Knowing that the sales commission to a broker on a $200,000 home could be $12,000 provides motivation for some homeowners to consider selling their homes themselves. The key to success in a fizbo (for for sale by owner) is to know what price to ask for your home. Asking too little could cost you much more than the commission paid to a broker. Setting the price too high keeps potential buyers away
Many homeowners begin by contacting a few brokers to get their opinions on how much the home is worth. Brokers are often quite willing to give their opinions because the homeowner might list the home with them if it does not sell quickly. Placing a for-sale sign on your lawn and spending about $300 on advertising the property should keep your telephone ringing for a month or so with all types of inquiries. If your home does not sell by then, you might consider listing it with a broker. Brokers require that homeowners sign a listing agreement permitting them to list the property exclusively or with a multiple-listing service. A multiple-listing service may work best because it allows every broker in the community to show and sell the home. Brokers “qualify” prospective buyers distinguishing between serious buyers and people who are just looking or cannot afford the home. If your broker cannot find a buyer within 60 days, consider signing an agreement with another broker that might prove more aggressive in advertising and selling your property. If a sale occurs (or begins) during the time period of the listing agreement, you must pay a commission to the broker for any sale to a buyer not listed as an exception in the listing agreement.
Selling Carries Its Own Costs
The largest selling cost is the broker’s commission. These commissions often amount to 6 percent of the selling price of the home. Some sellers are unaware that brokers may negotiate their commission. Smart sellers also pay for a title search, a professional appraisal, and their own home inspection as well. Most mortgage loans are paid off before maturity because people move and sell their homes. Mortgage loan contracts often have a clause that specifies a prepayment fee or penalty, which can range from 1 to 3 percent of the original mortgage loan. On a $160,000 mortgage loan, for example, the charge might vary from $1600 to $4800. Usually, the penalty is only for an early payoff in the first few years of the loan. Local communities may assess real estate transfer taxes. These taxes are paid by the seller and also possibly the buyer. The tax is based on the purchase price of the home or the equity the seller has in the home. These tax rates can be as high as 4 percent, that is, $8000 on a $200,000 home. When paid by the seller, they may affect the offer that the seller is willing to accept for the home.
Be Wary of Seller Financing
Some sellers who have experienced trouble when marketing their homes have successfully resorted to many variations of seller financing, although difficulties can arise with these options. Suppose you have a home worth $200,000 with a mortgage loan balance of $90,000 and equity of $110,000. The buyer assumes the existing mortgage loan, puts up $40,000 in cash, and takes out a second mortgage from you to repay the $70,000 over five years. At closing, the broker receives a commission of $12,000, and you come away with only $28,000 cash a small sum to use in making a down payment on another home. Also, seller financing carries a risk that the buyer may not be able to make the second mortgage payments to you and could potentially default on the loan.
Many homeowners begin by contacting a few brokers to get their opinions on how much the home is worth. Brokers are often quite willing to give their opinions because the homeowner might list the home with them if it does not sell quickly. Placing a for-sale sign on your lawn and spending about $300 on advertising the property should keep your telephone ringing for a month or so with all types of inquiries. If your home does not sell by then, you might consider listing it with a broker. Brokers require that homeowners sign a listing agreement permitting them to list the property exclusively or with a multiple-listing service. A multiple-listing service may work best because it allows every broker in the community to show and sell the home. Brokers “qualify” prospective buyers distinguishing between serious buyers and people who are just looking or cannot afford the home. If your broker cannot find a buyer within 60 days, consider signing an agreement with another broker that might prove more aggressive in advertising and selling your property. If a sale occurs (or begins) during the time period of the listing agreement, you must pay a commission to the broker for any sale to a buyer not listed as an exception in the listing agreement.
Selling Carries Its Own Costs
The largest selling cost is the broker’s commission. These commissions often amount to 6 percent of the selling price of the home. Some sellers are unaware that brokers may negotiate their commission. Smart sellers also pay for a title search, a professional appraisal, and their own home inspection as well. Most mortgage loans are paid off before maturity because people move and sell their homes. Mortgage loan contracts often have a clause that specifies a prepayment fee or penalty, which can range from 1 to 3 percent of the original mortgage loan. On a $160,000 mortgage loan, for example, the charge might vary from $1600 to $4800. Usually, the penalty is only for an early payoff in the first few years of the loan. Local communities may assess real estate transfer taxes. These taxes are paid by the seller and also possibly the buyer. The tax is based on the purchase price of the home or the equity the seller has in the home. These tax rates can be as high as 4 percent, that is, $8000 on a $200,000 home. When paid by the seller, they may affect the offer that the seller is willing to accept for the home.
Be Wary of Seller Financing
Some sellers who have experienced trouble when marketing their homes have successfully resorted to many variations of seller financing, although difficulties can arise with these options. Suppose you have a home worth $200,000 with a mortgage loan balance of $90,000 and equity of $110,000. The buyer assumes the existing mortgage loan, puts up $40,000 in cash, and takes out a second mortgage from you to repay the $70,000 over five years. At closing, the broker receives a commission of $12,000, and you come away with only $28,000 cash a small sum to use in making a down payment on another home. Also, seller financing carries a risk that the buyer may not be able to make the second mortgage payments to you and could potentially default on the loan.
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