Monday, August 1, 2005

Selling Your House Without An Agent

I recently went through the process of selling my house without an agent. Several people asked me to let them know how it went. So here's my report.


The housing market in Seattle is insanely hot this spring of 2005. I had heard many, many stories about houses selling for $20K over their asking price and the new rage, in Seattle at least, is for buyers to overbid and then waive the inspection. Clearly, there is a problem with supply and demand. A friend of mine had recently moved out of my neighborhood in Renton and bought a house up north. He sold his house himself and saved $9000, which was quite compelling.

Before I had made up my mind to try to sell our house ourselves, I interviewed a real estate agent who was a friend of a friend of ours. She came over, looked through the house and came back with a presentation. The presentation consisted of 1/2 Windemere propaganda and 1/2 comps. She suggested we sell our house for $310K. After thinking it over, my wife and I decided to try to sell our house ourselves and here's how we made that decision.

  • We weren't in a hurry to sell our house.
  • If selling our house didn't work, we could always hire Windermere.
  • Given the amount of money the real estate agent would make, we didn't think there was any way they could actually earn that money.

Preparation

We rented a 10x20' storage place for $200 a month and began the process of boxing up personal items. This took far longer than we initially thought it would. I'd say it took about 4 weeks. Taking all our neo- collegiate furniture to goodwill and the dump was the easy part. Note: Goodwill is now very selective about furniture they will accept. It has to be perfect: they turned away a beautiful couch whose only flaw was a small stain that probably would have come out with some Resolve or something.

We had our carpetting replaced -- you can do this cheap at Home Depot by selecting from a small set of carpet they have on hand to do quick installations. 500 square feet was about $1400 installed. That plus new coats of paint in the rooms that needed it made the house feel much newer and cleaner.

I really think that these three preparations, emptying the house of nearly everything, replacing old carpet and painting, did wonders to make the house look ready-to-move-in to.

Choosing a Price

I did my own "comps" by watching houses on Windermere's web site and getting a list from "homegain.com." I matched number of rooms, sqft and date built and finally chose something that was a little higher than the average of all. Our final choice was $330K, significantly higher than the agent's recommendation -- but a nearly identical house just down the street had recently sold for more than that.

Update: the appraiser recently confirmed that the price I had selected was just right for the neighborhood.

Listing

To list or not to list? If you live in a neighborhood where houses are going extremely fast,you probably don't need to list if you don't want to.

BUT... I was thinking that if I listed I might be able to trigger a bidding war because more people would see the house. So I decided to spend a little time and money and do a flat-fee listing. Listing on the MLS turned out to be easier than I thought it would be. I called a small local real-estate company and asked if they did flat fee MLS listings: of course they tried to tell me that was a crazy idea but finally they recommended I talk to Joe Fausto at By Owner International in Renton. Joe tried to sell me a %1-commission kind of deal but I was firm: I wanted just a listing and lockbox. He said fine, $500 will get both.

A note about the lockbox: today's lockboxes record the ID of all agents who unlock it. This prevents the rampant theft that was occurring before these were in use. Demand that your flatfee place provide you with this service as part of the $500.

Photos

Most real estate firms use professional photographers and stagers to photo your place. I figured that since our house was almost totally empty, we could do without the stager and just take digital photos ourselves. We did so and I brought Joe a CD with 9 pictures on it (that's the limit right now). Obviously take pictures of the front of your house for the "main" picture and then be sure you get the best parts of the house. I can't verify that our photos were "great" or "bad" or anything but they looked good to me.

Commission

In order to maximise the number of possible buyers and thus trigger a bidding war, I decided to offer the standard 3% buyers agent commission.

Last Minute Preparation

It was intensely stressful the week prior to the day-of-listing. We knew the house had to be as perfect as it was going to be so we worked on the house until 2 in the morning every night.

Or tried to. I'm sure that this would not be different if we'd have had an agent but it was tempting to call Joe and delay the listing for another week.

Zero-Day

I provided Joe with all the information he needed for the listing and told him to "list" the house on a Wednesday. I'd heard that agents often preview a house (drive by) before taking a client there so I wanted to give the agents a few days to do the drive-bys during the weekdays so they could bring their clients by on the weekend. I think this is actually what happened, because only a few people came by during the week, but I think up to 10 buyers came by on each of the weekend days.

I listed my own cell # as the contact number in the listing -- we decided we would always be "out" when people came by to look at the house and we were.

One of the last things I did before the listing went "live" was to buy a silly "For Sale By Owner" sign for $23 for my yard. I put my cell # on it. I bought it more to let the agents know at a glance which house it was rather than to get an actual sale.

I created a little one-page brochure with some of the better house pictures and a marketting-type list of the best features of the house and printed them out on glossy photo paper and left them in a pile on the counter. I then gauged the success of the day by how few were left.

So did it sell?

Sadly, in spite of my hopes, there was no bidding war. I talked to a few of the agents who had shown the house and they said it was priced just right. There's a lot of interest in the neighborhood but it is Renton after all, not a lot of bidding wars happening like in Seattle. Here's the funny part: it was the little $23 "For Sale" sign that sold the house. A young couple (Annie and Joel) from Seattle was driving around in the neighborhood and saw the sign. They called me and came by the next day while I was out fishing. They talked to Amy and told her they loved the house and were prepared to offer full price. This was 5 days after the house was listed and the little sign put up.

The fact that they had no agent threw me for a loop because I was counting on the buyer's agent to do all the work for us. On the other hand, no buyer's agent meant I'd save another $9000K. So I ended up doing all the coordination myself, but it wasn't that bad at all. Certainly not $9000-worth of work. Here's what I had to do.

The Paperwork

The Purchase Agreement

The first thing you need once you have a verbal agreement is get a signed Purchase Agreement. This is the document that everyone works off of. I called my bank and asked their mortgage guy to recommend a real-estate lawyer, which he did: Allen Sakai in Bellevue. So I called him up and asked him for to draw me up a "neutral" agreement (one that favored neither the buyer nor the seller). This document is sometimes referred to as "Document 21" by the MLS. All the agents have copies of the document in their cars so they can draw up instant purchase agreements. Sakai asked who I wanted to do the escrow. I said "pick someone good -- I'll go with whomever."

Anyway, the Purchase Agreement asks for a bunch of information such as the legal description of the property. Make it easy on yourself and just find the Purchase Agreement that you signed when you bought the house and give that to the lawyer. I agreed to leave all the appliances and throw in a little closing money for the buyers. All of that stuff is covered by the Purchase Agreement. I told Annie, the buyer, to find herself a real-estate lawyer to review the purchase agreement so she'd be satisfied with it. She did and she was.

We had Annie and her boyfriend over to the house and we sat there the four of us with no lawyers present and initialed and signed every page (our agreement was 5 pages I think).

The Disclosure Form

There were two other "action items" that had to be completed. On my part, I had to provide a legal disclosure form to the buyer within a certain amount of time. I had my lawyer give me the form and I filled it out. This form is called the infamous "Form 17" -- the buyer can back out for any reason up to 3 days after receiving this form, unless they sign immediately that they waive their right to do so. So I had Annie sign it and gave her a copy. I thought the question about whether the house had ever been used as a meth lab was funny.

The Inspection

The other action was that she had a certain amount of time to have the house inspected. She had someone there the next day. He found three small things and we agreed to fix them.

Paperwork Conclusion

Annie sent a copy of the purchase agreement to the escrow people and they began working off that document. I sent them the earnest money check that Annie had given me.

So that was pretty much that. 1. Purchase Agreement. 2. Disclosure form. 3. Inspection. That's about all there was to the paperwork. Its pretty easy because once you take care of those things, the escrow/title company and the banks handle everything else (such as the appraisal, etc).

Final Comments

My conclusions about this process: If you live in a desirable neighborhood, selling right now is easy. So easy in fact that I would recommend skipping the seller's agent. My total cost to sell my house myself was $500 for the listing, $360 for the lawyer and $23 for the sign = $883. Compare that to $19,800 if I had paid 6% to real estage agents. We saved $19,000. You might even skip listing on the MLS unless you too are trying to trigger a bidding war. Another reason to skip the MLS listing is that you save another 3% if you find your own buyer, as I did. Of course, you could do the MLS listing and not offer any agent commission but don't be surprised if no one shows your house. I have friends that tried this and had to eventually offer 1.5% to get an agent to show the house, and even then the agent was bitter about it (whatever!). If the buyer is cooperative and really wants the house, etc, the process of doing the paperwork is a piece of cake. I suppose that if my buyers had been trying to angle me or rip me off well then it would be nice to have an agent to spot those kinds of things. You decide. If you don't live in a hot neighborhood (houses in your neighboorhood take a long time to sell) then I'd consider getting the agent. BTW, I'd always use a buyers agent when buying a house (unless you have a certain house in mind, such as a friend's house). There's no reason not to. They see houses on the MLS first, they have a good feel for neighborhoods and they have better search tools. Plus, they can submit bids in the form of purchase agreements so you can lock the property quickly. We ended up using our friend of a friend agent to help us find an awesome house. We bought the first house she took us to, which just goes to show you how good she is.

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