Understanding the market:
The real- estate market is always changing. It is possible to try and predict its direction, but even major shifts can occur when nobody saw them coming.
A rule of thumb when selling your house is analyzing the market as to where it is currently at.
Many factors influence the real estate market, although the main factor, like many other things in life, is supply and demand.
When the market is “Hot”, it means that properties are selling fast, this market is also known as “seller’s market”. Seller’s markets are beneficial to sellers, as the environment is packed with buyers, investors and new homeowners. In relation to that, not too many people are selling their properties. This is a situation in which demand is in excess of supply, and it drives the prices of properties up.
It is easier to sell properties at a “seller’s market”, although it is possible to sell your house for a good price even when the market is a “buyer’s market”
A “buyer’s market” is describing the opposite scenario. A lot of people are trying to sell their properties, but there aren’t too many buyers. Prices of properties go down, and this is beneficial for buyers of course.
Waiting for the shift:
Many homeowners wait for the market to shift in their benefit, it could be worth it, but it’s also risky.
Not only the market will not necessarily change to your personal benefit, but it might also continue in its direction, putting home-owners or buyers, at a worse position in which they would end up selling or buying because they have to. This scenario is very common, therefore trying to wait for the shift isn’t always the best idea.
2 Ways of selling:
Whether you decide to sell with a realtor or without, depends greatly on the type of property you are selling. If you are trying to sell a distressed property that needs fix and rehab, there could be faster and cheaper ways to sell rather than using a realtor.
The people who buy distressed properties are usually cash buyers, real estate wholesalers who locate cash buyers, or investors. The reason behind it is that banks would not approve financing a mortgage on distressed properties. Banks see distressed properties as not livable, and can’t loan money against them.
If your property is distressed there are people who specialize in locating cash buyers for you. They will sell your house quicker and in an efficient way to an investor, or buy it themselves. You can even get an offer within 24 hours.
Consider using other channels than choosing a realtor.
If your property is at market standard, a realtor can do a good job at selling your house. Usually, it takes more time than locating a real- estate wholesaler or an investor who would give you a cash offer and save you the realtor commission.
A. Selling with a Realtor:
A realtor is an individual who is being compensated for supplying real estate services. Realtors must have a high school diploma, and they must be licensed by the state.
Realtors must take a course of 63 hours and pass a state exam.
It is possible for a person who never dealt with real-estate, to become a realtor in 1 week.
A realtor is employed by a real estate broker, and cannot otherwise be compensated for services. As a matter of fact, realtors are agents of the broker, and the amount paid to the realtor is actually paid to the broker who then pays the realtor after cutting his share.
It is relatively easy to become a realtor; therefore, a lot of realtors are not really professionals or have little to no experience in representing buyers and sellers.
There are of course realtors that are in business for years, have knowledge regarding the market, and have been involved in many deals throughout their careers. These realtors could do a good job of selling your house, and avoiding curtail and costly mistakes.
Realtors would almost always work on a commission based on the sale price of the property.
The states demand realtors to always be professional and put their customers and principals ahead, although, when a commission is involved, it’s hard not to doubt their intentions and to trust that what they are saying is in our benefit rather than their ambition to close the deal and getting paid.
Realtors are deterring to some people because:
When selling your house with a realtor, you would usually end up paying a 6% commission from the sales price to realtor and brokerage fees.
3% goes to the realtor who listed your house, and 3% goes to the realtor who brought the buyer into the deal, if the realtor who listed your house will also bring the buyer, he would then be compensated with the full 6%.
Realtors have a very powerful marketing tool – The MLS (multiple listing system)
the realtor will list your house in the MLS and this listing will then be exposed to many other realtors who have buyers.
In many cases, your realtor will list the house in the MLS and that will be nearly everything that they had done for you except closing the deal on closing day.
The minority of realtors would actually invest in other marketing channels for you to find a buyer, this might feel to you as a homeowner like little work for 3-6% of the sale price, and you are right.
Common mistakes made by realtors:
– Listing your house for a price that isn’t right (usually higher than market value).
This might drive away potential buyers, and it’s a very costly mistake. Your house can end up sitting in the market for even a year. The expenses (tax, insurance, HOA’s ) of course, are on you. As days pass by, potential buyers notice that your house hasn’t sold for months and months. They figure out something must be wrong with it, and that’s why it’s not selling, which makes things worse because now your house isn’t selling and every day that passes by makes your house more deterring for a buyer.
Of course, a realtor will most likely ask for an exclusive right of sale listing agreement. This agreement is binding and prevents you as a homeowner to sell your house through any other channel. If you do, you would still be obligated by law to compensate the realtor for the agreed commission on the listing agreement.
– Although against the law, realtors can intentionally not present a willing buyer’s offer, in an attempt to locate a buyer themselves and try to obtain a 6% commission.
Although realtors make mistakes, some realtors are great at what they do. They will represent you in a professional manner and manage to sell your house quick with little to no mistakes.
B. Selling without a realtor:
For sale by owner sites and signs-
Many homeowners are trying to save the 6% that they would pay in commission and fees for realtors, by listing their homes on a for-sale-by-owner (FSBO) or putting FSBO signs in their front yard.
FSBO is popular as people are trying to sell their house with the biggest amount of equity.
The biggest disadvantage is that buyers know that you are saving money because you are not using a realtor. In virtually 99% of the cases, they will ask for a discount or try to bargain.
As a seller, you might end up giving a discount on the value of the commission you would’ve paid realtors. Remember you had to market the property yourself and didn’t have the MLS at your disposal as a powerful listing system.
One case that an FSBO site or sign can be useful is if you are lucky enough to attract the attention of a family who wants to move into your area, and happened to saw your property in a website, or saw your FSBO sign on the front yard.
Remember: a realtor who is representing buyers would almost always divert the buyers from your direction. If they don’t make commissions they have no reason to show your property. They will show their customers properties that are on the MLS because they are getting paid a commission of the sale price by the seller, and if you are an FSBO, this is exactly the commission you are trying to save.
Wholesalers ( we buy houses, cash offers for your house, etc’ ):
Wholesalers are people that have strong buyers lists and great marketing skills. They work primarily with investors and they can market your property to thousands of potential investors in a click of a button. Their main advantage is that they will sell your house fast!
If you have a distressed property, which the bank wouldn’t finance for a buyer and you don’t have the time or money to fix it – consider that path.
Investors are craving for investment properties. They will buy your property for a price that is suitable for its condition, as long as they can fix it and resell it while turning a profit, a headache you don’t or can’t deal with. A wholesaler is basically the middleman between the investor and you. He will give you an offer, and if you accept it, he will either buy it from you directly and resell it, or he would put it under contract with you with the option of assigning the contract to an investor.
If he assigns the contract to the investor, he assigns it for slightly more than the price he paid you. This is how wholesalers make a profit. They use their connections and marketing skills to find a buyer for you.
Remember: you are not paying or hiring the wholesaler.
the disadvantage of using a wholesaler:
Wholesalers try to make a profit, so they want to buy low and sell for as high as possible. Sometimes there isn’t enough margin for an investor to buy the property from the wholesaler and still turn a profit. This is why wholesalers will try to get the lowest price from you so that it will be easier for them to market the property to a buyer.
Wholesalers vary, some of them will give you a very decent offer for their service.
Remember – they are selling your house fast so you also save money there. Every day your house is not selling is expansive and homeowners tend to ignore that fact.
For example- if you need to move out of state, or if a relative is sick and needs money, or even if you simply can’t afford to pay for your house anymore, a wholesaler is definitely a good option.
People tend to think that wholesalers would give them a ridiculous offer, this is not always the case, wholesalers sometimes would be interested in turning a profit of 5000$ for every property they move.
Wholesalers who have great marketing networks would sometimes even turn a profit of 2000$ a property. If you give them the option to assign the contract, they can “withdraw” the offer if they can’t locate buyers. This way they don’t have to risk their own money, and they won’t necessarily give you a low-ball offer. This situation is a classic win-win scenario, in which both sides gain with the help of the other.
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