The Cost of FSBO
Before you speak with or interact with a FSBO, get to know all the unexpected costs they will have. Most owners won’t know them.
Loan Prepayment Penalties = $_________________
Some loans, usually non-government loans, have a prepayment penalty. A prepayment penalty means if they pay off their mortgage, typically within the first five years, there is a penalty for doing it too quickly.
Holding Costs = $ _________________
Holding costs are costs that an owner still has while they wait for their home to sell. Most experts suggest that they will need to pay 4-6 months of payments after listing, at the very least. Some of these costs include:
- Monthly mortgage payments
- Monthly taxes and insurance
- Utility bill: electricity, water, gas, trash
- Maintenance: lawn care or snow removal
- Pest control
Research statistics from Realtor.com state that nationally, homes are on the market for about 86 days. Even when an offer is put on their house and the closing process starts, these costs are still there.
According to Realtor Magazine, about one-third of all real estate transactions fall through. So these can be some of the biggest cost these owners face.
Transaction Expenses = $ ______________
Commonly referred to as “closing costs,” these expenses may account for 2-3% of the total amount of the loan. A high-cost region like California or New York, closing costs may be much higher and can account for roughly 5-6%.
Cosmetic Fix-Up = $ __________________
Most houses need some kind of cosmetic design fix-up, whether it is a new carpet, paint, or yard work. If the owner really wants to sell for top dollar, the house needs to be in excellent, move-in-ready condition. When buyers view the property, they are mentally assessing what they will need to change or update.
Properties that are in move-in-ready condition generally sell faster and for a higher price than properties that have not made any renovations or changes. In today’s market, a FOR SALE sign is no longer enough to sell your house.
- Writing a Sales Contract
The owner may opt to get a real estate lawyer to write it or purchase a pre-made one online. It can cost anywhere from 200 to 700 dollars.
Advertising the Property
Advertising costs can vary widely. Advertising materials such as FOR SALE signs, brochures, pictures, or classified advertisements can become costly ($50- $2,000 on average).
Having a professional home inspection is strongly recommended for many FSBO sellers. Most buyers will hire a professional inspector to find any flaws or deficiencies in the house they are considering purchasing. A seller is liable for main deficiencies in the house that they know about (or should know about).
Surveying the property is important in order to define the exact scope of the property being sold.
Most real estate agents will hold at least one open house, but they need to prepare the house and advertise ($100).
Other costs include: staging their house to impress buyers, assessing the buyer’s financing alone, house warranties, the closing attorney, and negotiating the deal with the buyer.