an agent will call a FSBO seller and say that he or she has a potential buyer for your property. They will ask if you’re willing to co-broke? What does the agent mean?

What the agent wants to know is whether or not you’ll give them the selling office’s share of the commission? In other words, if they bring in a buyer, will you pay them a half, or a 3 percent, commission? (As noted, since you’re doing the work of the listing office, you’ll be keeping the other 3 percent.)

If you’re agreeable, they’ll usually want you to sign a short term listing (typically a day or two), to protect themselves, and then they’ll produce the buyer. If you sell, you’ll owe them that 3 percent commission.

SHOULD YOU DO IT?

I would. Many "by owner" sellers are purists. They are determined to pay no commission at all. They hope to find a buyer on their own.

If you feel this way, more power to you. But, keep in mind the odds are stacked against you. The majority of purist by-owners, fail.

On the other hand, why not go with a bird-in-the-hand? A broker who has a buyer for your property could mean a quick sale. And you’ll still only be paying half the usual commission. Just beware of a broker who might run a "pretend" buyer through your home hoping to trick you into signing a long-term listing. (This would be unethical conduct on the part of an agent.)

TIP

Don’t expect the selling office to do your work for you for half a commission. They won’t want to handle disclosures, run your end of the escrow, help you clear title or all of the other work that a listing office normally does. For that, they will want a full (5 or 6 percent) commission.

On the other hand, don’t do this work yourself, and still end up paying a full commission!

Did you know?
. . . the typical FSBO home sold for $198,200 compared to $230,000 for agent-assisted home sales.

FSBO Methods Used to Market Home:
Yard Sign . . . 61%
Friends/neighbors . . . 46%
Newspaper ad . . . 37%
Open House . . . 29%
Internet . . . 17%

Most Difficult Tasks for FSBO Sellers:
Getting the right price . . . 14%
Understanding paperwork . . . 17%
Preparing/fixing up home for sale . . . 16%
Attracting potential buyers . . . 9%
Having enough time to devote to all aspects of the sale . . . 8%

Source: 2005 National Association of REALTORS® Profile of Homebuyers and Sellers 

We first need to get some common anxiety issues out of the way. There is no curse on your house. Real estate agents are not conspiring against you. Home buyers are not tasteless idiots. Well, not all of them. If you’re stuck owning the house that won’t sell, there has to be an identifiable reason and you should be able to find out what it is. This is particularly true in the current real estate market.

The single biggest and easiest issue to address is the price of the home. Simply put, are you being reasonable when it comes to price? What are the comparable home sale prices in your area and how does your price compare to the sold houses that most resemble the condition of yours? If you are asking for more than similar houses, finding a buyer is going to be difficult. Remember, the issue is the appraised value, not what you subjectively think your home is worth.

One area where people get into trouble is improving beyond their neighborhoods. This occurs when you pursue home improvements that add substantial value to your home, but can’t be supported by the surrounding houses. For example, assume your home and those around it all appraise in the $250,000 to $285,000 range. If you redo kitchens, bathrooms and add a full second story to the tune of $150,00, your probably think your home should be worth roughly $400,000.  This is incorrect. Nobody is going to buy a $400,000 home in a $250,000 neighborhood. In such a situation, your best bet is to hold on to the house and pray the neighborhood appreciates over time.

If price isn’t the issue, you need to objectively evaluate how your house is different from those in the neighborhood. Ask a realtor to come take a look at the house and offer suggestions. If all else fails, hire an appraiser to come appraise the house and pay very close attention to the report.

Finally, one of the biggest problems I see with houses on the market is a lack of charm. It may sound superficial, but you want a potential buyer to be able to see themselves in the home. Don’t strip out personal or charming items. Instead, add flowers with a nice fragrance, plants and so on. Buyers are looking for a nice home, not a set of hospital rooms.

What do potential buyers really think about your house? Why didn’t they make an offer? Is there something you could be doing to facilitate a quicker sale?

 One problem many owners face when trying to sell their home themselves is dealing with buyer comments. Some buyers will tell it like it is. When they do, will you be too emotionally involved to take it as anything other than an insult?

Even worse are the buyers who won’t tell you the truth. Most people don’t like to be perceived as rude, and rather than give the seller the whole truth, they simply say they’re going to "think about it" or they’ll "be back". Unfortunately, these comments don’t help you make the adjustments that may be necessary to get the home sold.

Think about it - giving your house some market exposure just isn’t good enough. Maximum exposure brings buyers to your door. That’s why companies like McDonalds buy billboards, run ads on radio and television, place ads in magazines and newspapers and put those golden arches on top of some pretty high poles. Even though we’re not likely to forget who they are, they know that we just might spend our money somewhere else if not constantly reminded that they’re out there, ready to serve us.

Homeowners seldom have the resources to advertise their home sale on their own. If you’re not sure about the exposure you’re providing for your home, it may not be enough.

The one thing constant about life is change. You’re life is about to change with the sale of your home; and, as your neighborhood Realtor, I wish you an easy, safe and profitable sales experience.Selling your own home may seem easy at first, but there are various pitfalls for the novice seller if indeed You are one.

If you have any questions or if I can help you find a new home, please email a reply to this message or call me. I welcome the opportunity to work with you.