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Pros & Cons of the Different Methods for Selling Your House

In my previous blog post I discussed the Four Methods of Selling Your Philadelphia House.  Now I will discuss the advantages and disadvantages for the four methods.

Advantages & Disadvantages

Each of these methods has advantages and disadvantages to you based on how much you want to pocket yourself from the sale, how much work you want to do yourself, your knowledge of the home selling process, how quickly you need to sell, and the current condition of your home. No one can make this decision for you. It is a personal decision. You have to think about what you need and want at this point in your life and make the best decision for you. Every one of the methods discussed above is a great, viable way to sell your house. The difference is what you want from the whole experience. With that in mind, let’s explore the advantages and disadvantages of each of these methods so you can make the best decision for you based on your current situation.

Real Estate Agents

The biggest advantage of using a real estate agent is that they handle the marketing and sales process for you, and you only have to pay them if they find you a buyer. They will advertise your home in the Multiple Listing Service (MLS) which is the service that other realtors review when their clients are looking to buy a house. Your home has immediate exposure to all the buyers’ agents. A good agent will also look for other ways to market your house. They will do open houses, place ads in “homes for sale” magazines, and invite agents from other offices to preview your home. And since they provide a lockbox on your door, you do not have to be home for agents to be able to show your house. When an offer comes in, they will help you with the negotiations, and they will follow up on all the steps required to get you to the closing table.

The disadvantage of using an agent is that you pay a commission on the sale of the house. As I said earlier, this can amount to 5% – 7% of the sales price of the house. So on a $100,000 sales price, you would pay them between $5,000 – $7,000 for their services. Since they are not paid unless they sell the house, many agents will not spend any additional money to market your house. They are afraid that they may not sell your house, and so they will never get back the money they spent. My question for agents with that attitude is: “If you aren’t sure you can sell my house, why would I want to list with you?” 

Which leads to another disadvantage: since the agent works off of commission, if your house is not “easy” to sell, they will often just list it in MLS, but do little else to promote it in the marketplace. You should also be aware that some agents use a concept of listing as many houses as possible with the idea that some will sell, and some will not. They’ll make their money off whichever ones sell. That’s fine for them. But if your home is not one of the houses that happen to sell, it could sit on the market for a long time with no one working to locate a buyer.

Finally, real estate agents lock you into a listing contract for a specified period of time which prevents you from selling the house yourself without paying them a commission. This works fine when they quickly bring a buyer, but if the process is delayed, it can be very frustrating not to be able to take matters into your own hands and locate a buyer yourself.

Selling Your House Yourself

If you decide to go the FSBO (For Sale By Owner) route, you retain full control of the process, and you save the 5% – 7% commission. You can invest your money into marketing to advertise your house by running ads in the paper or in Real Estate For Sale magazines (this can be expensive).  You decide who enters your home, and when.

The challenge of FSBO is being able to get the information about your house sale in front of enough people quickly to get it sold. Also, everything is left up to you. You will also need to be available to show the house, negotiate the terms of the sale, and complete a Purchase & Sales Agreement with your Buyer. Be sure to consistently follow-up on the status of their loan application so you have no surprises and no delays before closing.

Flat Fee Listing Services

Flat Fee Listing Service companies offer the half way point between using a real estate agent and selling the house yourself. They offer some marketing for you, show you ways to market your property, and show you how to walk through the negotiating and contract phase with your potential buyers.

The down side is that there is an up-front cost associated with this service, and no guarantee that you will find a buyer. After going this route, you may still find that you need to contract a real estate agent which means that you will pay for both this service and the agent’s services.

Real Estate Investors

All of the methods for selling your house that we have discussed so far depend on locating a buyer for your house. When you contact a Real Estate Investment company, you are dealing directly with someone who wants to buy your house – not list it for sale. If you are looking for a very quick sale, or if your house is not in prime condition, this is often your best alternative. Once you call an investor, they will ask you about your house, the repairs that are needed, your current situation, and why you are selling your home. They’ll use that information to create an offer that works both for you and for them. Generally, they will close (buy your house) as quickly as you need, or stretch out the closing date if you need additional time. 

The biggest advantage is that you are dealing directly with a buyer, so once you come to an agreement, your house is as good as sold. All you need to do is start packing. You don’t need to worry about if and when the house is going to sell. You won’t have a bunch of strangers walking through your house at unpredictable times. And you’ll have no repairs to make since an investor will buy your house in its current condition.

They have all of the necessary forms and will handle everything for you. You just need to show up to closing and collect your money.

If you decide to work with a real estate investor, you’ll want to find one who is concerned with your situation and is looking for a way to structure the sale so you both get what you want. Unfortunately, not every investor is created equal. A good investor has numerous techniques for buying your house, and can create flexible programs that meet your needs.

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February 11, 2010 - Posted by | Uncategorized

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