Denver FSBO Tips

1. Provide the buyer a list of closing costs. Offer the buyer a list of estimated closing costs based on your expected selling price. You would be surprised at how many deals fall through because buyers didn't factor in settlement costs. You don't want to get weeks or even months into a deal only to have your buyer experience settlement sticker shock. Many times the buyer simply doesn't have enough cash to close, even though they badly want your house. I will be happy to work up an estimated list of closing costs for your property based on your expected selling price. Simply give me a call.

2. Don't forget about repairs arising after inspection. Allow for the cost of repairs that might be required after inspections. Don't be inflexible about renegotiations. If you and the buyer have struck a deal and problems are found because of inspections, the buyer will either expect the repairs to be made, the sales price to be reduced, or a seller concession (money paid to the buyer at closing out of seller proceeds) for the cost of repairs. Don't let this take you by surprise. When I sold my last home the garage door mechanism and the instant hot water doodad on the kitchen sink both failed inspection. I think the repairs totaled around $900. I just paid for the repairs.

3. Consider paying the buyer's closing costs. Instead of accepting an offer that is less than your asking price, consider offering to pay some of the buyer's closing costs instead. If the buyer is tight on cash, paying some of the buyer's closing costs could make the deal go through. Some loans have restrictions on how much of the closing costs can be paid by the seller; others allow the seller to pay all of the closing costs. Many loan programs restrict the amount that a seller can contribute to closing costs by a fixed number-say 3%. Other lenders will allow seller concessions up to 6%, and some will allow concessions up to 9%. The biggest benefit to paying the buyer's closing costs is that it makes more buyers eligible to buy your home. Most sellers don't get asking price anyway, so sticking to asking price and paying the buyer's closing costs is often a win-win for both parties. Paying for part or all of the buyer's closing costs is known as a seller concession. Unless the buyer puts down 20% or works out some creative financing, the buyer will be required to pay for private mortgage insurance (PMI). Paying some or all of the buyer's closing costs will free up cash for the buyer, possibly enabling PMI to be avoided by the buyer making a down payment of 20% or more.

4. Consider paying "points" for the buyer. Another negotiating point is to consider paying "points" for the buyer instead of negotiating on asking price. One "point" is one percent of the loan paid to reduce the borrower's interest rate. Seller-paid points are tax-deductible for the buyer, so the buyer hits a double by getting a lower interest rate and being able to deduct the points paid by the seller. Buying down the buyer's interest rate can be of more benefit than simply paying the buyer's closings costs. If you pay $5,500 towards the buyer's closing costs, the buyer benefits by exactly . $5,500. But if you take that same $5,500 and buy down the buyer's interest rate from 6% to 5.375%, for example, let's ballpark how much the borrower would benefit. On a $250,000 loan with a 30-year term . if the borrower kept the loan for 7 years . the benefit would be in the neighborhood of $11,000! And that doesn't include the fact that the points are tax deductible for the buyer.

5. Every dollar counts. You wouldn't believe it, but sometimes hundreds of dollars can make or break a deal. There are a lot of sellers who have walked away from negotiations when they were so very close to striking a deal. Listen carefully and ask a lot of questions to find out what the buyer really needs to make the deal work. Remember that a lost buyer means more mortgage payments for you as well as home repairs, lawn maintenance, sprinkler winterization and the like.

6. Consider getting a professional appraisal. Any realtor will tell you that it's better to price a house right the first time rather than lowering the price later on. A new house for sale generates attention from potential buyers, but those buyers will look and move on if the price isn't right. Those potential buyers might not be back for a second look after you lower the price. Buyers are also leery about houses that have been on the market too long. Don't price on what your neighbor "told" you he sold his house for, as people don't always tell the truth. Don't price based on grabbing a few fliers of other houses for sale in your neighborhood. Remember that those houses could be incorrectly priced themselves. Having a realtor friend run a market analysis is better than shooting from the hip, but your buddy's market research might not be up to snuff. Also don't price based on what you "need" to get for the house. Buyers don't care what you "need" to get out of a house; they only care what the house is worth. Do not under any circumstances price based on the assessed tax value plus some rule-of-thumb percentage. And whatever you do, don't leave money on the table. Under pricing a house even by just a little bit could cost tens of thousands of dollars. A $500,000 house priced 3% below market value amounts to $15,000! Depending upon the size of your house and its location, a professional appraisal will run $300-$500, but it's better to spend a few hundred than to leave tens of thousands on the table or to lose a potential buyer and make extra mortgage payments, one after the other. The best way to price a house-and price it to sell-is to obtain a professional appraisal. A professional appraiser will base the appraised value on comparables (houses nearby and similar to yours that have sold, the details of which have been recorded at your local courthouse). Appraisers base their appraisals on hard facts. In addition to pricing the house to sell and sleeping well at night knowing that you aren't leaving money on the table, there is another huge benefit to getting a professional appraisal. Possibly the greatest benefit to obtaining a professional appraisal is that you can show it to every potential buyer who dusts their shoes on your welcome mat. Each and every potential buyer will be able to see in black and white the actual appraised value arrived at by a professional appraiser. This will give your buyer an assurance that they aren't paying too much for the house. Paying too much for a house is every buyer's number one concern. A professional appraisal will also give your deal a better chance of making it to closing. A lot of deals fall apart prior to closing because of "buyer's remorse." The buyer signs the papers, and you start making plans to move (and maybe even buy another house yourself) when suddenly the buyer backs out of the deal and you are forced to trudge off to Home Depot to purchase yet another "For Sale" sign.

7. Don't forget about Seller's Closing Costs. There are costs involved in selling a property. Some of these costs include: . fees associated with repaying the seller's mortgage and clearing liens on the property . transfer taxes . documentary stamps on the deed . title insurance charged by the title company to give clear title to the buyer . courier fee . credit to the buyer for unpaid real estate taxes . attorney's fees (if you choose to use an attorney) . condo/co-op move out fee . association transfer fees . upside down loans (you owe more than you will receive in proceeds at closing) . document preparation . mortgage pre-payment penalty . escrow fee . home warranty premium (if buyer insists on having one) . certificate of zoning compliance

8. Street signage. If there is a busy cross street at the end of your street, talk to your neighbor about permission to put a sign in their yard pointing to your yard. Pick a tasteful sign, something like, "Home For Sale" with an arrow pointing toward your house. Buy the sign (keep the receipt), and take the sign with you to show to the neighbor when you ask permission. If you ask nicely and have the sign in hand, few people will turn you down.

9. Listen to seemingly insignificant comments. If you are showing your home and a potential buyer says to their spouse, "We could put the sofa here, and your desk could go over there .," you know that you have an interested purchaser. If you hear a "Wow," get their contact information. Think about it; you don't say "Wow!" that often.

10. Ask questions of potential buyers. How does this home compare with other homes that you have looked at? What do you most like about this house? What do you least like about this house? Do you think this house is priced right based on other houses you have seen? Do you think this house would work for you? And last but not least (and even though it's sort of sales-ish) . What would it take for you to buy this house? If you ask a really straightforward question like this and wait for an answer, you are going to find out quick if a potential buyer is seriously interested. A buyer might shoot back, "Well, we would have to sell our house first," or "If you came down on price some we might be interested." Also ask if the buyers are pre-approved. If the prospective buyer has gone through the steps to become pre-approved (not just pre-qualified), you know that you are showing your home to a serious home shopper. The important point is that you only get answers if you ask questions.

11. Sell in spring if you can. Spring is the optimal time to sell your home. If you can list your home in the spring, you will have a better chance of selling quickly as well as selling at a better price.

12. Be wary of accepting contingent offers. An offer can be contingent on any terms listed in the contract, and contingencies should always have a time frame. The most common contingency, however, is the sale of the buyer's current home. Think twice before accepting an offer with a contingency that the buyer must first sell their present home. Good contingencies always have stipulations allowing the contingency to be waived if the seller finds another buyer. In that case, the first buyer would have a period of time-72 hours for example-to step up to the plate and close the deal or the contract would be void. The good thing about this type of contingency is that it gives the seller an out if another buyer comes along. The bad thing about accepting this type of contingent offer is that it often stigmatizes a house in the eyes of other potential buyers. Buyers don't want to buy a house that is already sold. Purchasing a home is also an emotional decision, and when a buyer is ready to make a deal, they don't want to have to wait 72 hours. A buyer might get cold feet during those 72 hours and change their mind. Think twice or three times before accepting a contingent offer.

13. Don't be offended by lowball offers. When buyers see a house that is for sale by owner, they will think that they can get a steal on the home. Expect lowball offers, and don't get offended when they come. Remain unemotional, ask the buyer why they think the house is worth less than the asking price, and make a counter offer. The buyer may just be shaking the tree to see what falls out. Lowball offers are commonplace because-from a buyer's point of view- it never hurts to ask. Don't forget that lowball offers often turn into sales at reasonable prices. When I sold my second home, the buyer had originally presented a lowball offer. My home was listed for $459,000, but the original offer was for $425,000. Months after the original lowball offer, the same person appeared somewhat out of the blue, and we eventually agreed on a sales price of $450,000. Another crazy idea that a lot of buyers have is that the real estate fee should come off the sales price since the house is being sold by owner. It defies good sense, I know, but it's a characteristic way for buyers to think. I once had a good friend tell me that he wouldn't buy a house that was for sale by owner unless the seller came down by the real estate fee. A house should sell for at or around appraisal value, regardless if it's for sale by owner or offered by a listing agent. Realize that a lot of buyers are willing to stick their feet in the mud on this issue. Keep the dialogue flowing with the buyer, and do your best to structure a counter offer that will satisfy the buyer's common sense shortcomings and get the buyer excited. Basing your selling price on a professional appraisal will ward off a lot of lowball offers. It also helps in making your counter offer because you can point out that any counter offer you make is below market value.

14. Simple negotiation tip. Virtually every buyer is going to expect you to come down on your asking price. Let's pretend that your home is listed for $400,000. Just between you and me, let's say that you are willing to take $390,000. If a buyer makes an offer of $390,000, consider the following counter negotiation strategy. Explain to the buyer that dropping the price by $10,000 only drops the monthly payment by approximately $60 dollars per month (at around 6% interest). That's not much. Instead, offer to give the buyer $7,500 CASH at closing to use on home improvements, decorating or to apply to the first 3 mortgage payments. At a rate of $60 per month, the buyer would have to own the home for TEN years to get the actual financial benefit of handing them $7,500 CASH. The beauty of this negotiation tip is that it's a great way to get a buyer excited, and it allows you to pocket $2,500 over what you wanted to get for the house. If you have asked a lot of questions, you will already know what the buyer doesn't like about the house. If your house doesn't have a fence, for example, you could use that as a negotiation strategy. Instead of dropping the price by $10,000, offer to give the buyer $7,500 cash at closing to spend on adding a fence to the property. The cash left over after the fence installation could be used to make a mortgage payment, for example. Negotiations are all about finding out what is important to the buyer and making a counter offer that will get your buyer EXCITED!

15. Encourage prospective buyers to get pre-approved. Explain to prospective buyers that sellers take offers more seriously when the buyer is pre-approved because the seller has a reasonable degree of surety that the deal will go through. Help the prospective buyer understand that if a seller gets two offers-one from a buyer who is pre-approved and one from a buyer who is pre-qualified-the seller is much more likely to accept the offer from the pre-approved buyer. You simply never know who is going to buy your house. You might offer this piece of advice to a couple who is waiting for their own house to sell before making an offer. If you give them this friendly advice and they go through the pre-approval process, it could speed things up if they wind up wanting to purchase your home.

16. Keep a list of people who have looked at your house. First, if anything comes up missing, the first thing your insurance company will want to have is a list of people who have been in your home. Second, you might wind up listing your home with a real estate agent. Over 80% of For Sale by Owners end up listing with real estate agents. Of homes sold by owner, 80% indicate that they would not sell by owner again in the future. If you wind up listing your home with a real estate agent, you will need a list of prospective buyers who looked at the property prior to the listing date. Their names and phone numbers will need to be kept so that they are exempted from the contract if one of those prospective buyers winds up purchasing your home. Let's say that Mr. and Mrs. Watson look at your house in June. They don't make any comments negative or positive, and they simply thank you for your time as they leave. A lot of serious buyers play it cool because they don't want to jeopardize their negotiating position. Three months later your house hasn't sold so you decide to list it with a real estate agent. Mr. and Mrs. Watson pop out of the blue and make an offer on your home. What you didn't realize was that they actually loved your home, but they wanted to keep that to themselves and wait for their own house to sell before making an offer. If Mr. and Mrs. Watson wind up buying your home, you'll have to pay the real estate commission unless you have made an allowance in your listing contract. You should be able to negotiate a clause in your listing contract that would exempt certain buyers from the listing agreement. Your real estate agent will probably want to limit the number of exemptions to a few or even one single exemption. Do your best to negotiate on this point. You don't want to pay a big real estate commission when you effectively sold the house without a real estate agent. On the off chance that you wind up listing with an agent, keep a list of potential buyers, including their names and phone numbers.

17. Consider relocating your pets while your home is on the market. Pet owners don't like to hear this, but pets scare off a lot of potential buyers. A lot of people are uncomfortable with pets, some buyers are allergic, and some people are actually terrified of animals. Some potential buyers think, "There is probably hair and dander all over this house!" If you have a parent or friend who could take care of your pet(s) during open houses and showings, it could improve your selling price. If you are unable to temporarily relocate your pets, do your best to keep them out of site. Have your spouse take Fluffy on a walk while you show the home to potential buyers. Keep litter boxes, food bowls, pet toys, leashes, pet cages and the like out of site. But don't just put the pets in the backyard or garage. If a pet-phobic buyer sees a dog in the backyard, thoughts of "Urine stains, doggie vomit, scratched woodwork" and the like may jump into the buyer's mind. It sounds harsh, but try to remove every trace of your pet from your home, including photos. Clean pet stains using professional enzyme cleaners, and vacuum your carpet and furniture with zeal. Consider having a friend or neighbor come over for a sniff test to see if they can smell any pet odors. As the lovable owner, you could be so used to the smell of your own home that you might not notice a pet odor. However, a person without pets can smell pets. It sounds silly, but consider baking some cookies or lighting vanilla-scented candles prior to a showing. Use cleaning products with a lemon scent. You can also boil cinnamon in water for 30 minutes prior to a showing. Remember: a house that smells good sells good. While you think of your cat or dog as your snuggly best friend, prospective buyers may think of your pet as a stinky, hairy, drooling destructive menace. Pets enrich your life, no doubt about that. But pets do not improve the value of your home.

18. Hold back information. Have you ever placed fifty fliers in your box only to have all the fliers disappear in a few days? But you didn't get any phone calls, right? Virtually every real estate agent on the planet has bemoaned the disappearing fliers phenomenon. This happens for one reason and one reason only. You broke a cardinal rule of marketing: never provide information without the ability to follow up. One small tweak can fix this problem with the potential to convert a looker into a buyer. What you need to do is withhold important information. That will spur the potential buyer to pick up the phone and call. Withholding square footage is a good idea because that's something everyone needs to know. Price means nothing without square footage. Savvy real estate agents have been using this tactic for years. If you can get a potential buyer to call, you can develop a dialogue and have a chance to talk up your home. A telephone conversation also gives you a chance to invite the potential buyer over to look at your home.  

19. Order a payoff letter. The "principal balance" on your mortgage statement isn't accurate for payoff purposes. I know it sounds crazy, but it has to do with the way lenders do their calculations. In the United States, mortgage interest is paid in arrears. That means that when you make your November mortgage payment you are actually paying October interest. If you are planning on paying off your mortgage (which effectively happens when you sell your home), you need to know where you stand financially. If your closing date is set for December 1st, your mortgage lender will add 31 days of interest. 31 days of interest assumes that your last payment made was the November payment that paid October interest—30 days of November interest + 1 day of December interest. What often happens is that sellers are shocked to discover that their principal balance owed is higher than the balance listed on their mortgage statement. It's a bit confusing, I know, so to be on the safe side, obtain a formal payoff from your lender. Sometimes a lender will charge a small fee for this, but it is well worth it. 

20. Less photos = lower sales price + more time on the market. Buyers LOVE pictures. A real estate agent named Frank Llosa did some interesting research on the link between sales price, time on the market and the number of photos presented in the listing. He reviewed 268 listings in the Fairfax, VA area in the $400k to $500k price range. MLS now allows a maximum of 30 photographs to be posted for each listing, up recently from a maximum of 20. That sounds like a lot of pictures at first, but think about it —3 bedrooms, 2 bathrooms, 1 living area, 1 garage, 1 façade, 1 landscaping, 1 laundry, 1 back yard, 1 rear of the house—that's 12 shots, and this is for an averaged size home. Given that you want 2-3 pictures of each room, you can see how it is easy to get to 30 pictures. The more pictures, the better. Frank Llosa's research showed that 24% of listings only had one picture. Only 12% of agents had posted the maximum number of photos. Help your home stand out by posting as many pictures online as possible.

Frank Llosa also found that listings with more photos sold faster. Fewer photos = more Days on Market (DOM). Here is how the numbers break down:

• 1 Photo = 70 Days on Market
• 6 Photos = 40 Days on Market
• 16-19 Photos = 36 Days on Market
• 20 Photos (the MLS limit at the time) = 32 Days on Market

Remember that a home that spends 70 days on the market vs. 36 days on the market means a little more than one extra mortgage payment. One extra mortgage payment stings—but not as much as the final blow to sales price. Listings with few photos garnered lower sales prices. A home with only one photo brought 91.2% of the original price whereas a listing with 6 or more pictures sold for 95% of the original listing price. On a $400,000 home, that translates to $15,200 of money left on the table by not posting sufficient photographs to facilitate interest in your listing. If you add at least one extra mortgage payment of $3,000 because of extended DOM, that means money down the toilet to the tune of at least $18,000! Not getting it done when it comes to pictures could negate any real estate commission savings that you receive by selling your home by owner. When it comes to pictures, be prolific!

21. Take pictures of your neighborhood. When posting pictures to MLS, don't forget to include pictures of your neighborhood. Buyers—particularly out of town ones—want to know that your home is in a "good" neighborhood. They need to envision their family spending years walking your sidewalks with kiddie wagon in tow. They want to know that they will be safe jogging in the evenings and that the neighbors are generally good folk. People can tell a lot of things from pictures. Hojin Chang's picture below says it all.

The picture says: this is a nice, safe, family neighborhood.

When I sold my last home (which was in a neighborhood that looked remarkably close to the one pictured above), my listing agent did a clever thing. We had a trendy coffee shop in our neighborhood complete with daily baked goodies, a fireplace and an old-fashioned soda counter where kids could order homemade ice cream. My listing agent got a menu for the coffee shop and put it in an upright plastic display case on our kitchen counter. If your home is in walking distance of a library, for example, that will mean a lot to stay at home mothers looking for things to do with the little ones. Take a picture of the library and post it on your listing. These little extras sell houses.

If you do wind up listing your home with a Colorado real estate agent, make sure to read Understanding Real Estate Commissions before you sign your listing agreement.