Options for a Home Seller - Part 1
Part 1: Traditional Listing
Part 1 of an 8 part series -
Goal: To educate a home seller on the options for selling their home.
“What are my options?”
This is one of the most common questions I receive from home sellers, and it’s a valid question. How do you, as a home seller, expect to make an informed, intelligent selling decision without knowing all the options you have available? The short answer is you can’t. But don’t fret! The goal of this article is to clarify and explain all the options you (home seller) have when liquidating your property.
Below is an outline of the options at your disposal (in no particular order):
- Traditional Listing
- Net Listing
- Mortgage Assumption
- Cash sale (off market)
- Owner financing
- Short sale
- For Sale by Owner (FSBO)
Now that you know all eight options let’s dive into more detail describing each option and cover a few pros and cons.
- Traditional Listing: According to Realtor.com a real estate listing means, “a certain brokerage company has a contract to “list” a seller’s home for sale on the marketplace. The agent called “listing broker or agent” puts it on the MLS and it is then referred to as a listing.”Now, what does that mean in layman’s terms? You sign an exclusive right to sell with the realtor and they market the property to all the buyers on the MLS (multiple listing service). Realtors can also do pocket listings where they don’t market the property on the MLS but rather to individuals or house buying companies.
- Large exposure to buyers. By listing on the MLS you will have the largest exposure to buyers, way more than a FSBO or an off market deal.
- Can create a “bidding war”. A large number of buyers can create a “bidding war” where the buyers are competing with one another, sometimes resulting in offers above asking price.
- No dealing with buyers. You as the seller don’t have to deal directly with the buyers, that’s the realtor’s job. Your realtor will handle all the paperwork and hopefully be working in your best interest to close the deal (realtors are held to a Fiduciary standard meaning, by law, they are required to act in your best interest).
- Showing prep. Traditional listings should be show ready, meaning you should clean the property and make the necessary repairs. You can list the property as-is but you will get a higher sales price if you’ve completed the necessary maintenance and repairs.
- Showings. You must show the property to prospective buyers. You can set the timeframe but typically buyers want to come after work or on the weekends, which can be inconvenient with kids or a busy schedule. Also, you should keep the house clean because you never know when there will be a showing.
- Commissions and Fees. With a traditional listing typical realtor fees are 6%, 3% for both your agent, and the buyer’s agent (6% total). These are negotiable! There are also the closing costs with a traditional listing; title policy, survey, attorney fees, escrow fees, document prep, courier fees, wire fees, tax certificates, etc. These fees all together average between 1-2% of the sales price, totaling about 8% in commissions and fees. Again, these commissions and who pays for the fees (buyer or seller) are 100% negotiable.
- Buyer financing. With the increased lending restrictions put in place after 2008, there are numerous borrowers who find it hard to get financing. An accepted offer can be weeks into the transaction before you find out the buyer can’t qualify.
- Timing. Regardless of what the realtor tells you, no one knows when you will find the right buyer, and when that buyer wants to close. The house could sell the first day on the market, or after 300 days and numerous reductions. The fact is the close date is uncertain.
- Home inspections. Most, not all, but most buyers will complete a home inspection, where a licensed inspector evaluates your property for 3-5hrs. If you have any neglected maintenance or repairs, the home inspector will find it and report it to the buyer.
Continue with Option 2 of our 8 Part series!