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The Pros and Cons to Selling Off-Market

Updated: Aug 2, 2021

So, the time has come. You're finally ready to sell the most expensive thing you own. Now you must decide which route you will take. Will you find a realtor and list your home on the MLS, list your home as a For Sale By Owner, or will you sell your home off-market to an investor?

Your answer to that question should largely depend on your knowledge of real estate, the amount of time you can delegate to selling, and your financial goals in the transaction. I'll break down the three most common options into digestible differences to guide you towards your selling decision.

Selling with a Realtor

Finding a realtor who is excellent at his/her job is tough. There are more terrible realtors than good ones and they would all love to sell your home. The break down below is assuming you've found a realtor who is amazing at what they do.

Knowledge needed: Little to none. You are hiring an expert who has done this many times before.

Time needed: Minimal. You've hired a realtor to do all the time consuming jobs. You just need time to clean up your place and get it ready for photos.

Money needed: Equity. When you sell your home with a realtor, you will be paying 6% in realtor fees. So, if you sell your $150,000 home, you'll pay $4,500 to your realtor and $4,500 to the buyer's realtor. Additionally, the seller often gets negotiated into paying closing costs as they're already on their way to getting a check. The reason you need equity in your home is because the realtor fees and closing costs come from the proceeds of the sale. Again, let's assume you're selling your home for $150,000. You only owe $100,000 on your mortgage. So, after $9,000 in realtor commissions and $4,000 in closing costs; you'll walk away with $37,000. However, if you owed $140,000 and you sold your home for $150,000; you're going to be in the hole 3k at closing unless you negotiate otherwise.

Pros: You have an expert guiding you through the process. Your realtor suggests an appropriate list price. You don't have to worry about the listing or marketing of the home. Your realtor answers all the phone calls and coordinates the showings and open houses easy. You have an increased amount of serious buyers looking at your property. Your realtor also makes sure you don't miss a step in your due diligence or duties with the title office.

Cons: The biggest con here is that you're paying 6% commissions to your realtor for a lot of work that is done behind the scenes. The other biggest con is that you must find an excellent realtor.

Selling For Sale By Owner

Knowledge needed: Substantial. When selling FSBO, you determine the list price which can be tricky to do without pulling comparable sales prices near you. Additionally, you'll be responsible for drafting and signing the law-binding contract. This will most likely require the help of a title office or real estate attorney. Lastly, you will need to know the steps to take with the Title company in order to assure the home is sold free and clear in a timely manner.

Time needed: Substantial. When you list your home FSBO, you are in charge of the marketing the property and responding to all interested parties. You'll be getting flooded with realtors who want to sell your home for you and tire kickers thinking they can get your house for a buck and a half. Assuming you are able to weed out the undesirable and find a serious buyer, you will then be in charge of negotiating and establishing a realistic timeline to complete the signed contract.

Money needed: Cash + Equity. You'll most likely need a cash budget for marketing, for drafting a real estate contract, and for the listing fee if you are going to list it on the MLS. You will also need equity in your home to cover your remaining mortgage potential closing costs. Oh, and your buyer may be brining an agent in which case one of you will be paying a 3% commission.

Pros: You get to keep a larger chunk of your sales price by eliminating the realtor commissions (unless the buyer is using a realtor).

Cons: You're legally responsible for the sale of the home which leaves you with a greater potential to be sued if things go sideways. Your head is pounding from wasting your days on the phone. You miss a voicemail from your mom because your inbox is full. You're responsible for keeping all parties on track in order to close in a timely manner.

Selling Off-Market

By selling off-market, I am referring to selling to an investor or general buyer who you have found or who has sought you out. Once again, there are many investors who couldn't care less about you and your situation; however, there are several who are ready to collaborate with you to make everyone happy (like Hamer Homes).

Knowledge needed: Basic. When selling to an investor, you'll need to be confident in your home value or at least able to decipher the comps that the investor shows you. You should also be familiar with the real estate buying and selling process to increase your chances of a successful selling experience.

Time needed: Minimal. The investor or home buyer should be finding comps to present to you and negotiating accordingly. You won't have to answer many calls or market to the masses. All you need to do is make sure your goals are met through the written contract and complete the necessary tasks with the title office once a contract is entered.

Money needed: Equity. Because you will not be using realtors, there will be no 6% commissions off the sale. And, investors will often times split the closing costs or negotiate to find what works best for the both of you. The equity is crucial so that you walk away with a check at closing.

Pros: You don't have to spend hours cleaning to list your house for sale (many times the worse the better for investors). You have no realtor commissions. You have a greater chance of getting a cash offer or open the door to seller financing to defer your capital gains.

Cons: You may be selling your house for less money than if you cleaned it all up and listed it on the market with an agent. You need to do your due diligence on the investor.

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