Everything You Need to Know About Closing Costs for Sale by Owner Home?
Are you preparing to sell your house and wondering and worrying about all that entails? Should you select a real estate agent and pay their commission rate? Should you try to sell your home yourself?
You might be surprised to learn that 93% of home sellers work with a real estate agent. Further homes sold with an agent make a median sale price 25% higher than those for sale by owner homes (FSBO).
If you're trying to decide if FSBO is right for you, there are many things to consider. From pricing your property to closing costs for sale by owner sales to how to market for sale by owner house, there is an awful lot to consider.
As you prepare to sell your home, read on to learn more about FSBO home sales, including do you pay closing costs for sale by owner sales.
What Does It Mean to Do a For Sale By Owner Sale?
When you work with a real estate agent, they do the work to get your house sold for you. It's the reason you pay them a percentage of the sale price of your home in commission. The agent will help you to establish your property value and do the marketing to get your home sold.
When you sell your home without the help of an agent, you are responsible for all of the work that a real estate agent would do. This might include:
- Establishing property sales price
- Advertising and marketing your home
- Negotiating with potential buyers
- Preparing for inspections
- Preparing documents for closing
All of the paperwork for sale by owner homes must be prepared for the new buyers mortgage company. You might be surprised by the sheer volume of paperwork needed to close on a house.
Once you have found a potential buyer, you will need to create a purchase agreement and prepare for closing. Some states require an attorney or broker to complete a sale. Typically, the buyer will have their mortgage lined up. You will need a title company to do the transferring of documents too.
Home Sale Closing Costs
One important part of a home sale and often up for negotiation is the closing costs. Closing costs are all of the fees and charges that come with buying and selling a home beyond the actual purchase price of the home.
Closing costs might include:
- Loan origination fees
- Discount points
- Appraisal fees
- Title searches
- Title insurance
- Deed recording fees
- Credit report charges
If you are doing a for sale by owner sale, you would need to know how to figure these numbers or have someone do it for you. Many of the things on this list are calculated by either the lender or the title company.
Closing costs often run between 2% and 5% of the purchase price of the house. Typically, these costs are paid by the buyer not the seller.
Having said that, many experienced real estate agents will tell you that if you want to make a sale, closing costs can become a negotiation point. Sellers who are motivated, for example, might offer to pay part of the closing costs in an effort to get their home sold.
Closing costs can add up quickly and often the amount can be a surprise when it comes time to close. A common term in the industry is something called junk fees. Junk fees are the long list of fees that lenders often tack on at the end, giving them a bigger profit. These junk fees are often not disclosed and can be quite a surprise.
Junk fees might come from:
- Administrative fees
- Application review fees
- Appraisal review fees
- Ancillary fees
- Processing fees
- Settlement fees
As you can see that is a long list of fees that are vaguely explained and can add up to a hefty sum. When you do a FSBO sale, either as a buyer or seller, these fees can create a real issue at closing time.
Other Considerations When Doing a FSBO
There's a reason realtors make such a big commission when they sell your home. There are many aspects to selling a home that you need to be aware of when you prepare to do a sale by owner. Let's take a closer look at some of these considerations.
Property Sales Price
One of the tricky aspects of doing a FSBO sale is getting your house priced correctly.
Often homeowners will either price the house too high. They believe it's worth a certain amount and have personal connections so they can't look at the price objectively. When a house is priced too high, it can sit on the market for too long. When a house sits on the market, buyers assume there's something wrong with it.
On the flip side, sellers under price the home because they aren't using good data to come up with the price. Pricing a home correctly helps it to sell quickly.
A real estate agent will use their access to market analysis to help you price the home correctly. A home price can also be set by having an appraisal done. A home appraiser would come in and consider all aspects of the home, its condition to help come up with a price.
The other consideration related to price is someone else being able to get it financed. Even if you overprice your home and get a buyer, they may not be able to get the financing they need if the price doesn't like up with fair market value.
Marketing Your Home to Sell
It's one thing to decide to sell your home yourself and even be willing to put in the effort. It's a whole other thing to find potential buyers. It would be rare luck to be able to put out a sign and have the house sell.
Real estate agents have access to marketing tools so your house gets noticed by potential buyers. You would need to make sure you have a plan for marketing to get noticed.
Consider having professional photographs taken of the home. If you plan to use the internet to market your home, you need those photos to make a good first impression. Don't just hire any professional photographer, hire one who is used to doing real estate photos.
Finally, be careful to write a compelling description of your home. This is how potential buyers will first learn about it. What are the things you know about the house that you couldn't learn any other way?
Other Real Estate Agents
Here's the truth, other real estate agents might not be willing to show your home to their buyers. One of the reasons homeowners often wish to sell their home as a FSBO is to save on the commission they need to pay a real estate agent. An agent may be unwilling to make potential buyers aware of your home if they don't see a commission in it for themselves.
You should decide if you are willing to offer a buyer’s agent commission. You can include this information right in your marketing materials, then other agents know if helping to sell your house could get them a commission.
Once listed you need to be prepared to handle calls from interested buyers. This means being available to show the house at the buyers convenience.
It is also likely you will field a barrage of calls from real estate agents asking you to consider listing with them.
Other Options to Get Your Home Sold
Many people assume selling their home themselves will save them thousands of dollars, which could be true. But they also don't consider the amount of work and potential for error if they do it themselves.
Before you jump on the idea of doing a FSBO sale, consider all the things you need to know and do. You might decide using an agent is actually worth the cost in the end.
The other option is skip many of these steps and use the internet to help you get your home sold quickly and efficiently. Consider using an iBuyer for your home. How does this work?
You simply locate an iBuyer in your area who has access to homebuyers willing to pay cash for your home. You get a fair home valuation done, you skip the cleaning, marketing showings, etc. There's no need to worry about closing costs and home inspection. The iBuyer will offer you cash and you have your home sold.
Selling Your Home and Understanding Closing Costs for Sale By Owner
From closing costs for sale by owner homes to all the rest of the steps it takes to sell a home, be ready to do the work if you want to sell your home FSBO. Sure, it could save you some commission. But if you have to pay a seller's agent commission and do all the work, is it really worth it?
You might consider finding an iBuyer in your area. Simply enter your address, get a home valuation and find a buyer. There are iBuyers in markets all across the country. To find out if you have an iBuyer in your area, visit our website now.