For Sale By Owner: How It's Done  

by Elizabeth Rhodes
Seattle Times staff reporter  

Douglas Cole and Marcie Sims are one happy couple. Last month they decided to sell their North Seattle home - advertised as a sunny 1926 cottage with hardwoods, French doors and a territorial view - by themselves.  

They placed a newspaper ad, paid a firm $400 to put the house in the Northwest Multiple Listing Service - and then watched it sell in less than a day based on a simple sign Doug Cole plunged into his lawn. The price they got?  

"It was for a little more than we asked," he confesses. What's more, the deal went together as smooth as butter on toast because "the negotiating wasn't that hard. Fortunately, the people we've worked with have been professional but relaxed."  

With the Greater Seattle market hot, hot, hot, tales like the couple's of quick, lucrative sales are making an increasing number of sellers question the need to pay an agent.  

Indeed, why not become a "fizzbo" - slang for For Sale by Owner - and pocket the standard 6 percent listing commission themselves? On a $200,000 house, that's a tidy $12,000.  

As the current seller's market has strengthened, Eagle Mortgage senior loan officer Deborah Estridge has seen an increasing number of homeowners attracted to her free class on how to sell their homes themselves. (Such classes are listed in the Home/Real Estate Datebook in this section.)  

Invariably, after listening to her presentation, sellers tell Estridge that there's much more to being a fizzbo than they thought. And indeed, real estate pros stress that selling one's own home isn't for the faint-hearted.  

But it's not just agents, who obviously have a sales commission at stake, who are saying this. So, too, are others, including Estridge and Bellevue real estate attorney Richard T. Morse. He owns an escrow company and thus sees many fizzbo transactions.  

Says Morse bluntly: "A fizzbo seller is at the same disadvantage as having a bad agent." And "a fizzbo seller can be greatly harmed by a skilled buyer."  

So what does one need to know to decide if self-sales is the correct path? And if it is, what are the basics to be mastered?  

Generally, the pros say using an agent makes sense when you don't want to go to the considerable work of learning the sales process; when you don't want to deal directly with marketing, showing and selling your home; when you're on a strict timeline; or when your home is in the upper price ranges.  

Why that last one? Because Estridge says people who can afford a half-million-dollar home don't want to mess with amateurs. "They expect a real high level of professionalism. And usually your higher-end buyers are your tougher negotiators. That's why they've got the money."  

And a big reason some sellers go with an agent is because they've already tried to sell without one, and it hasn't worked.  

That's why one fizzbo seller decided to list her South Seattle house with an agent after trying for two weeks to sell it on her own. She held two open houses. The first week, "it was a beautiful day, and everyone who came enjoyed the house and liked the view and no one bought it."
The next weekend the weather was dreary and the lookers didn't seem as enthusiastic. At this point, she concluded that her house would appeal only to a "target market" - those people who don't mind a steep driveway and lots of stairs - and it would need a lot more exposure than her newspaper ads to bring those folks in.  

Says Mike Gain, owner-broker of Prudential Northwest Realty: "The way to get the maximum dollars for a house is to expose it to the maximum number of people. It's pretty hard for a fizzbo seller to do this."  

However, going the fizzbo route does make sense when you have the time and inclination to learn the process, as Doug Cole did. Not only did he read books on the subject, he attended a class and put what he learned into practice, sprucing up his home so it would sparkle. "My mantra became `street appeal,' " he says with a laugh. He also sought the advice of a realtor friend. Doing a fizzbo also makes sense if you're comfortable with sales and the negotiations involved, if you can be available to show your house whenever potential buyers want to see it (and persist when they don't show up) and when you have the up-front funds to aggressively market your home.  

Fizzbo is also a good avenue for owners who have so little equity they can't afford to pay a real estate commission.  

Setting the sales price
But those who take this route will find they must do several things. First is pricing their home correctly for the market - not for what they need to get from the sale.  

Unless fizzbos hire an appraiser or get a realtor or two to calculate a sales price (many will, for free, in the hope that the owner eventually will give them the listing), they're on their own.  

Estridge says in this market many fizzbos are setting the price too high, and often they know it. "They think they can price it high and someone will bring them an offer, and if not, they can always lower it later and it's no big deal."  

But real estate agents say that can backfire because a home draws the most attention when it's first marketed. If it's overpriced, buyers go away. Then when the price is dropped, another wave arrives, but they may note the home has been languishing and consider this grounds to bargain even lower.  

Should the owner take less, he may find he nets no more than if he'd used an agent - yet he's had to do all the work himself.  

Obviously, the other pitfall is setting the price too low.  

Estridge recalls an older Snohomish County home that had been completely restored by the owner, who sold it himself for full price: $150,000.  

"Then the (buyer's) appraisal came back for $185,000. The seller certainly saved his real estate commission, didn't he? The buyer was doing a jig."  

A fizzbo's next task is developing a marketing plan. It may include placing newspaper ads, writing and printing fliers, putting up signs, listing the home on the Internet and paying a discount brokerage to place it in the multiple listing.  

Hiring expertise
The next step is buying hired guns. Because a home sale is a legal transaction, any error in the paperwork can be legally binding - or worse, may generate a lawsuit. Eagle Mortgage's Estridge just shakes her head when she gets fizzbo transactions on stationery-store forms "that have absolutely nothing to do with our laws in Washington. I have a transaction going on now that's been rewritten three times."  

Thus fizzbo experts overwhelmingly suggest hiring an attorney to draft, or at least review, all the paperwork, making sure it's legal, complete and does exactly what the drafters want it to do.

Indeed, attorney Morse says many problems can be avoided if purchase-and-sale agreements are crystal clear. "Parties will perform their contractual obligations, but if there are ambiguities, people start making excuses for their responsibilities."  

Here's an example from one recent sale. The owner threw in the hot tub, making no mention in the sales agreement of its condition. Before closing, the buyer learned the tub didn't work. So then the parties had to decide if the owner would get it repaired, have it removed or lower the price, or whether the buyer would simply take it as-is.  

Fizzbo experts also recommend an escrow company be involved early to hold the earnest money, and then to make sure the sales transaction goes smoothly and all funds are paid out correctly. If there are loose ends, a skilled escrow closer likely will catch them, Morse says.
Some fizzbo sellers also decide to pay a discount broker. Instead of the usual 6 percent commission, a discounter charges a reduced flat fee, or by the service.  

Sutton Real Estate in Mill Creek is one that charges a flat 4 percent. Of this, Sutton gets 1 percent for pricing the house, putting it in the MLS and on the Internet, plus advertising in a supermarket homes-for-sale book. The firm also helps the owner negotiate with the buyer, and follows through until closing. Open houses are up to the owner. The other 3 percent goes to the buyer's agent. "We offer that 3 percent so other companies are motivated to show our listings," says broker Kenneth Sutton. "Without them, it wouldn't work."  

Indeed, Prudential Northwest broker Gain says agents aren't eager to show fizzbo listings for fear of not being paid for their time (generally it's the seller who pays the buyer's agent).  

Sharon Rosengreen, who decided to list her Federal Way home with Windermere after trying to sell it herself, learned "most agents won't touch a fizzbo unless the commission is over 2 percent. They won't even look at it."  

The negotiations
After a buyer is found comes the hard part, Estridge says. "The easy part is getting the offer. The difficult part is the negotiations. Buyers negotiate not only on price, but everybody has been to buyer's school, and they all know you have to have an inspection on the property.  

"An inspection can be anything from heavy-duty things, like a roof replaced, to littler things. That's where an agent can be really helpful negotiating the things the buyer has brought to the seller's attention."  

There may be additional negotiating over information the seller reveals in the Real Property Transfer Disclosure Statement, or Form 17. On this standard form, sellers must disclose everything from the state of the roof to whether the house has been the site of drug manufacturing.  

Inexperienced sellers can be at a disadvantage if they're unaware they don't have to know the answers to all the 80-plus questions. Nor do they have to fix any defects they report prior to sale.  

But the buyer certainly may want to haggle over them.  

When a seller is his own agent, he'll have to do this face to face with the buyer, something American culture doesn't train people to do, Estridge notes.  

Or if the seller has agreed to accept offers from a buyer's agent, then he's negotiating with a pro. The irony, says Morse, is that the seller ends up paying this agent - for representing the other side.  

When principals deal with each other, Morse has found several negative things can happen.
They can become too emotional; Morse saw that recently in a transaction where the buyers were far more educated and affluent than the sellers. The sellers knew this, resented it and the result was "bad chemistry between them."  

Or the sellers can inadvertently say too much, and it can cost them. This happened to Mary Evans when she sold a rental home in February. It was her first fizzbo sale. Because she already had a buyer - the tenant - she felt it unnecessary to list with an agent.  

Evans set the price at $169,950. The buyer countered that this is what the house would sell for if an agent had listed it, and asked Evans to lower the price.  

Evans agreed to $168,000, with the stipulation that the buyers take the house as-is. The buyers agreed - so long as the inspection found the house OK.  

"That's where things started getting sticky," Evans says. And they really stuck on the roof. Knowing that it didn't leak, had been maintained and "looked fine," she casually told the buyers that she'd replace it if need be.  

The buyer's inspector decided the roof needed a major repair. Because she'd told them she'd buy a new roof if there were any problems, Evans felt she had no choice - to the tune of $5,000.  

Some $7,000 poorer from the transaction than she'd anticipated, Evans vows she'll never sell a house herself again. "If you don't know the facts, find someone who does because otherwise you might pay for it in the long run. It's a lesson learned."