When the time comes to sell your home, you may be tempted to sell it yourself. There is primarily only one reason for doing so, and that is saving on a real estate commission. You may indeed save money, but on the other hand, the saving could be an expensive illusion.

The following remarks are not intended to dissuade you from attempting to sell your own home, but to place the process in realistic perspective. The comments apply whether you are selling your own home or an investment property. In the end, you will have to balance the benefits and disadvantages of course, and decide what is best for you.

1. Poor Offer Price
   You may think the offer is the best offer from that prospective purchaser, or any purchaser, and therefore may accept it. That price may not be the best price at all. You may have started too low or too high for your initial asking price, based on emotion or needs, not reality; you may have received a “low-ball” offer from a prospective purchaser that was never intended to be accepted but was designed to reduce your expectations; you may be inexperienced in applying real estate negotiating skills; or you may be subjected to effective closing skills on the part of the prospective purchaser.
2. Lack of Experience
   If you don’t know all the steps involved, from the pre-sale procedures and strategies to completing the deal and receiving the money, you could and probably would make mistakes that could be costly to you.
3. Increased Time Commitment
   You have to have open houses as well as show your property at times that may not necessarily be convenient to you. In addition, you are going to be spending time preparing the ad copy and staying at home to respond to telephone calls or people knocking on the door.
4. Minimal Advertising
   Costs include all the daily or weekly newspaper classified and/or box ads, as well as a lawn sign. You would pay for these yourself. In addition, you may not know what specific types of advertising would be appropriate for your type of property; how to write ad copy that would grab the attention of a reader and prospective purchaser; nor how to identify and emphasize the key selling features of your property.
5. Limited Exposure
   There are considerable differences in market exposure in terms of advertising by yourself and the types of advertising and promotion a licensed agent could do for you. There is obviously a direct correlation between the nature and degree of market exposure and the end price. Clearly, limited market exposure means limited prospective buyers.
6. Potential Legal Problems
   The prospective purchaser may supply you with his own agreement of purchase and sale. This contract may have clauses and other terms in it that could be legally risky, unenforceable, unfair, or otherwise not beneficial to you. You may not recognize these potential problems or risks. In addition, you could end up agreeing to take back a mortgage (vendor-back-mortgage) when it would not be necessary or wise, or to accept a long term option or other legal arrangement that could be risky.
7. Lack of Familiarity
   You may not have a clear or objective idea of exactly what a similar property in your market is selling for, or the state of the real estate market at that point in time. This can place you at a distinct disadvantage. For example, if you are being unrealistic in your pricing, along with limited advertising exposure, you could literally price yourself out of the market. Prospective purchasers may not even look, let alone make an offer. You may eventually sell your property, but only after several price reductions and after a long period of time. Naturally, of course, this depends on the market and the nature of your property. Conversely, you could have a property with unique features or potential that could justify a higher sale price than you might realize.
8. Emotional Roller Coaster
   Many people, especially with their own home, tend to get emotionally involved in the sale process because of the direct interaction with the prospective purchasers. For example, frustration can be experienced due to rejection of the house, negative comments or fault-finding, people whose personality you don’t like, or people who negotiate toughly on the price. These one-on-one direct dynamics or comments can sometimes be taken personally, and therefore be a cause of stress.
9. No Pre-screening
   You would not generally know the art of pre-screening prospects in terms of questions to ask them over the phone. The end result is that you could waste your time talking to people over the phone or showing them through the house, who are not and never will be serious prospects. You could also end up accepting an offer from someone who does not realistically have a chance of financing the house, or who asks for unrealistic time periods for removing purchaser conditions, which effectively would tie up your property during that time.
10. Lack of Skill
    This problem was referred to in the previous point. You may lack any negotiating or sales skills and feel very uncomfortable or anxious in a negotiating context. As a consequence, the price and terms you eventually settle for may not be as attractive as they otherwise could be.
11. Implied Discounts
    It is not uncommon for the prospective purchaser to determine what the fair market value is and then ask to have an additional discount equal to the real estate commission you are saving. The primary reason why prospective purchasers are attracted to a “For Sale By Owner” is the prospect of getting a better deal than a property listed with an agent, due to the commission otherwise built into the sale price.
    The primary reason why you are selling the property yourself is to save the full amount of any commission otherwise payable. Hence the problem. A compromise may be possible whereby the price is further reduced by a percentage of the commission saved. Again, in practical terms, it is normally an illusion to think that you will save the full or even a substantial amount of the commission.
12. Less Effective in Buyers Market
    Buyers in this type of market are very price sensitive, negotiate toughly because they want the best deal, and have the time to be selective after comparing what is available in the market. You are at a disadvantage if you don’t receive all the exposure possible and use all the negotiating and selling skills available. You could go down further by that time in a declining sale market, due to oversupply of homes, limited demand and reduced exposure.

Real estate transactions can be tricky. The widespread myth that selling real estate is easy has lured many home sellers into making expensive mistakes by trying (and failing) to sell their own home.

Many people assume that all you need is a sales contract, a classified ad and a “For Sale” sign. But even the most basic step — setting the correct sale price — depends on a number of factors. The location, size and condition of your home, the relationship between the local supply of homes and the number of qualified buyers, and the recent selling prices of comparable homes in your neighborhood all affect the market value of your property. Homeowners who sell without a professional realtor often misread the local market and overprice the home.

Sellers might also mishandle contingencies, home inspections, title clearance, deadlines and disclosures. The advice and guidance of an experienced real estate agent is essential to ensure that you avoid the risk of expensive litigation and ensure a successful home sale.

The virtue of self-reliance is as American as baseball and apple pie–except if you are trying to sell your own home. Here such a “virtue” can cost you time, effort, and possibly money.

Because the overwhelming majority of homes that sell are listed with a real estate agent, you will be going against significant odds if you decide to sell your own home. The experience of a real estate professional may get you a better price and help you to avoid all the “little” things that can go wrong in a real estate transaction.

The desire to “save” the commission on a property is the reason most people decide not to work with a real estate agent. Prospective buyers who look for properties that are “For Sale By Owner” (FSBOs) are also wanting to avoid the commission–and to get a less-than-market-value deal. However, nothing is saved in the majority of FSBOs. Listing your home with a real estate professional can save you money, spare you the inconvenience of showing your home, and save you the time you would spend talking to buyers who could not qualify for a loan.

Real estate transactions can be tricky. The widespread myth that selling real estate is easy has lured many home sellers into making expensive mistakes by trying (and failing) to sell their own home.

Many people assume that all you need is a sales contract, a classified ad and a “For Sale” sign. But even the most basic step — setting the correct sale price — depends on a number of factors. The location, size and condition of your home, the relationship between the local supply of homes and the number of qualified buyers, and the recent selling prices of comparable homes in your neighborhood all affect the market value of your property. Homeowners who sell without a professional realtor often misread the local market and overprice the home.

Sellers might also mishandle contingencies, home inspections, title clearance, deadlines and disclosures. The advice and guidance of an experienced real estate agent is essential to ensure that you avoid the risk of expensive litigation and ensure a successful home sale.

Most home buyers understand the basics of home mortgage loans. They know what a mortgage loan is, how interest works, and other fundamentals of the home loan process.

But when it comes to the closing costs associated with buying a home, many of these same home buyers get caught off guard – by both the variety and total amount of closing costs. By understanding and preparing for these costs ahead of time, you can avoid such surprises.

What Are Closing Costs?
Closing costs are the total cost of completing the transfer of ownership of a house. These costs do not include the purchase price of the home. Rather, they are the extras — fees and expenses aside from the purchase price.

On average, closing costs range between 3% and 5% of the total loan amount. So for a loan of $200,000, closing costs might run $6,000 to $10,000 (3% and 5% respectively of $200,000).

What’s Included Within Closing Costs?
Closing costs vary depending on where you live and what mortgage lender you choose. But closing costs often include fees for the following (this list is not all-inclusive):

* Loan origination
* Loan application
* Appraisal
* Document preparation
* Attorney’s services
* Escrow agent’s services
* Pest inspection
* Credit report / processing

Getting an Estimate of Closing Costs
The Real Estate Settlement Procedures Act, or RESPA, requires that mortgage lenders give you a good faith estimate of all the loan-related fees you’re likely to pay at closing. They must give you this estimate at the time of loan application. Keep in mind, however, that these are just estimates. Actual closing costs may be more than the good faith estimate closing costs.

Shop Around
It’s a good idea to obtain good faith estimates from multiple lenders. Don’t choose a lender based on their interest rates alone. Shop around for estimated closing costs as well.

Just realize that large discrepancies between estimated and actual closing costs are not uncommon. You can prepare yourself for this by having enough money in the bank to cover the good faith estimate amount and then some.

A few days before closing, you will receive another document called a settlement statement, or “HUD-1 statement.” This document will give you a more exact tally of the closing costs you’ll be expected to pay at closing.

Conclusion
Closing costs include a wide variety of fees and charges. They can add up to a sizable amount, so it’s important to prepare for them in advance. Be sure to factor closing costs into the equation when looking for a mortgage lender. Proper planning can help you avoid unpleasant surprises on closing day.

Professional Advice From HomeBuyingInstitute.com