When selling a home for sale by owner, you’ll need to know
how to sell your house without a realtor – that is, how to prepare, market,
show, sell, and close on your home. But
you’ll also need to know how to negotiate the sale once you’ve attracted a
buyer who is interested in buying a home for sale by owner.
It’s possible that you are agreeable to an offer just the
way it’s submitted on your home for sale by owner. If so, then sign, date and return it to the
buyer within the timeline noted in the contract and PRESTO – you have an
executed contract. No negotiating
This is rare, though, so it’s best to be prepared for some degree of negotiating.
Many books, CDs, seminars, and webinars are available to teach you all kinds of techniques, strategies, skills, and tricks on how to get what you want out of a transaction or interaction of some type.
Mostly, though, it’s all about simply asking. Then listening closely. We have two ears and one mouth. Let’s go ahead and assume that means we
should listen twice as much as we speak.
As infants, we learn quickly that if we cry, we’ll get fed. As children, we learn that if we just keep
asking (nagging?) either mom or dad, someone will eventually cave in and give
us that candy bar or toy. As teenagers
and adults, we learn that the “pretty girl” or “cute guy” won’t know we’re
interested unless we speak up and ask them to the dance, out for dinner, or to
join us for a cup of coffee.
Information is king.
In any negotiation, information is king. That’s why reading and understanding the
buyer’s offer and collecting all pertinent documentation and information is so
Step out of your shoes and into the buyer’s shoes as best
you can. If you can figure out what the
buyer wants, you may be able to give it to him.
And perhaps without having to give up something that you want.
Example: a typical transaction requires 60 days from
contract to settlement. The buyer’s
offer includes a 60-day settlement because he thinks you need 60 days to move
out. You learn, though, that he must be
out of his apartment in 45 days and will need to arrange temporary housing and
storage until the closing occurs in 60 days.
You know you can be out in 30 days and his loan will be ready in 40
days. Counteroffer the buyer with a
40-day settlement for a slightly higher price.
He agrees because he now doesn’t need to incur the expense of temporary
housing and storage. You get more money
for your home for sale by owner. You
both win and you didn’t have to give up anything for your share of the win.
Another example: You learn that the buyer, a first-time
homebuyer, is interested in buying a home in one of two condominium
communities, yours and another community on the other side of town. Individual condo units in the two communities
are comparable and sell for about the same price. The buyer has the income to qualify for a
mortgage but doesn’t have much savings for a down payment and closing
costs. In your research, you’ve learned
that while your community qualifies for a US Department of Housing and Urban
Development (HUD) FHA mortgage, the other community does not. The buyer will need a 5%-10% down
conventional loan to buy a unit in the cross-town community, while a HUD FHA
loan requires just 3.5% down. You point
this out to him and structure a contract for your home for sale by owner at
slightly above your asking price. You
give the difference back to the buyer at settlement as a buyer credit to help
with his closing costs. The buyer gets
his condo and gets to become a homeowner.
You get your home for sale by owner sold. And both of you are satisfied.
The 3 most important words in real estate
Everyone knows that the 3 most important words in real
estate are location, location, location – right? Wrong!
The 3 most important words in real estate are price, price, price! I have seen properties in what anyone would
call a beautiful and perfect location not sell.
Why? They were overpriced! I have seen properties in horrible locations
– virtual war zones – that successfully sold.
Why? They were dirt cheap! Of course, all else being equal, a home for
sale by owner in a nice location will sell before one in a poor location. But price, not location, is what will
ultimately drive a sale.
Having said all that, don’t let your negotiating ever come
down to just price. If that happens –
your absolute bottom line is, say, $325,000 and the buyer’s absolute highest
is, say, $310,000 then that particular sale will not happen. Which happens sometimes. To avoid this, work hard to keep a few
variables open during your negotiating.
You can go to $310,000 but only if the buyer will let you rent back from
her after settlement for, say, 3 months until you find and close on your next
home. That might work for the
buyer. Or, if she will come to your
$325,000, you will make the repairs to the home that you had previously
requested she handle after closing. You
are willing to do this, for a $325,000 price, because you have handyperson
skills and your good friend is a contractor.
Together you can do the repair work for a fraction of the retail price
the buyer would pay after settlement.
Another way to keep from locking in on just price (or any
negotiable term) is to have a plausible explanation for your request. Most people understand logic. They may not like it, but they understand
Consider this: The buyer asks you to mill and resurface your
asphalt driveway before settlement. Cost
estimates range from $5000-$7000. You
agree that your driveway could use some attention and you have estimates from 4
blacktop contractors who would all be happy to do the full resurface for
$5000-$7000. But all 4 also said that
they could make some spot repairs and then re-seal the entire driveway for
under $1500. And each will provide a
written warranty that you can transfer to your buyer. You show the 4 estimates to the buyer, tell
her to pick the contractor she’d like you to use, and you’ll have the spot
repairs and re-seal done before closing.
And at your expense. The buyer
would surely prefer the brand-new driveway, at your expense, of course. But she agrees to accept the spot repairs,
re-seal and transferrable warranty and agrees to pay the $325,000 for your home
for sale by owner.
Now consider this: The buyer says to you “My agent and I
have researched comparable home sales in the past 3 months – here’s a copy of
our report. There’s just no way that
your home for sale by owner will appraise at $325,000. $310,000 is the market price and that’s what
I’ll pay.” You don’t like it, but you
know the report is accurate. You accept
the logic and agree to $310,000.
In the first case, the negotiations never locked in on just
one term. By establishing a friendly,
give and take dialogue, and by using written facts and figures, you were able
to reach an agreement and create a win-win outcome for you and the buyer.
In the second case, logic prevailed. You didn’t like settling for $310,000 but you
accepted that your $325,000 was not a true market price – no buyer would pay it
and no appraisal would support it.
If information is
king when it comes to negotiating, who, or what, is queen?
Why, time, of course!
If the buyer’s offer gives you 3 days to consider and respond, don’t
counteroffer back to her 3 hours after receiving the offer. And definitely don’t get back to her with
your fully signed approval of her offer in 3 hours! Even if you’re thrilled to death with the
offer, at least act a bit hard to get.
Let the buyer think you needed to sleep on it… consult with friends and
family… consider other offers on your home for sale by owner.
Think of the psychology here: if the buyer gets the sense
that you jumped on her offer, she may just draw the conclusion that she
overpaid for your home for sale by owner.
That’ll make her nervous. And
perhaps upset. And maybe she’ll come at
you that much harder after she gets the results of her home inspection. And maybe she just plain wants out of the
deal. Remove hurdles, don’t increase
them. And the perfect buyer? Someone who wants to buy your home at least
as much as you want to sell it. So, take
your time when communicating during negotiations – time is queen.
Conversely, if you get the sense that your buyer “just has
to have your home for sale by owner”, then naturally you’ll want to use that to
your advantage. One way to get that
sense – she responds quickly and eagerly to your communications during
➢ Ask questions and gather
information. Put yourself in the buyer’s
➢ Information is king, and time
overthink it – keep things as simple as
possible. And as friendly as
possible. “Ease into” an agreement.
expect to always just “get”. And if you position things correctly, you may
be able to give something that wasn’t all that
painful to give. Negotiating is a give
and take process – a 2-way street.
be afraid to simply ask for something.
Sometimes that’s all it takes.
➢ Make every effort to keep a
few variables in play. Don’t lock in on just one, especially price.
➢ And use logic to your advantage – in writing whenever possible. People may not like it, but they will generally accept it, allowing your home for sale by owner transaction to move forward.
For a complete step-by-step guide to selling your home for for sale by owner see my ebook, FSBO It: A Broker’s Guide to Selling your Own Home.
By Rick Sheppard, Associate Broker, GRI, SRES, Collegeville PA, December 3018