You’re here because someone or some company wants to buy your house privately. Maybe you’re getting unsolicited calls, or someone knocked on your door. Either way, you’re thinking about taking offers seriously.
Before you go any further, here’s the bottom line.
You should only consider two factors when you get offers to buy your home.
- If you’re willing and able to relocate
- If the offer is enticing enough based on your home’s value, market conditions, and the added hassle of moving.
What is a Private Buyer?
Demand is high in the current real estate market. Prospective homebuyers use any means necessary to find a home, including door-knocking, cold calling, networking with real estate professionals, and more.
The question is, who are these prospective homebuyers? They usually fall into two classes of people.
- “Normal” Homebuyers: You know, everyday people who might have a family, kids, and a desire to live where you live. They’re willing to go the extra mile to find their dream home or their next slice of the American Dream.
- Real Estate Investors: Real estate investors look for homes that are currently off the market. If the owner is interested in selling or needs to move, these properties may come at a discount. If the owner desperately needs to sell, it may come at a bigger discount. If you’re facing foreclosure, bankruptcy, or need to move ASAP for personal reasons, an investor can help you cash in on your equity quickly.
A bonus 3rd situation would be a pocket listing.
A pocket listing is an off-market listing marketed privately, typically by a real estate agent, to a select group of potential buyers or their agents. It is not officially advertised or listed on the Multiple Listing Service (MLS). The property’s availability is shared within the agent’s network, brokerage, or among specific clients.
Pros Of Selling Privately
Lower Sales Commissions
In a traditional home sale, two agents are typically involved. Each agent receives a commission split of 3% each (on average). On a median-priced $417,700 home in the United States, 6% comes to more than $25,000
When you sell privately, you can sell your home without the help of an agent. Instead of paying a 6% commission, you can work with a title company and/or real estate attorney to handle the paperwork and closing process.
Avoid Extensive Prep Work
When you sell your home on the MLS, you have to go through a lengthy process of listing, staging, and showing your home. If you already have an interested buyer, they may want your home as-is to speed up the process.
Difficulty Gauging Market Value & Negotiating
If you choose to sell your home without the help of a realtor, you may have trouble gauging the market value of your home. You can go buy similar comps in the area, but nothing beats experience. The same can be said about negotiating with potential buyers and not leaving money on the table.
Cons Of Selling Privately
Handling Paperwork Yourself
Again, this assumes that you’re going the FSBO route. Without an agent, you have to handle a lot of paperwork yourself, which can pose legal and financial risks and frustrations. The selling process requires several disclosure documents and forms. The help of an attorney or title company can mitigate risks and mistakes.
There’s a Lot Involved
You may think you know your home better than anyone else, so who better sell it to? That’s not always the case, especially when you’re drowning in to-dos such as pricing, negotiating, preparing paperwork, making repairs, etc.
At closing, legally transferring ownership is a complex process without proper representation. An attorney can help you vet buyers so you don’t waste your time.
Negotiating
If you don’t have real estate experience, you may have trouble negotiating the best price with a private buyer. Your home isn’t on the market since you’re agreeing to negotiate with a private buyer. This means that you have less negotiating power.
Decide: Realtor, Title Company, Or Attorney?
The first and best thing you can use a realtor for is a comp. Even if you don’t work with a realtor, you can call agents in your area to help you get an accurate comp. Don’t be the guy/gal who sells their house based on the Zillow estimate. You’re leaving money on the table if you do this. Especially if you’re selling to a real estate investor or someone with experience.
- Agent: A motivated agent is the quickest and “sure bet” way of moving a sale across the finish line. That will come at a cost of 3% for someone to probably only prepare the purchase agreement. Realtors earn their commission mostly from finding buyers, but you already did that. Some realtors may offer a “no commission” ala carte service. They’ll handle all of the paperwork and closing for a fee instead of the usual commission.
- Attorney: You likely don’t need an agent if you already have a buyer. For a flat rate, an attorney will do the job just as well as an agent, if not better. An attorney will charge anywhere from $500 – $3,000 to handle offer & negotiation, settlement fees, document prep, and title insurance.
- Title Company: Some title companies have an attorney on staff or a “transaction coordinator”. They will do a title search to find liens or chain of ownership issues, issue an insurance policy, and coordinate closing. They will also act as an escrow agent, collecting money and issuing checks to whoever is getting paid (mortgage lender, buyers deposit, themselves, lawyers, and the seller)
If you work with an attorney, stay on top of the process because of the work involved. Keep in touch, let them know when you want to close, and answer questions. Make sure you get the buyer’s lender in touch with your attorney. These are things that an agent will do. A real estate attorney can help with this, but they’ll charge extra.
What If I Already Have An Agent?
If someone approaches you outside of your agent and you don’t have an exclusive listing agreement, you don’t owe them a commission. You can also sell to a private buyer if you have an open listing agreement. We would advise against this. If you won’t commit to a real estate agent a real estate agent, they won’t commit to you.
Decide: Can I/Do I Want To Move?
Realize that buying a house is an utter nightmare right now. This is probably why homebuyers are hitting you up unsolicited to purchase your home. Do you want to end up in the same position as them after you sell?
A move may be in your favor if you’re ready to cash in on the market rates and you already plan on downsizing. Maybe your kids are located somewhere a lot cheaper like the Midwest. Maybe it’s time to start traveling the world.
Bottom Line Of Selling Your Home Privately
Selling your home privately can be a viable option in today’s hot real estate market, especially if you’re willing to relocate and the offer is right. However, it’s crucial to understand the pros and cons of such a transaction. Lower sales commissions and avoiding extensive prep work are definite advantages, but you must be prepared to handle the paperwork, gauge market value, and negotiate effectively.
Whether you choose to work with a realtor, attorney, or title company, make sure you’re informed and comfortable with the process. Ultimately, the decision to sell privately should align with your personal and financial goals, ensuring a smooth and successful sale.
