Sell Your Home

We’ve all seen the ugly yellow signs on the telephone poles saying “We Buy Houses Quickly in 7 Days or Less”.

And you probably have the same questions we all did the first time we saw them.

• What’s the catch?

• Are they really offering cash for homes?

• Can I really sell a home in only 7 days?

• Are these just scam artists looking to take advantage of people in need?

We at The Mahtani Group decided to write this article to educate home sellers in New Jersey who might want to sell but for some reason, they are not looking to use a realtor even though they have a lot of equity in their home.

Who are These People?

There are mainly four types of people who put up these “yellow signs” on telephone poles or post listings on Craigslist saying “We Buy Houses in NJ Really Fast” :

1. Time Wasters:

These are people who have recently attended a 2-day real estate seminar at the local Holiday Inn and are going through the motions to try to become real estate investors.  They account for about 90% of the signs you will see.

2. Burglars:

There are smart burglars who use the We Buy Houses for Cash gimmick to be invited into homes and to figure out if this is a home they wish to rob at a later time.

Have you ever seen on the news about a home invasion where the robbers already knew what to take? This is one example.

3. Wholesalers:

These are the people whose part-time job is to find homeowners who are willing to sell their homes at a discount well below the actual retail value. They are not the ones who actually buy your homes even if they are offering you a written Purchase Agreement.

Generally, after they get a home under contract for a price that is extremely below retail value, they will then “assign” the purchase contract to an end buyer who is most probably a professional rehabber. As a “wholesaler”, they receive a small profit between $3,000 to 5,000 from the actual buyer as an “assignment” fee.

In short, they are basically selling the signed Purchase Agreement they have with a homeowner to somebody else for a quick buck.

4. Rehabbers:

These are the people who actually will buy your home at 35% below retail value from you. They will then fix it up & then flip (sell) the property at the full retail value using a realtor.

They normally make a profit of $75,000 or more by buying, fixing and flipping a property all within 3 months.

How much do these people offer and how do they calculate it?

They have a simple formula that they follow to calculate the MAO (Maximum Allowable Offer).

Step 1. First, they calculate the ARV (After Repaired Value).

ARV basically means the worth of the home if it was fixed up nicely and put on the market through a Realtor.

Whoever visits your home will be estimating out the repairs needed and will then contact their Realtor to find out how much comparable homes (comps) are selling for in your neighborhood.

Step 2. Next they multiple the ARV by 0.65

Seasoned rehabbers have a rule to never, ever under any circumstance pay more than 65% of the ARV.

Step 3. Finally, they subtract what they estimate to be the cost of repairs from the number calculated in step 2, and are left with the MAO.

Keep in mind, that two different rehabbers can have extremely different estimates of how much repairs will cost.

So the formula for Maximum Allowable Offer is written as the following:

(After Repair Value X .65) – Cost of Repairs = MAO

Let’s do an example with actual numbers:

Suppose you owned a home in Paramus and called a rehabber or wholesaler off one of the “We Buy Houses Fast for Cash” signs.

He comes by and writes down notes for repairs and talks with his realtor.

The numbers show him that your home could be worth $600,000 after it is fixed up nicely but it would require about $50,000 to make it worth that much.

So he calculates:

($600.000 X .65) – $50,000 = $340,000

And remember, $340,000 is the maximum he will offer you.

He could make you a cash offer even less than that, if he believes you are desperate to sell.

Rehabbers think purely about numbers and always like to make a profit when buying real estate so they don’t have to worry about it when they are selling the property a few months later.

Another thing to remember is that even if your house was in immaculate condition with the newest appliances, shiny new hardwood floors, and freshly painted walls, the most you will be offered is 65% of the retail value they have calculated.

So suppose you decided to fix up the home yourself and make it worth $600,000 but for some reason you still don’t use a Realtor and decide to call up the same rehabber.

He will still only offer you:

$600,000 x .65 = $390,000

Why only $390,000?

Again, because they like to make their profit when buying real estate so they don’t have to worry about it when selling.

Here is a calculator where you can enter what you believe is your ARV & cost of repairs to see what you most likely would be offered for your home:

So is it a Solution or a Scam to Sell to These Guys?

Now that you know the MAO formula they use to calculate offers and that their goal is on making a profit at the time they are actually buying a home, it is really up to you to decide.

Can I Really Sell My House Fast in 7 Days or Less?

Obviously, nobody wants to get stuck buying a property with mold, termites or foundation problems.

So these professional buyers always insert inspection contingencies into the purchase agreement so they can change their mind about purchasing anytime they want without losing a penny.

However, if they can get you to sell at a price that is 20% or more below the MAO, they will do whatever it takes to buy your home quickly before you change your mind.

If they believe their profit is large enough, they will take the risk of getting stuck with unforeseen problems and buy the property with cash in 7 days.

Who Usually Sells to These People?

I have personally talked to professional rehabbers in Bergen, Hudson, Essex & Union Counties and asked them what is the motivation of a homeowner who will give up $20k to $100k equity in their home for a quick sale and the following are the most common reasons:

• Bitter Divorce:

The couple just wants to get away from each other as quickly as possible.

• Inherited the Home:

The adult kids who live out of state inherited the home and don’t want to wait much longer to get some cash from it.

• Tired Landlord:

The owner was sick of being a landlord and wanted to sell the property quickly with the tenant still in it not paying rent. The rehabber was willing to deal with the tenant and the eviction process.

In all these situations, the home seller has little to none emotional attachment in the home.

If you are in one of these situations and want to sell your house fast and are willing to wait upto 30 days for the sale of your home, please contact us so we can get you top dollar for the home and put an extra 20k or more in your pocket.

The idea of earning more from selling your property yourself is a common misconception. True, you would not have to pay an agent a percentage of the sales as commission. However, it is not as simple as it seems. Homeowners should know that when they are selling the home without a realtor, they would have to do all the hard work themselves. If you are considering trying it out, the following advantages and disadvantages can help you decide if For Sale By Owner (FSBO) is the way for you.

What Are The Advantages of FSBO?

In the past, homeowners had almost no other way of selling their houses other than contracting an agent. While not every owner will decide to do it on their own, there are those with enough time and experience to do it themselves. While having the alternative is great, it is still important to understand the pros and cons and weigh them before choosing to go FSBO.

1. There Is A Chance To Save Money

The clear and simple advantage of doing away with the realtor is that the homeowner would not have to pay the usual 5 to 7% in real estate commissions. If your home has a median value of around $200,000, then this would amount to $10,000-$15,000 in commission to the real estate agent. Because the buyer pays this amount, the seller can then keep this commission. The seller is also under no obligation to pay for the buyer’s agent commission.

2. The Property Price Is Lower

In some cases, the homeowners choose to not pocket the commission amount and instead, lower their selling price. This difference can make the property more attractive and sell faster. Because of the Internet, buyers can easily check how much similar homes cost and they can just as quickly identify which ones are cheaper. Another technique is to use these savings to offer to pay for the buyer’s closing costs and other expenses.

3. There Is Control Over The Selling Process

Another advantage to selling your own home is that you retain control over the whole process. You would not be reliant on the price set by the realtor. You will also get to dictate when prospective buyers can view the place, even doing a pre-screening of interested parties. You will also get to take an active part in the negotiations, rather than remaining a silent party.

4. Agent Has No Full Knowledge Of The Property

At times, buyers ask questions about the history and other peculiarities of the home that realtors will be unable to answer. However, in FSBO, the owner will have complete knowledge of the property and thus will be able to provide all the answers. Moreover, the passion and love for the house will be evident during the viewing, which might endear buyers to purchase the home.

5. Selling Is Easier Nowadays

In the past, sellers found it very hard to spread the word about their property. This is before everyone started getting online. Nowadays, there are many ways to advertise your home for sale, using a Multiple Listing Service, or websites like We Buy Houses, Zillow, NJMLS or ForSaleByOwner.com.These sites are also visited by interested buyers, or in the case of We Buy Houses, are then quickly resold to real estate investors or others who purchase homes. In fact, this is a huge factor in making For Sale By Owner incredibly popular, overcoming the last big hurdle for homeowners to sell without worrying about not reaching potential buyers.

What Are The Disadvantages Of FSBO?

It is easy to decide to do away with the real estate agent. However, you have to realize that they are paid for their knowledge, expertise, time, and hard work. Many homeowners have a simplistic view of the whole process of selling homes. Advertising it and getting people to visit it, and the negotiation bit make up only a small part of the process. There is much more to it, as you would soon realize. In fact, you will find that the list of disadvantages is much longer than the possible advantages.

1. It Is Time Consuming

Before you put up that For Sale sign on your lawn, there is already a lot of work that you should have done. First of all, you need to price the home correctly. Doing so means you need to do proper research on the market, the price range of similar properties, the value of the home and the surrounding homes, and sales strategies that will make sure you get the price you want in the end. There is much to know about how to sell a house by owner.

More than that, you will need to brush up on all the legal and financial steps necessary during the selling process. Many buyers and sellers are used to just choosing the property, letting the agent negotiate at a price they want, and securing that loan from the bank. But in reality, there is much more paperwork necessary and if this is your first time, you would have to do your homework.

Afterward, the hardest part comes, when you start getting the word out that you are selling your property. If you are living on a busy street or beside other homes for sale, then you might get more interest but otherwise, you have to work double time in advertising your house. You will also have to spend time showing the place around, and unfortunately, FSBO properties are visited more frequently by people who are not really serious, because they just want to look around. This can really take so much of your time in the end.

2. The Final “Sold” Price Is Generally Lower

An accurate list price is the most important thing to figure out so that you can sell your property at the price you want. In many cases of For Sale By Owner, the homes were priced and sold much lower, up to $50,000 less than agent-listed properties.

Getting to that right amount is easier said than done. A real estate agent has studied and specialized in this, knowing how the market itself is doing, and how similar homes in the area are being offered. They will also know if and when to lower prices, as well as which offer prices are fair. Negotiation is an important part of the process, and without the right skills and knowledge, you can easily lose thousands of money on your home.

3. Preparing The Home Is Necessary

Real estate agents are experts in selling homes, which include knowing how to present it properly. Even if your home for sale is in top shape and semi-furnished, you will still need to do a bit of interior decorating to make it attractive to buyers.

If your home is not in tiptop shape, you would have to organize the repairs and upgrades of the homes to make sure the house is habitable. Otherwise, you risk getting a much lower price for it if there are any repairs necessary. Of course, even just getting it inspected will already cost you money.

Additionally, you have to get it cleaned up, photographed, and dressed up to create a good impression and attract some buyers.

4. It Is Hard To Advertise

Even with access to a Multiple Listing Service, it is not the same as the ones used by realtors. FSBO sites still do not get enough traffic to ensure that buyers find your property for sale.

Moreover, well-known realtors are also more often approached by buyers, so they can already quickly connect them to your home. It will also be very expensive for a private seller to employ normal marketing techniques like signs, Facebook Ads or Google Adwords. Even postcards, flyers, open houses, and the like, can be very expensive and time-consuming work.

5. The Seller’s Emotional Investment

An agent is normally a third person in the picture, and will not react negatively if the offers are too low or there are negative comments on the place. A realtor remains as a third-party in the selling process and is, therefore, more capable of calmly and detachedly negotiating with the buyer.

6. The Lack Of Know-How

Unless you have attended courses or are licensed to be a real estate agent, you can be sure that you will not know the full tricks of the trade. These people are efficient experts and are capable of selling your property much more quickly than non-agent home buyers. They will also know how to price it in the beginning and determine what the list price should be so you will still end up with your desired selling price.

7. The Need To Qualify Buyers

A huge mistake other FSBO sellers make is that they do not understand the financial side of the selling process. Being pre-approved for a mortgage is definitely not the same as being qualified. Some homeowners have actually been burned because they simply do not know what kind of paperwork they need on the sale.

8. The Legal Steps

In some places, you need to accomplish some legal paperwork before you sell the property. This means you have to schedule some inspections to ensure that the home is in great shape. You might also need additional legal paperwork for the sales process itself. Because this step is very important, you should take the time to read up, plan, and do the paperwork before putting the property on the market. All these administrative tasks will not end, as you will have some more documents to process and submit after a deal has been reached.

You also need to know about state disclosure laws. In some cases, owners think that small issues around the property can be covered up or fixed quickly without being truthful. Do not take this risk and instead work on getting the place as fixed up as possible.

Conclusion

Selling your own home is a big deal, as it involves a lot of money as well. By this reason alone, you should know that turning to experts is necessary to make sure it goes down well. Beyond that, the processes and the laws change constantly, so that there is a need to invest a lot of time on learning about it and going through the sales process per se. It does not mean it is impossible, as there are sellers who have done their homework and understood all they need to do to sell their homes.

This list of advantages and disadvantages is enough to give homeowners a clearer idea of the demands and the steps on how to sell a house by owner. The choice, ultimately, is yours in the end but this decision should be made considering all the pros and cons.

In fact, there is only a small percentage of houses that end up selling FSBO. Up to 92% of FSBOs eventually sign up for a real estate agent. There can be a whole list of reasons as to why they end up doing so, but the hard work required might be a reason why.

A good workaround to this is to have an open house where agents are also welcome to view the home. If a realtor manages to find a buyer that you eventually accept, only then would you need to pay the commission. But because you might also get interested individuals even without the real estate agent, you can always opt for the direct buyer, if you prefer that. Still, this is better than paying commission whether or not your property gets sold, or leaving your home too long on the market that it loses value.

For Sale By Owner is a complicated and tiring process that can easily be done away by simply going to a real estate agent. If you get a good one that appraises your home higher than you expected, you might still end up with more savings than by doing it all yourself. But if you are keen to try out the experience and live in a very high-valued community with high property values, you can also try the For Sale By Owner approach.