Question:  I found your website doing a search for “for sale by owner” information. I am considering the pros and cons of listing this myself, or enlisting a broker to help me out.  I am impressed by the amount of information you provide for free.

Although my property is in Kitsap County, I am writing to ask your advice regarding setting a price that is well above the current market value.  The reasons I am considering this are:

1. I am in no hurry for a sale. If it takes the market improving to the point that my asking price is more obtainable, I may be willing to wait for that.

2. Property is 1+ acre in a location that would be perfect for a small business owner. we are on a busy road, and although right now it is zoned residential (the home is manufactured), there are several businesses very nearby. It is only a matter of time before this property is used commercially as well.

Thank you for your time and thank you also for being so generous with the information on your website.

Joe [not real name]

Answer:

One of my pet peeves is overpriced real estate. An overpriced home on the market can actually cost a seller a lot of money. A home only sells for fair market value (FMV), not more than buyers are willing to pay. That’s what FMV is–what a ready, willing, and able buyer is willing to pay for a home. Yet we still see both FSBO’s and agent listings on the market above FMV, and some are substantially above FMV.

If your home is for sale at a price above FMV, you can end up selling it for even less than FMV down the road. I’ve been preaching this for almost 20 years now, but finally there is authoritative proof. [See my earlier blogs on this: Save $10,000 Buying and Port Angeles and Sequim Overpriced Listings]

The proof is in the Sunday, October 28, 2007 issue of the Seattle Times at page E7:

“Real estate agents often warn sellers about the danger of overpricing a house. Now they have evidence to show skeptical clients: research by Jeffrey Otteau, a New Jersey appraiser. He found that in a market where prices are declining, sellers who ‘test the market’ with a high price usually end up with a lower price than those who price realistically.”

The article points out that a house that is priced right for the current market sells within a reasonable time, but one that is overpriced will sit on the market while the market prices decline, and when the home does finally sell, it sells for less than the FMV of that home when it was first on the market.

The statistical proof showed that in a market where a home that was listed for $599,900 (FMV) and which sold for $599,000 (almost full listed price within 30 days), a comparable house that was overpriced at $634,900 actually sold for $585,000 months later when the market had declined even a little more.

There’s another solid reason not to overprice your home.  When a home first goes into the MLS and is advertised at that price, you have an opportunity to reach a small percentage of buyers who may be interested in your home, can actually afford it, and who are ready to do so now.  An overpriced home may cause them to look elsewhere.  And this is the clincher, buyers rarely come back to look at the same home again even after you’ve reduced the price.  That’s true.  Not only will most buyers not come back to see if you’ve reduced the price in the months to follow, but by the time you actually do reduce the price in the MLS, those original buyers are long gone, most having purchased a home that was not overpriced.  So as a practical matter, you have one shot at each buyer.

Sometimes a seller who wants to gamble by asking far more than his home is worth will say, “I’m in no hurry to sell.  If it doesn’t sell, I can hang on to it until prices go back up.”  If that’s your sentiment, then don’t waste time and effort listing it for sale when you know it won’t sell.  Hoping you will get lucky and find an uninformed buyer who will pay way more for your property than the true FMV is a pipe dream.  Buyers are very intelligent these days, especially with the availability of the powerful tools on the Internet.  If you want more, then don’t list your home until prices actually do appreciate to that level.  Believe me, no one will buy an overpriced home.

This is such an important lesson for homeowners who want to “test the market” with an excessively high price. Don’t do it. You could lose a lot of money by the time you end up selling it for much less in a slower market.

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Selling your home as a FSBO (for sale by owner) puts you at a huge disadvantage from the starting gate. I’ve seen that many times over the past 30 years. I don’t do any cold calling of FSBO’s. I’m pretty darn busy just working with buyers, and I don’t have the time. Keith Sorem, an agent in Glendale, California, wrote a concise article on FSBO’s, and with his permission I’ve reprinted it here.

Given the current market condition I suggest that you think long and hard about your decision [to sell on your own]. A couple of helpful facts:

In a “normal” market about 10% of homes sell without professional representation. This is not a normal market.

There have been significant changes in how appraisals are conducted since May 1st causing major problems in valuation. so buyers who finance their purchase are having to cancel escrows, sellers are having to lower prices.

In August there are new underwriting guidelines coming out, which are going to make it even harder for buyers to qualify.

According to a recent survey buyers have a Realtor represent them about 90% of the time. From the buyer’s perspective they get a “free agent”, so it is a good deal for them, In most markets there is a lot of inventory, so the problem by selling on your own is that the Realtors are not looking on other websites for their buyer’s homes. Your listing basically does not exist.

My suggestion is that you should interview a few Realtors, have them analyze your property and situation, then if you want to try it on your own, go ahead, you might get luck.

Know that 76% of sellers eventually list with a Realtor. 5% sell to someone they know, 5% sell to someone they don’t know. When they sell they, on average, sell for 16% less than the average sold by Realtors.

For a full discussion of the two multiple listing services and how marketing real estate compares, including the FSBO issues, see the Sequim MLS and the NWMLS.

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If you are a For Sale By Owner, FSBO, and you want the best professional advice from years of experience to help you make tough decisions, Chuck Marunde is offering a free consultation.   Now any Realtor can offer a free consultation, right?   This is much more.

First, you get a consultation with a 30-year veteran who practiced real estate law for 20 years.   He’s been involved in nearly every aspect of a real estate transaction.   He’s negotiated hundreds of transactions, drafted hundreds, and helped clients avoid litigation and resolved many difficult issues.

Second, your free consultation includes what you would expect of any Realtor, plus honest and frank discussions about how selling really works in the real estate industry, how the competing multiple listing services actually work (or don’t), what advertisting works and doesn’t work, what role the Internet plays in marketing your property, and where the buyers are coming from and exactly what they want.   I track these subjects with research and analysis, and I offer these free in this consultation.

Third, I open up what I am doing, so you can see how to do what you need to do.   Now, I’m not going to share my trade secrets that I don’t want other Realtors to know about, but you will be surprised at how much I do share.

Fourth, you will be so impressed with how hard I have worked to create the systems I have in place that there is a significant probability that you will want to list your property with me, BUT there is absolutely no obligation and no pressure to do so.   I won’t even ask.

There’s a lot at stake in this market if you want to sell your home.   Don’t you want to be sure that you will do everything possible to get the highest price in the least amount of time?

Email me or call me at 360-775-5424.   I’d be delighted to share whatever I know and have learned with you.

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Do you have a Sequim home for sale, maybe a FSBO?   Retired real estate attorney Chuck Marunde, now a real estate broker, Internet marketing consultant, and writer, wrote an eBook for homeowners who have thought about selling their own homes.   The eBook is short and to the point, but with the content and the resources made available in the eBook, there are over a 100 pages of solid content, especially for the Sequim and Port Angeles homeowner.

The subjects covered include topics on arriving at an accurate fair market value, appraisals, advertising and marketing, negotiating like an expert, an MLS tool for homeowners to look at what is for sale now in Clallam County, free classifieds for advertising, a list of document titles for the legal documents that may be needed, and traps for the unwary (like the Form 17 Seller’s Disclosure).

Download Free FSBO eBook

FOR VISTA users:   If you are running VISTA on your computer, after you download the program, you open it by right clicking on the icon and then clicking on the “Run as Administrator” button.   On XP or other operating systems, you don’t have to do that, but VISTA is quirky.

Offered as a courtesy of Chuck Marunde, J.D. and SequimRealEstateNews.com.   May I also recommend a new online newspaper at Sequim-News.com.

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From a FSBO in Sequim I received the following question.   Enclosed is my response.

Question: I’m interested in selling my own home for one reason–to save the real estate commission.   What’s wrong with that?

Answer: Nothing.   That’s a good American reason to be a For-Sale-By-Owner.   The question is, can you?   In other words, do you know how to price your home?   Do you know how to collect accurate information on fair market value?   Do you know how to make adjustments in the prices of the comparables?   Do you know the most and least effective ways to advertise and market?   Do you have experience developing compelling sales scripts that will attact buyers?   What about negotiating?   Can you negotiate for top dollar while not killing a transaction with a good buyer?   Do you know all about terms that change your net proceeds?   Are you aware of the top mistakes that FSBO’s make regularly?   Do you know about tax implications?   Are you a competent document draftsman?   Can you include all relevant terms and langauge without ambiguities?   Do you know what legal documents are required by law in Washington and Clallam County, and in Sequim and Port Angeles?   Can you help your buyer get a loan (there’s much more to this step than 99% realize)?   Can you provide the kind of attention and focus needed from the day there is a written agreement with your buyer  until closing?    Iin other words, do you know how to be a transaction coordinator?

If your answer to all of these question is an intelligent “yes,” than I encourage you to sell your own home.   But if you can’t talk for 20 minutes on each of these issues, you may be  unprepared.   It takes many of us a lifetime to really begin to get good at many or most of these steps.   No one is naturally good at all of these things.    There are too many details that must be learned on the street.    If you have gained the knowledge and experience to competently handle all these questions and all the issues  within each question, I would say, “Go for it, and God speed.”

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Sequim FSBOs and Port Angeles FSBOs are having a tough time selling their homes, just as real estate agents are listing but not doing much selling.   The market is slow, and on top of that we are in the slow winter months for home sales here.

While it is true that sales are few and far between right now, it is also true that the Sequim and Port Angeles areas have not suffered the crashing prices that so many other areas of the country have.   Las Vegas is down by 30% and even more in some areas.   My son recently moved to Vegas in a job transfer, and has made an offer on a 3 bedroom, 2 bath ranch home in a nice area.   The home was listed at $139,000, and his offer was accepted by the owners at $129,000 subject to a short sale (the bank approving the purchase since the net proceeds will be less than the current balance of the owner’s mortgage).   Okay, that’s an amazingly low price for a nice home like that in a nice area, but the Vegas real estate market crashed.   Developers and builders overbuilt, and the economy there has taken a huge hit, there have been job layoffs, and a lot of homes are in foreclosure.

No so with Sequim and Port Angeles.   Some might say, “Gee, I wish we could buy a house in Sequim for $129,000.”   If you could, that would mean that our market had crashed, that our local economy was in shambles, and that thousands of homes are in foreclosure.   But none of that is true, so you cannot buy a house here for $129,000.   Thank God!   Thousands of homeonwers here are thankful that their homes have not been devalued.

This is actually good news for Sequim and Port Angeles homeowners and investors who are thankful they haven’t suffered terribly like so many around the country.   While this may not be fantastic news for buyers, it should be encouraging, because it means we have a stable real estate market here, and that is very good news.   Our prices are still down and sales are down, but nothing like Vegas.

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You can put lipstick on a slow real estate market, but it’s still a slow market.   You can lower the price on your home to sell it quickly, but it’s still a slow market.   Lowering the price may not be the powerful incentive it would be in a normal market.

You can stage your home with the nicest furniture and decorations, but it’s still a slow market.   You may have a beautiful home in a wonderful area, but it’s still a slow market.   You can have $40,000 in landscaping, but it’s still . . .

If buyers are not showing up, and they are not, you can use the brightest red lipstick on the market, but it’s still . . .

I have talked with many homeowners who have told me they want to sell their homes quick, within a month or two.   Hmm.   Maybe we can do that, if we connect with one unique buyer who falls in love with this home, but it’s still . . .

A slow market requires many things.   Certainly it requires expert marketing skills to connect with the small number of buyers who are qualified and serious about buying now.   But it also requires patience and realistic goals.   Here’s the rule of patience:   Be patient now, or frustration, anger, and time will make you patient.   As John Wayne might have said, “We can do this the easy way or the hard way.   Which will it be?”

But being patient is not enough.   You also have to be smart in how you market your home, especially in a slow market.

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Are you a FSBO, aka for-sale-by-owner, aka for sale by owner?   Or are you planning to list your home for sale with an agent?   In either event, in order to sell your home for the highest possible price in a reasonable period of time, you must have a good advertising plan.   If you don’t, you could get stuck with your house on the market for a long, long time, or you could sell it for much less than you should get at FMV (fair market value), or both.

This is the 3rd installment in our series entitled,   “How to Advertise a Home for Sale. ”   Today we look at Using the Internet to Sell Your Home. The Internet is unquestionably the most powerful tool for buying and selling real estate today.   Traditional advertising has long since peaked and has been declining in effectiveness for at least a decade.   Today, newsprint and magazines and billboards are three of the least effective means of advertising real estate.   This does not mean these tactics should never be used.   It does mean that they should be used sparingly, and rationally based on the return for the dollar spent.

For a long time now, the Internet has been used by real estate agents to post their listings in their local multiple listing service (MLS), and while that was originally only accessible by members of the MLS by subscription, it has become searchable by the public through what is called an IDX accessible database through the real estate agents’ websites.   It doesn’t include all of the data available to agents, but at least it is a nice way for the public to plug in their parameters and be able to see what active listings are available. The Internet also has become a powerful tool to advertise listings on agent websites and blogs, as well as numerous subscription and online classifieds.   Most agents (about 98% of them in my speculation) still are not in tune with this technology and are not using it to benefit their clients.

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Selling your own home in Sequim or in Port Angeles requires marketing knowledge, and the best marketers have been through the school of hard knocks, so they’ve learned some valuable lessons in selling a home.  It takes courage to sell your home, especially in these challenging times, and there is risk that you will fail.  Marketing is risky, because there are things that work well, things that don’t work at all, and some things that work a little.  A FSBO might be willing to take on the risk to save a commission.  This series is intended to provide guidance to help you avoid the major traps for the unwary.  Don’t be like the cat in this photograph, which is taking incredible risk when it doesn’t have to.  Risk should only be taken when it is balanced with the reward, and one should never take unnecessary risk.

In this article, Part 2 of our series on How to Advertise a Home for Sale, we talk about:

Traditional Advertising – What Works and What Doesn’t Work.

Traditional newspaper advertising as a means to sell real estate has been dramatically losing its effectiveness over the past decade.  This is common knowledge among top producing salesman in busy metropolitan areas, and many successful Realtors have testified that they have substantially reduced or even stopped using the newspapers to sell their listings. What’s interesting to me is that newspaper advertising is not only one of the least effective ways to sell real estate today, it is also one of the most expensive venues to advertise in.

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How do you advertise a Sequim or Port Angeles Home for sale in this slow market?   That is the question.   Get the answer wrong, and two bad things can happen to you:

1.   You could sit on a house for sale for a year and still not sell it.   That is a major non-event that disrupts lives and plans.

2.   Even worse, you could actually sell your home and lose a lot of money.   Money is hard enough to earn without burning it up for lack of knowledge.

So how do you develop a powerful and effective marketing plan that will actually sell your home in this market?   This assignment is far too big to tackle in one article, so this is the first in a short series that will answer the question with solid principles that work.

Most home owners who decide to sell their home will either list it with a real estate agent or become a FSBO (pronounced “fizbo”).   The term almost sounds derogatory, but no offense is intended by the term FSBO.   It is the common nickname given to a for-sale-by-owner and has been for at least three decades.   The point is simply that either your Realtor has to be an expert in marketing to sell your home, or if you are a FSBO, you must be the expert in marketing.

In my 30 years in real estate, first as a Realtor and Associate Broker in Alaska in the mid ’70’s, then as a real estate attorney for 20 years, and now again as a Broker, I’ve seen   many Realtor’s try to sell real estate who did not understand marketing.   Remember the saying, “He knows just enough to be dangerous.”   That cliche definitely applies to those who would market real estate today.   I think most home owners understand that just because a person gets their real estate license, that does not mean they have mastered   real estate.

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