Tips on How to Price a Home

A home's asking price is one of the first pieces of information that buyers will want to know about any home on the market. If sellers price it too high they risk scaring potential buyers away. If it's too low the sellers risks risk losing money. In order to price a home accurately, a "by owner" seller has to become educated about the local real estate market. Doing so will allow the seller to set an asking price that will compete favorably against other comparable homes.

But don't worry, it's easy to do if you just follow these simple steps:

1. Know the Competition: Visit real estate websites and drive through your local area to search for homes for sale that are similar to yours in size, number of bedrooms & bathrooms, lot size and square footage. Educate yourself about their asking prices and, especially for condos, calculate the price per square foot. Trulia.com will do most of this work for you and allows you to print out a list of comparable homes, but you'll also want to visit Realtor.com and ForSaleByOwner.com to get a more complete list of available homes on the market.

2. Visit Open Houses: Now that you know what's on the market, visit as many open houses as you can in order to find out how your home compares to others. Your goal is to learn as much about those homes as possible, such as upgrades and renovations to the kitchen, bathrooms and bedrooms.

3. Learn About Recently Sold Properties: Your next step in educating yourself about the local market is learning how much homes have sold for in the recent past. Home sale information is public information and can be found a number of ways. Your county clerk's office and/or local town hall can provide you with this data, but the Internet has made the task even easier. Trulia.com and Zillow.com each have a "Recently Sold" feature that will list all information about properties that have sold near any given address.

4. Get a Starting Point: For a simple, cost-effective way to get a ballpark range of how much your home is worth, consider getting an Automated Valuation Model (AVM). Similar to a real estate agent’s Comparative Market Analysis, an AVM will compare your home to similar nearby recently sold properties. The AVM won’t know if your home has an upgraded kitchen, finished basement or new roof, etc., but it will give you a suggested range to price your home. The AVM will also provide you with a list of nearby recently sold properties. ForSaleByOwner.com offers an AVM tool that is available here.

5. Evaluate Your Research: Now that you have information about homes currently on the market, data on recently sold properties and a price range, you have all the data you need to compare your home to others in your neighborhood and local area. Evaluate the information you have learned and ask yourself how your home stacks up with the others. Be honest. What condition is it in and how does in compare in location, features and aspects like a remodeled master bathroom?

6. Live in the Now: One of the biggest mistakes sellers are doing in today's market is pricing their home at price points of one, two or three years ago. The national median home price has dropped more than 15% in the past 12 months (in markets in CA, FL and AZ the median home price has fallen by more than 20 percent!), and those that price their home too long will just see it sit on the market. The homes that are selling today are those that are priced competitively to other homes are on the market, providing buyers with the sense that they are getting "a good deal."

7. Take Advantage of Being "For Sale By Owner": Owners of homes being sold through a real estate agent will have to fork over expensive commission fees equal to 5-6% of their home's sale price (or $18,000 for a $300,000 home). Or, in other words, the seller of that $300,000 home will only "pocket" $282,000. As a smart "for sale by owner" home seller, you won't have that expense and -- depending on how quickly you want to sell -- you have the unique ability to price your home anywhere in that $282,000-$300,000 range and still come out ahead financially compared to sellers of similar homes. You'll also be able to get more buyers as well because they'll be attracted to your home's asking price.

8. Set the Price: The time has come. You now have a complete picture of your real estate marketplace. Set the price using all the information you've learned through the above steps.

Congratulations! You have reached a major milestone in your home selling process. Not only have you arrived at an asking price, you have become an expert in your local real estate market. Prospective buyers will be impressed with your sense of knowledge and honest assessment of your home's value, and you'll be able to communicate about its strengths and weaknesses as compared to other homes in your neighborhood, town and area.

Tips on Buying a FSBO Home

With “by owner” real listings accounting for approximately 20% of all homes on the market, ForSaleByOwner.com offers the following tips on how to buy a “by owner” home without using a real estate agent:

1. Determine Your Budget: The first step in any home buying process is determining how much you can afford. It’s important to not overextend yourself. There are many Internet-based mortgage calculators that will tell you how much you can afford based upon your income, debt level, mortgage rate and available cash for a down payment.

2. Get Pre-Approved: Now that you know the price range that you can afford, you’ll want to get pre-approved so that you can move forward in the home buying process. In today's market, buyers with a large down payment and a strong credit rating are more likely to obtain a mortgage. Getting a pre-approval letter is a quick process that will tell sellers that you are a serious buyer who can afford their home.

3. Search For Homes: This part is simple. Nearly 90% of all buyers use the Internet to search for a home, so ForSaleByOwner.com can help find your ideal home. Keep in mind that nearly 25% of all properties on the market are “by owner” listings, so remember these properties as you search for your next home.

4. Contact the Owner Directly: Unlike homes represented by an agent, there’s no middleman to interfere with you from getting directly in touch with the seller. Phone or email the seller and ask additional questions about the home that wasn’t on the online property description. If you’re still interested, agree on a mutually convenient time to tour the home.

5. Get a Valuation Report of the Home: Either before or after you see the home, get a valuation or property report to see how the home’s asking price compares to other recently sold homes within the neighborhood. It’s similar to a real estate agent’s CMA (comparative market analysis), and it will compare the home you’re considering with recent nearby home sales. Remember that such property reports and CMAs do not factor in any recent renovations -- such as kitchen or bathroom remodeling -- so the price of the home will be affected accordingly.

6. Hire an Attorney: For a few hundred dollars, a quality real estate attorney will provide you with all the advice and counsel you’ll need to go from the offer to closing. Use a local attorney who is knowledgeable about your town’s ordinances when it comes to real estate transactions, as well as your state’s disclosure laws.

7. Make an Offer: Now that you’ve seen the home firsthand and have a property valuation report, plus an attorney in your corner, you’re ready to present the seller with an offer. Your attorney should have the necessary offer forms or you can use ForSaleByOwner.com to get all of the state-specific paperwork that you’ll need.

8. Lock in Your Mortgage Rate: Assuming that the seller is entertaining your offer, you’ll want to shop around for the lowest mortgage rate. You should contact major lenders, visit local banks and contact mortgage brokers to price compare. Once you’ve settled on a lender and a mortgage product, they will lock you in that mortgage rate and give you a set amount of time to close the real estate transaction. A 30 day or 60 day “lock in” period is most common.

9. Get the Home Inspected: The next step is hiring a quality home inspector who will go through the home – from foundation to attic – to see what condition the home is in. A home inspector will cost $300-$600 and the inspection will take around 2 hours. You’ll get an inspection report outlining any mechanical or structural problems that the home might have.

Depending on the results on the inspection report, you might want to re-negotiate the purchase price. For example, the inspector might tell you that the furnace to be replaced. Negotiate with the seller to lower the price to compensate for any such expense.

10. Close the Deal: Your real estate attorney will handle most of the details at closing and, depending on your state and local area, will advise you on any special paperwork that needs to be completed between you and the seller. Your attorney and your mortgage lender will also assist you with coordinating the financing and providing payment to the seller. The seller will sign over the deed of the home and, voila, you’re the new homeowner!

Qualifying Buyers for a Mortgage

One of the biggest headaches any home seller can experience is working with an interested buyer and negotiating a sales price, only to find days or weeks later that the buyer is unable to obtain a mortgage. That's precious time wasted and perhaps you even turned down offers from other interested parties.

According to the Mortgage Bankers Association, roughly half of all mortgage applications are being rejected. Lenders aren’t giving mortgages to just anyone nowadays. They’re turning down applicants who don’t have a high enough credit score or are not making a sufficient down payment.

As a seller, you’ll want to focus your attention on those who can afford your home and can get the necessary mortgage necessary. Ask interested buyers if they have a pre-approval letter from a mortgage lender. They might say that they are “pre-qualified,” which isn’t as strong as being pre-approved because the lender has not verified the buyer’s credit score, income, assets or liabilities. (click here for more about pre-qualified vs. pre-approved).

If the buyer is pre-approved, great! If not, before you spend any significant amount of time negotiating a sales price, ask that they take the important step of getting pre-approved. Not only will you be putting yourself in a situation to only work with those who are more likely to get a mortgage, you will be providing sound advice to buyers who will gain more confidence in buying a “for sale by owner” home without the help of a real estate agent.

Tell them to visit local banks that handle mortgages or contact any of the large home lenders, such as Wells Fargo or Bank of America, to get a pre-approval letter. Online lender Quicken Loans can even help buyers get fully approved for up to four months while they shop for a home.

Having your buyer get pre-approved is actually a very simple process and will benefit both you and the buyer.

Searching Tips and Tricks

We are always looking on ways to improve search. We get many suggestions regarding different terms and ways people would like to search through the listings. You requested and we listened. Here is a helpful list of ways to search through our listings that you might not have known about.

1. Searching by State/Province
You can easily search by State or Province on our site. Just type the State/Province in the location field and hit search. Note that some areas (i.e. New York City) have the same name for the city and state. If you type in just "New York" you will be shown the results for New York City. If you want to search the state, simply type "New York State" in the location field.



2. Open Houses
If you are planning to visit an area and want to see if there will be open houses in there, use the "Sort by Open House" functionality. This will place all of the properties that have an open house at the top of the results.



3. New Listings
Similar to the open house capabilities mentioned above, you can also sort by "New". This will place all new listings at the top of the search results.

Hopefully these tips and tricks will make finding your next home easy using ForSaleByOwner.com. If you have any comments or suggestions please let us know as we continuously strive to improve our search.

Home Prices Drop 18.6%

Home prices declined in each of the 20 metropolitan areas tracked by the S&P/Case-Shiller home-price index.

The monthly index found that, from February 2008 to February 2009, prices dropped 18.6% across the 20 markets, with the biggest declines occurring in Phoenix (-35.2%), Las Vegas (-31.7%), San Francisco (-31%) and Miami (-29.5%). Markets with the smallest declines were Dallas (-4.5%), Denver (-5.7%) and Cleveland (-8.5%).

Visit this page for a complete table of the 20 cities tracked by S&P/Case-Shiller.

Competing Against Distressed Properties

With distressed sales accounting for half of all home sales, many home sellers are finding that traditional sales are competing with discounted prices offered by foreclosed properties and short sales in their local area. To help home sellers attract buyers and compete against the discounted prices offered by distressed properties, ForSaleByOwner.com offers the following tips and advice:

Skip the Agent: Housing has lost more than $6 trillion in value since 2006, and hiring a real estate agent can cost as much as another 6 percent of the home's sales price. Selling “by owner” will allow the seller to save that money while also marketing the home at a competitive asking price. The National Association of Realtors also recently found that “by owner” sellers actually sell quicker and for closer to asking price than agent-represented sellers.

Price the Home Correctly: Home sellers need to price their home according to today’s market and not based on the high price that a neighbor might have received a few years ago. Using a combination of an online appraisal and a licensed home appraiser will help today’s seller price the home accurately based on recent sales activity.

Market the Home More Effectively: Traditional home sellers have access to more marketing channels than distressed properties, since not all distressed properties are found on the Multiple Listing Service (MLS), popular websites like Realtor.com or by owner websites like ForSaleByOwner.com. Traditional home sellers, including for sale by owner sellers, can market their properties with these resources to reach a larger audience of buyers than financially distressed homes. (info on getting your FSBO home on Realtor.com)

Keep the Home in Top Condition: Foreclosed homes are typically in disrepair and are in need of some repair or renovation due after having been left vacant. It can easily cost a new owner tens of thousands of dollars and months of work to get the home back in shape. A home seller should stage their home to give it the appearance of being in “move in” condition. The house, as well as all closets, should be kept clean and free of clutter to create the appearance of a more spacious home. Sellers can make their home stand out by doing things like landscaping the front yard to improve curb appeal, replacing worn-out carpets and old appliances, applying new paint in key interior rooms, and tackling other minor home improvement projects.

Offer a Quick Closing: An advantage of being a conventional home seller is being able to offer a quick closing, often an advantage for buyers who wish to move quickly. Distressed properties can take many months to reach a closing date. Sellers should be prepared to offer a 30-day closing date to attract buyer who wants to move quickly.

Qualify Interested Buyers: Nothing is more discouraging than spending weeks with a prospective buyer, only to learn that he or she is unable to obtain a mortgage. To avoid such situations, make sure that your buyer is pre-approved for the loan amount necessary to finance the purchase of your home.

Get Help with the Paperwork: For a couple of hundred dollars, a local real estate attorney or a title company will craft and review all contracts between you and the seller, and ensure that you are adhering to all state and local disclosure requirements. Remind buyers that while a real estate agent isn't needed to buy real estate, that they should get an attorney and/or title company to handle their paperwork.

$3.9 Billion... and Counting

If you follow the real estate industry in any fashion, you probably know that last year the Federal government introduced a $7,500 tax credit for first-time home buyers and increased it to $8,000 for those who purchase their first home this year prior to December 1st.

According to the government's Interim Results of the 2009 Filing Season, $3.9 billion in first-time home buyer tax credits have been claimed on more than 567,000 tax returns. Incidentally, if you bought a your first home anytime after April 8, 2008 and have not claimed the tax credit, I'd recommend that you contact an accountant to determine you eligibility and file an amended return to get this free money. (you can also click here for eligibility requirements)

It will be interesting to see how these figures grow this year and into next year's tax season, as first-time home buyers account for roughly 40 percent of all homes sold. Last year there were 4.9 million homes sold and this year will be less but still probably north of 4 million. Not every first-time home buyers will be eligible for the tax credits -- due to the tax credits' income thresholds and because it applies only for purchases made in the fist 11 months of 2009 and roughly last 9 months of 2008.

But we can assume that since most first-time home buyers are under the income thresholds ($95K for individuals and $150K for joint filers) and will time their closings to occur prior to December 1st, it is easy to assume that the $3.9 billion in claimed tax credits is only the beginning.

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Customers Ask, ForSaleByOwner.com Listens & Responds

Unlike many "by owner" real estate websites, ForSaleByOwner.com offers live customer support and we answer questions about buying or selling a home. Here's a good question that was recently asked of us that is applicable to many home sellers:

Once I have accepted an offer, do I have to take my home off the market or can I wait until they are approved for their mortgage? - Pete in Gallup, New Mexico

And our response:

Pete,

Hindsight is always 20-20, it is recommended that sellers pre-approve interested buyers before any offer is submitted or accepted. That is especially true for today's market, where buyers are having a harder time getting financing due to stricter mortgage guidelines. The pre-approval process doesn't take that long, and can be even be done through an online lender like Quicken Loans.

In your situation, does the Offer to Purchase state anything about taking the home off the market? In New Mexico, like most other states, most real estate contracts stipulate that once an offer has been accepted, the seller must disclose to other parties who come forward that the property is "Under Contract" but that the seller is accepting "Backup Offers."

We recommend that sellers and buyers hire a real estate lawyer to handle the sales contract, and provide counsel on all state and local laws.

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Sold By ForSaleByOwner.com

We're using today's blog post to ask recent ForSaleByOwner.com customers to share their tips on what they did to get their home sold in today's marketplace. Share any tips and pieces of advice so that others may learn from your successful experience and get their home sold while saving on commisison.

Below are some of the most frequently asked questions by FSBO sellers, so address one or more of these topics as you share your advice.

- How did you arrive at an asking price?
- Did you hold open houses?
- How did you know that interested buyers were qualified for a mortgage (did you ask for a pre-approval letter,etc)
- How did you handle negotiations with the buyer, etc?
- Who handled the legal work and other paperwork needed to complete the real estate transaction.
- How much did you save on commission?
- What other advice would you share?

Post your advice by clicking on the below "comments" link.

Introducing Our New "Find a Pro" Service

You might have noticed a new tab along the banner of ForSaleByOwner.com. "Find a Pro" is our new resource to help sellers and buyers connect with with service providers to help them through the real estate process and become new homeowners. We're building up "Find a Pro" with experts in more than 20 professional categories, from title companies and real estate attorneys to electricians and general contractors.

We welcome professionals in all markets across the country to join our new service to market their services to our website's more than 50,000 daily visitors and active selling and buying community. Since our customers are independent sellers and buyers, this is a tremendous opportunity for service providers to gain new clients who to traditionally are steered to businesses favored by real estate agents.

A Harvard study found that new homeowners typically make improvements after they purchase a home and spend an average of 20-25 percent more on home projects than other households. The new ‘Find a Pro’ service helps businesses can attract new clients in the untapped "by owner" market, while providing valuable services that ForSaleByOwner.com customers need to sell, buy and maintain a home.

Real estate businesses and home improvement service providers can visit http://www.forsalebyowner.com/pro/new to learn more about the program and register as a participating provider.

Adding an MLS Listing to Your FSBO Strategy

Once upon a time, only a real estate agent had access to the Multiple Listing Service (MLS), which is a database of homes currently on the market. The MLS is a great marketing tool for any seller who wants to generate more exposure for their home. As this video explains, ForSaleByOwner.com offers a service that will put a seller's home on the MLS.

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Mortgage Rates Hit New Record Lows

The Associated Press is reporting that interest rates on 30 year mortgages have fallen to their lowest level in the history of Freddie Mac tracking mortgage rates, which was back in 1971. The average rate on a 30-year fixed-rate mortgage was 4.78% this week, down from 4.85% the prior week and down more than a full percentage point from a year ago.

Using this mortgage calculator, we can see what this means for prospective home buyers, and those with higher mortgage rates who are considering refinancing. (If you do qualify for refinancing, by all means this is a great opportunity to do so.)

Let's use a $200,000 mortgage to see how today's low rates affect a monthly payment:

In this scenario, the cost of a monthly payment over the past year has dropped by more than $120. Over a year's time, that's $1,400+ in savings and, during the course of the 30 year loan, nearly $45,000.

It is anyone's guess how long today's low rates will last, and if it will help stimulate home buying activity. But there's a lot of favorable things happening for prospective buyers. We have record low mortgage rates, home prices that are at 2003 pricing levels, an $8,000 tax credit for first-time home buyers and a large inventory of available homes.

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