At 4:00pm today the buyers signed the papers. Become a Complete Fool
That's right folks...in one of the worst RE market regions in the nation and one of the worst markets in more than a decade in Arizona, we went against all odds and sold our house FSBO!
You may remember the following post on 8/25:
Where I stated:
Actually, it's not emotionally challenging. I have the fortitude to stick with selling it myself, and will be successful. I have chosen a very desirable location and have made the house attractive to buyers. I have no emotional attachment and can be very objective about the worth of the house. I made my money going in by purchasing at a very good price and putting a lot of sweat equity into it. I can carry the property for over a year, have it depreciate 10%, and still make money.
Well, it finally happened.
We purchased the house at the beginning of June. We bought it from our neighbors without Realtors representing either side. We actually had the escrow instructions, the contract, and the earnest money in place in January. We set a closing date in June because that's when the family was moving.
During the months of Jan-Jun we purchased tile, appliances, and cabinets so that we'd be ready to flip the house immediately after taking possession. After closing on the house, we fully remodeled it and added a bedroom in the course of about 6 weeks.
We had our first open house the third week of July. We continued having open houses daily until it sold. Two hours each day, 7 days a week. This required putting up 10 signs before open house and taking them all down afterwards. Putting the signs up and taking them down took a total of about an hour each day. And it also required loading up our 3 kids all aged 5 and under for these trips. Fun, fun, fun!
Finally, a couple walked in and found just what they were looking for. We came to an agreement on the terms, and drew up the escrow instructions the next day. That was exactly 13 days ago. We closed in less than two weeks. They weren't represented by an agent so no Realtor fees were incurred.
What we learned...
Selling your house FSBO is TOUGH! It takes a lot of time, effort, and persistence.
What we did right...
Open Houses - Having the Open Houses every day was absolutely necessary, in my opinion. Getting as many eyeballs on those signs as you possibly can is essential because it only takes that *one* person walking through the door that loves your house to make the deal. But you have to have a *LOT* of people walk through in order to find that one. You won't be able to compete with the Realtors through the normal channels (see below) so you'll need to create an inroad for yourself.
Word of Mouth - We told everyone we knew to tell everyone they knew to tell everyone they knew that we had a house for sale. It turns out that the couple that bought the house heard about the house through a mutual friend. They saw our Open House signs one day and stopped in for a look.
Market Analysis - By the time we put our house on the market, we knew every house that was for sale in a 1 mile radius. We knew the asking price per square foot, the amenities, the lot locations, and our assessment on whether they were asking too much or if they were fairly priced. This allowed us to price our house correctly in order to sell in a quick manner but also at a good profit level. Knowing the market this well took hours and hours and hours of scouring the MLS, the county assessors web site, and the recently sold property listings during the months leading up to taking possession of the house. Knowing the area is essential!
Budgeting - It was necessary for us to not only budget the remodeling costs, but also the marketing and carrying costs that we would incur during the selling phase. Because we had researched the recent sales DOM numbers and had a marketing plan, we were able to budget what we thought it would cost us to advertise and carry this house after the remodeling phase. We actually budgeted to carry the house for 3 months and ended up only making 2 payments...just narrowly avoiding the third payment by closing at the end of this month.
Borrow, Borrow, Borrow! - Now, you have to have the stomach for this in order to pull it off. Essentially, we borrowed the 20% down payment on the house from our HELOC on our primary residence. We then took out a primary mortgage on the property. This was done in order to minimize the amount of capital we'd have tied up in this investment. Also, by putting 20% down with the HELOC, we were able to avoid a 20% second mortgage at an investors rate of 10% (since it was not our primary residence). We then took full advantage of Lowe's 12 month no interest programs for the remodeling materials. Risky? A little. But all of the risks were calculated (ad naseum) in spreadsheets and the like. Essentially there were relatively very few actual dollars taken out of our personal liquid assets for this project. But if you do this...TREAD LIGHTLY and KNOW WHAT YOU ARE GETTING YOURSELF INTO. Ignorance is certainly not bliss when it comes to OPM.
What we did wrong...
Monkey See, Monkey Do - When trying to sell a house, who better to copy than the Realtors themselves? So, we got ourselves on the MLS for a flat-fee listing ($399). This resulted in exactly zero phone calls in over 6 weeks. Which, even in this terribly slow market, is an anomaly according to my two Realtor friends. If you click on the link above in this post and then read the whole thread, you'll see my theories on why it's not possible to compete using the MLS if you're doing a FSBO or are going through a "discount broker".
FSBO Internet Site - I had read articles about a specific FSBO web site and had also seen it featured on news programs. At the cost of $595 I added our home to this site. This resulted in exactly zero phone calls (but did get one scam e-mail from London). And this was most likely my lack of research that caused this. It's become apparent to me that homes under $250k might do well on this site, but when you're selling a home for almost half a million, you're not going to get much action. We got over 1200 hits to our page though!
Funny thing is....I also, on a whim, put a $2.00 ad in our Credit Union's monthly rag and got more phone calls (1) from this than I did from spending $1000 on the MLS and the FSBO site.
Too Optimistic About The Market - Although I had been reading the articles about the "bubble" and the coming downturn in the market, I underestimated this. No one has a crystal ball, but certainly the projections presented by analysts should be given more thought and attention. It's not that I ignored the reports or trends, it's just that I kept telling myself that rates were still relatively low, jobs were still good in the area, and prices had stabilized. I did a good job in almost all areas of not becoming emotionally attached, but I was weak in this area. My optimism could have cost quite a bit here.
Anyway, if you got this far, I appreciate you reading the saga. It was a wild, fun, and sometimes scary ride. In the end, I'm happy to say that it was well worth it mentally, emotionally, and financially.
And, I'm no longer running into traffic in order to put my signs up in the median every day, so that's a good thing. My dad always told me to go play in traffic. Well, he got his wish.
Here are some stats:
- Sold for 98% of initial list price
- Total saved in Realtor fees: $52,440 (I actually captured the 6% on both sides. As part of the original deal in the purchase of the home I agreed to buy the property as-is if they would give me 6% off of their listing price that they'd normally pay in Realtor fees and an addition 1% for a "counter-offer" discount.
- Days on Market: 56
- Current Average Days on Market: 87
- Hours spent on project: Many. Many, many, many.
-shorty, movin' on to the next one
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At 4:00pm today the buyers signed the papers.
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