Thinking of Selling Without an Agent? 6 Reasons Why You Shouldn’t

You wouldn’t try to rewire your home, give yourself a root canal, or replace the engine in your car on your own without the help of a professional, would you?

Well, selling a home is no different. This is a critical asset and one of high value, and the selling transaction should be handled with the representation of a real estate agent.

The thing is, agents charge commissions to sell homes. It’s how they make money. It’s their job. You wouldn’t expect to report to the office 8 hours a day without a paycheck. Your tasks are valuable to your company, as are the tasks that agents handle to ensure a successful transaction.

But many sellers try to take the FSBO route in an effort to save money. But what ends up happening is that many sellers not only end up with less money in their pocket at the end of the day, but they also put themselves at risk for litigation.

If you’re planning to sell your home and are thinking of going solo, consider the following reasons why you should think twice.

1. Emotions Could Get the Best of You

Buying and selling real estate is an emotionally-charged situation. As a seller, you’re probably emotionally vested in your home, especially given the memories you’ve likely built up in that place. It can be tough to keep these emotions out of the picture when negotiating with a buyer.

Instead, a real estate agent can be a neutral buffer that you need to serve as the middleman between you and the buyer. Your agent will be able to keep a cool head and make sure that all pertinent matters are handled appropriately and professionally without letting emotions cloud better judgment.

This will help you avoid making any regrettable mistakes, such as overpricing, overreacting to a lowball offer, or throwing in the towel if you’re in a rush to sell. Having an agent in your corner will help to keep these emotions from getting in the way of making sound decisions.

2. You’ll Have to Spend a Lot of Time Booking and Hosting Showings

One of the many things that real estate agents do is book showings for their listed homes. After all, buyers need to have a chance to scope out a home in person, and booking a showing is the way to do that.

But if you’re selling on your own, you’ll be tasked with taking all these calls and making sure that the people who want to meander throughout your home are qualified and even trustworthy enough. Taking these calls and qualifying buyers is a lot of work and takes a lot of time. It would be a real nuisance, especially if you work full-time and have to put up with your job being interrupted regularly.

A real estate agent will be able to put a cap on these hassles and book showings with buyers who are more likely to be serious about buying. They’re trained to ask the right questions to identify how serious or motivated a potential prospect is. Listing agents will also ensure that buyer agents are present during the showings.

If you do this on your own, you’ll either have to be present during the showing or allow a complete stranger to walk around your home unattended, neither of which is recommended.

3. Negotiating Can Prove to be Very Difficult

How much experience do you have negotiating real estate deals? Unless you’re an agent yourself, you probably don’t have much. The thing is, negotiating is a critical component to ensuring a successful transaction.

An experienced listing agent will have already negotiated several home sales and will know exactly what needs to be said and done in order to ensure there’s a meeting of the minds between buyer and seller.

Sellers who try to negotiate on their own probably aren’t familiar with local market conditions or customs at the negotiating table. Instead, agents have their finger on the pulse of the market and are better able to understand what’s currently driving demand. This, in turn, gives them the benefit of knowing what terms of the contract are worth negotiating for versus those that they can let the buyer take.

4. You Likely Don’t Know How to Come Up With an Appropriate Listing Price

One of the most important aspects of selling a home is coming up with an appropriate listing price. Many sellers have a natural inclination to go high with their listing price, which is a bad idea if it’s not in line with the market. If you price higher than what your home is worth, buyers will likely gloss over your home in favor of a property that’s more fairly priced.

This can leave you with no offers to consider and will cause your listing to become stale. The longer it sits in the market, the more buyers will start to think there’s a problem with it. At some point, you’ll have to drop the price. You may even have to lower it below what the market value dictates just to get some attention.

Instead, an agent will be able to find out what similar homes sold for in the recent past in your area and help you come up with a competitive listing price that can help you get your home sold more quickly and for a higher price.

5. You Could Put Yourself at Risk of Legal Action

A real estate contract is legally binding. That means that all parties involved have a legal obligation to follow through with its terms. There are plenty of legalities involved in a real estate contract, so if you are not prudent enough to make sure the contract is legally airtight, you could find yourself at risk for litigation.

6. You’ll Have a Much Shorter Marketing Reach

Real estate agents are masters at marketing homes for sale. It’s one of their best traits – and most important ones. A crucial aspect of selling a home is being able to reach the masses of buyers out there.

When selling, how will you reach buyers if you’re taking on this job on your own?

Instead, an agent will use every marketing avenue they have available that would effectively reach buyers. They have analytic tools and know how to promote their listings to other agents in the area to find a buyer sooner rather than later. Having this type of marketing help is crucial to a successful sale.

The Bottom Line

If you’re thinking of selling soon, one of the first things you should do is start interviewing agents. Going it alone is not recommended at all. You’ll leave yourself at risk of legal action and could even end up selling for a lot less than you should.

Plus, it will take up a lot more time that you probably have and can end up being a stressful situation if you’re inexperienced with this type of transaction. Your best bet is to leave it to the pros and call in an agent to help you sell your home.

Investing in Real Estate Investment Trusts (REITs): 101

Investing in real estate is a great way to build wealth over time and even make a very handsome income as a career. Whether you buy a property to rent out, fix and flip a fixer-upper, or just buy in hopes of a property appreciating in value, making a lot of money in real estate is possible.

But there’s another way to make money in real estate without actually having to deal with physical properties: with REITs.

What Are REITs?

Real Estate Investment Trusts (REITs) are companies of shareholders that own and operate different types of properties that generate income. The properties are typically large scale and include office buildings, industrial warehouses, commercial units, shopping malls, apartments, hotels, and storage facilities.

Instead of developing properties in an effort to resell them for a profit, REITs buy and develop properties mainly to operate them to generate an income over the long haul.

Many REITs are publicly traded on the stock exchange, while others are private. It’s important for investors to distinguish between the two before deciding which type to invest in. You can buy REITs through a broker, or purchase shares in a REIT mutual fund or exchange-traded fund (ETF).

When you purchase shares of a REIT, the REIT pools that money with other investors’ capital to make investments. REITs do their due diligence when scoping out properties to buy and make informed purchasing decisions in order to ensure the properties that are being added to the investment portfolio will be big income drivers.

The REIT earns income from rent payments or from interest on real estate debt. The dividends are then distributed among the investors according to how many shares they’ve got invested.

What Types of REITs Are There?

Equity REIT – These are the more common types of REITs that invest in real estate to generate income from rent. Mainly, rent is collected from leases. The money collected is then distributed as dividends to shareholders who have a stake in these properties.

Mortgage REIT – These types of REITs either lend money to real estate owners or purchase existing mortgage-backed securities. Income is generated as a result of the interest earned on the loans, minus the cost of funding such loans.

Hybrid REIT – These combine investments in properties and mortgages. In this case, REITs own properties while providing mortgages to real estate investors. Income with these types of REITs is generated from both rent and interest earned.

Why Invest in REITs?

There are plenty of reasons why you might choose REITs, including the following:

Easy to liquidate – With publicly-traded REITs, you can enjoy liquidity by easily selling your shares.

Provides a steady source of income – The dividends that are earned from a REIT can provide you with a steady stream of income at each pay period.

Diversified investment portfolio – It’s suggested that investors have a diversified investment portfolio that’s made up of different investment products in order to protect them in case one particular investment vehicle does poorly. Throwing REITs into the mix can be a great way to diversify your portfolio.

Relatively safe investment – Generally speaking, real estate tends to do well in terms of appreciation, and REITs are directly impacted by the level of appreciation of the properties invested in.

Hands-off investment – REITs don’t usually require much involvement on your part, so there’s little for you to do.

Are There Any Drawbacks to REITs?

While there are plenty of reasons why you might want to consider looking down some capital in REITs, there are some risks that you should know about first.

Fees – Many REITs charge high fees in exchange for all the services provided to find and buy income-generating properties, as well as for property management and administrative costs. These fees can be rather high and can eat into your profits.

Little control – Since you don’t actually own the property on your own, you don’t have the same level of control over your investment as you would if you owned a physical property yourself.

Slow growth – About 90% of profits made are distributed among investors. That only leaves 10% to be reinvested back into the company, which means growth can be rather slow.

Vulnerability to market volatility – REITs that are publicly traded on the stock market are subject to the same risks as other stocks. And fluctuation in share prices will directly affect investors’ bottom line.

The Bottom Line

REITs present a unique investment opportunity for investors who are interested in investing in the real estate market in addition to owning physical property. If you’re thinking about adding this type of investment vehicle to your portfolio, make sure you weigh the pros and cons. Consult with a real estate agent and investment advisor to help you decipher which avenue is best for you.

How Do Short Sales and Foreclosures Compare?

No buyer wants to pay more for a home than they have to. Instead, buyers are typically on the prowl for a good deal, and some look to short sales and foreclosures in an effort to slash a few thousand dollars off the final purchase price of a home.

Both short sales and foreclosures are last resorts for homeowners who are struggling to keep up with their mortgage payments. When they default on their home loans, they either have to sell short or lose their home through foreclosure.

While this is a negative situation for homeowners, it can be a good opportunity for buyers to snag a good deal. That said, there are plenty of factors involved in buying these types of homes that can complicate the transaction.

So, what exactly are short sales and foreclosures? How are they similar? And how do they differ?

What is a Short Sale?

A short sale happens when a homeowner has trouble making their mortgage payments and resorts to selling for less than what their home is currently worth in an effort to avoid foreclosure. This situation usually happens when the homeowner owes more on the home loan than the property is currently worth.

With a short sale, the lender allows the homeowner to get out of their mortgage and avoid foreclosure by selling for less than what they would normally have fetched if selling under normal circumstances. The owner basically asks the lender to accept a lower amount than what is currently owed on the mortgage. If the lender accepts, the mortgage will be settled and the homeowner will be released from the mortgage.

Typical home sales don’t involve lenders, but with short sales, the mortgage lender is part of the process. In fact, the lender will have to approve the short sale in order for it to go through. Lenders typically prefer to deal with short sales than foreclosures because of all the expenses and red tape associated with the latter.

Obviously, the seller will want to recoup as much as possible on the sale of their home, but the ultimate goal is to be released from the mortgage without having their home repossessed.

Short sales can take anywhere between 90 to 120 days on average to close, which is longer than the average time needed to sell a home under normal circumstances. That’s because a number of details will need to be ironed out, including getting buyers to agree to cover the cost of making repairs and covering typical closing costs that would normally be paid for by sellers.

What is a Foreclosure?

When homeowners default on their mortgage and are unable to sell their home through a short sale, a foreclosure may be imminent. When this happens, the homeowner loses possession of the home, and the lender ends taking back the property. Since the home is used as collateral for the mortgage, lenders can repossess this valuable asset when borrowers default on their payments.

A Notice of Default will be filed with the local county’s office after three to six months of the homeowner missing mortgage payments. This will inform the borrower in writing of the risk of foreclosure. The homeowner then has between 30 to 120 days after receiving this notice to attempt to settle their mortgage debt with the lender.

If nothing is done about the debt owed, the lender can initiate the foreclosure process and sell the property at a foreclosure auction. Usually, these types of properties are bought without buyers actually seeing the homes or receiving any warranties.

How Do Short Sales and Foreclosures Differ?

While both short sales and foreclosures involve the homeowners vacating the premises, the end results differ somewhat. With a short sale, the homeowner still has some level of control over the sale process. Further – and perhaps more importantly – owners are still allowed to live in the home while it’s on the market until a deal is reached and the closing date arrives.

With a foreclosure, on the other hand, the owner is evicted from the premises and is left with no equity when all is said and done. Further, foreclosures usually involve many more fees, penalties, and legal costs compared to short sales.

Both short sales and foreclosures are unfortunate events. But at the end of the day, short sales can leave homeowners with fewer financial headaches than foreclosures.

The Bottom Line

Homeowners who are struggling to make their mortgage payments should seek out assistance in order to avoid a short sale or foreclosure. And for buyers, it’s it’s important to work with a real estate agent who’s well-versed in buying distressed properties in order to get a good deal and ensure the transaction is as seamless as can be.

How to Prepare Your Home For an Appraisal

When you find a buyer for your home and strike a deal, there are plenty of events that will follow, and an appraisal is one of them. Lenders order appraisals in order to make sure that whatever price the buyer agreed to pay is in line with the current housing market.

But sellers can have their own appraisals ordered (at their own cost) before they even put their home on the market. Having a home appraised will help sellers determine how much their home is worth according to current market conditions and come up with a sound listing price.

Either way, an appraisal plays a crucial role in any real estate transaction. And for obvious reasons, you’ll want to make sure the appraised price comes back as high as possible. To help make that happen, there are a few things you can do to make sure the appraisal goes your way.

Make Any Necessary Repairs

While you might be aware of certain minor issues with your home that you just never got around to fixing (or never intended to fix), there might be a number of other little problems that you might not have been aware of. Now’s the time to walk around your home with a watchful eye and look for any issues that might need attention.

Make a list of anything that catches your eye. And before you list, take the time to make the needed repairs so your home is appraised at a high value. Chipped tiles, cracked windows, leaky faucets, ill-functioning appliances, or nail pops should all be rectified before the appraiser steps foot through the front door.

Not only will this help you fetch a higher price, but it can also impress buyers. Not only that but the home inspection that the buyer orders after offer acceptance will likely come back with far fewer issues if you’ve taken a proactive approach and tackled any known issues yourself.

Make Any Helpful Upgrades

Certain upgrades can bring in a high ROI. Ideally, you’ll recoup all the money spent on home improvement projects – and then some. That’s why it’s important to pick your projects wisely.

Appraisers will take note of any upgrades that they notice and will typically add to the value of your home accordingly. Whether such upgrades are just cosmetic in nature or are more structural, any upgrades will be included in the appraiser’s report and will impact the final appraised value.

Even just quick and simple cosmetic upgrades – like refacing kitchen cabinets, replacing countertops, or replacing old flooring material – can make a big difference not only in how your home looks but in its perceived value, too. Just make sure that you verify whether or not any building permits are required for any projects you undertake, as the appraiser will want to see them if they find out any work was done.

Keep a List of Upgrades Handy to Provide the Appraiser

Whether you just made a few upgrades recently in anticipation of the sale of your home or have already made some improvements in the past, you might want to provide the appraiser with a list of all these updates. While they will likely notice them, it might be helpful if you make the appraiser aware of the work done.

Appraisers will be looking for upgrades, but they’re not always going to notice every single one. They’re also not going to know exactly how much you spent on them. Make this easier for them by providing them with a list that highlights all the upgrades made and the expense of such improvements. Your list should also include the date that each improvement was made, any permits that were obtained to get the work done, and any home warranties that accompanied such work.

Clean and De-Clutter

While a messy home shouldn’t really affect property value, it can skew the appraiser’s opinion of your home. The final appraised value that your appraiser establishes for your home matters a great deal to the sale of your home, so anything you can do to make your home stand out in a positive way should be done. And that includes cleaning and de-cluttering.

Make sure that everything is put away in its proper spot. Things that you don’t use anymore should be tossed or donated. You might even want to start packing a few things in boxes in anticipation of your upcoming move to make de-cluttering easier. A couple of days before the appraisal, have the home deep cleaned and be sure to stay on top of dishes, laundry, kids’ toys, and so forth to make sure your home is spic and span. 

Paint

Giving your home a fresh coat of paint is a great way to perk up your interior and make your home seem newer (and cleaner). In fact, painting is typically considered to be the best upgrade to make because of the high ROI it tends to bring. The cost of a couple of cans of paint pales in comparison to how much more value you can add to your home, and your appraiser will take notice.

Boost Your Curb Appeal

Your appraiser will assess not just the inside of your home, but the outside, too. Ensuring that your home has great curb appeal is crucial and will play a key role in the appraised value of your home. Cut the grass, trim the hedges, water the flowers, rake the leaves, spruce up the front door, and tidy up your front porch in order to appeal not only to the appraiser but to potential buyers as well.

While you can always call a professional landscaper to tackle this for you, you can get the job done yourself in as little as a weekend to save some money while potentially adding some extra value to your home.

The Bottom Line

The appraisal report plays an important role in the sale of your home, so you want to make sure it goes well. Whatever the appraiser values your home at will have a direct impact on the deal. Before your appraiser visits, be sure to take the time and put in some effort to prep your home to ensure all goes well with the appraisal.