Homeowners: Sell it yourself

Be your own broker when you sell your house and you could save thousands - or drive yourself nuts.

By Josh Hyatt, Money Magazine senior writer

NEW YORK (Money Magazine) -- The last time Sabrina Williams sold a home herself, she received a solid offer the first week, got her asking price of $319,000 and saved nearly $9,000 in broker fees in the process. Snap, just like that.

So when Williams, 32, a pharmaceutical company manager, and her husband Michael Cunningham, 37, an IT consultant, recently decided to sell the three-bedroom townhouse they own in Germantown, Md., she figured she knew just what they had to do to find a suitable buyer.

Sabrina Williams and Michael Cunningham saved $9,000 in 2004 by selling without a broker.
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"We'd fluff up the towels, clean the carpets and buy a new chandelier," she says. "And in return we'd save thousands."

But while that simple approach worked well when the couple sold their first home in 2004, that was then (then being one of the hottest real estate markets in decades) and this is now (when inventories of unsold homes are at their highest levels in nearly 15 years).

In the two months since they put their townhouse on the market, Williams and Cunningham haven't gotten even one bid from a prospective buyer, and they're already beginning to consider other options.

"We can always knock down the price," Williams says. Or maybe, she muses, they'll postpone selling until spring: "It's not like we're in a hurry."

Welcome to the brave new world of FSBO (pronounced fiz-boh), an acronym for "for sale by owner" and the shorthand way to refer to houses that sellers market themselves.

With home prices expected to fall this year and next, more sellers are going the FSBO route. Their goal: to keep a bigger share of the proceeds from a sale by forgoing the services of a listing broker and saving the 3 percent commission she'd likely charge (when you do a FSBO, you typically still have to pay a 3 percent commission to the buyer's broker).

Last year about 20 percent of sellers unloaded their homes without an agent, up from 12 percent in 2005, reports industry newsletter Real Trends. And that's expected to rise again next year.

But even in the best of times, many homeowners who start out doing a FSBO eventually enlist the aid of a broker. Some get fed up with around-the-clock phone calls and the stream of nosy strangers. Others aren't sure how to price their house, show it to best advantage or deal with the legal ins and outs.

And in tougher real estate markets like this one, those challenges only get, well, tougher. Luckily, as interest in FSBOs has grown, so has the number of businesses that serve them.

"There are plenty of places where you can go for guidance," says Steve Ozonian, chairman of Help-U-Sell, which has 800 franchises offering such services as staging (getting your home ready to show) and help with the closing.

As long as you're willing to show the place, you can pay a few experts here and there and still wind up saving a big chunk. You probably won't spend much more than $1,600.

Money Magazine asked homeowners who did it - and experts who serve them - how to do a successful FSBO. Their advice:

Plan for a major time suck

You probably expect you'll have to block out Sunday afternoons to show your place. But it's worse than that - much worse. You also have to be ready to show it at any time, even during work hours. (Hope you have an understanding boss.) And you'll need time to conduct negotiations and make repairs that buyers demand.

"It helps to be handy," says college professor Bruce Weinberg, 48, who repainted the kitchen of his suburban Boston house in one night last year while his family slept. He sold the house in six weeks for $850,000, saving an estimated $21,000 in commissions. "You can only get through it by focusing on the savings."

Don't get greedy

Many first-time FSBOs come up with an unrealistic listing price based "on whatever amount of money they need" to afford the next house, says Laura Dee Mytinger, an agent in Kansas City, Mo.

Instead, base the price on what similar houses in your area sell for. You can get up-to-date sale prices by visiting your county records office. Or hire a professional appraiser. Typical fee: $300. (Look for one at eppraisal.com.)

List it right

Sticking a for sale sign on your lawn isn't enough. Because 80 percent of home buyers start their search online, you have to get your house entered in the multiple-listing service, a central repository where all the brokers in a given geographic area share listings.

The MLS feeds other sites for house hunters. You can find a licensed real estate agent to list your place on FlatFeeMLSListing.com. Doing that will run you $250 to $400. And post a notice at craigslist.com; it's free.

Spiff up the place

Cluttered, poorly laid-out rooms can make your house look smaller than it is. And size equals money. If you're clueless about home design, recruit a stager to create a plan for making the house look more appealing. Cost: about $300. (Find an accredited pro at stagedhomes.com.)

For a few thousand more, stagers will execute their tips - replacing draperies or painting over the color scheme you stole from Taco Bell. You can DIY by watching homestaging shows such as HGTV's Designed to Sell, suggest Dave and Erin Kaegebein.

The couple, who sold their Aurora, Ill. house in six weeks last year, attribute the healthy price they got - $204,500 - to advice from such programs. Among their tips: Use neutral wall colors and clear out closets to make them look bigger.

Don't skimp on a lawyer

An experienced real estate attorney can tell you what flaws you're legally required to share with buyers (that slab leak, for example) and what you can let them discover for themselves (those noisy neighbors).

He can also help you negotiate the final deal and draw up closing documents. Expect to spend at least $500. To find a lawyer, get referrals from friends who have recently sold a home - without problems - or go to realestatelawyers.com and plug in your zip code.

Make 'em show you the money

Ask buyers to include with their offer a letter from a lender confirming that they can afford the mortgage required. And don't take your house off the market until you get a good-faith deposit of at least $1,000.

Above all, stay patient. As Williams says, that may be easier to do if you remind yourself how much you're saving in commissions. She notes, "Even if we do have to reduce our price, I'm confident by selling the house ourselves, we'll make a better profit on the deal." Top of page