How you choose to market your home is one of the most important decisions you'll make as you prepare your home for the market. Your decision comes down to three basic options: - listing with a for sale by owner (FSBO) service provider,
- listing with a flat fee MLS provider, or
- listing with a full-service real estate brokerage.
Why go FSBO?
If you are planning to go FSBO, you more than likely have one primary motivation: You want or need to net more money on the sale of your home by avoiding a real estate sales commission. Many FSBO sellers do successfully sell their home for a good market price while avoiding a sales commission. Visit fsbomadison.com and you'll see that plenty of sellers are able to succeed with the FSBO approach. You'll also see examples of sellers who are finding it a challenge to get the right offer. The bottom line is every selling situation is different, with more than just the sales commission determining the financial success of the sale. In addition to the sales commission, sales price, marketing costs and holding costs all play a part in the financial equation of marketing a home.
Marketing your home - the financial pieces
You can view the financial pieces of your marketing plan as an equation made up four of different variables: Your Benefit = sales price - sales commission - marketing costs - holding costs Sales price is the first variable in the financial equation. You're looking for the right buyer who loves your home and is ready to pay a good market price. Proper pricing and a good marketing plan will increase the odds that you'll find that buyer. It's important to note that your odds of receiving a high market price will increase when a large numbers of pre-qualified buyers are exposed to your home. You can expose your home to more buyers by listing your home with a flat fee MLS provider or a full-service real estate brokerage. Some FSBO sellers who convert to a flat fee MLS listing or a full-service brokerage listing are pleasantly surprised when their home sells quickly and at a high market price. The reason is more exposure to pre-qualified buyers. Sales Commission is the second variable. The sales commission that you end up paying will vary depending on the method that you choose to market your home. If you go the FSBO route, you can expect to pay a sales commission in the range of 0 to 3% of the overall purchase price, depending on whether or not a buyer agent is involved in the transaction. If you market your home via the MLS, you can expect to pay between 2 to 6% of the total purchase price, depending on the specific marketing plan that you choose. A note about sales commission: commission structures vary. The numbers provided above are ballpark figures only. Commissions are highly variable and include both percentage-based and flat fee options. Marketing costs are the third variable. FSBO marketing costs are generally quite reasonable. You can sign up with a FSBO service provider and generate your own online listing for a low fee. If you should go the FSBO route, consider creating your own marketing budget. Identify up front how much you are willing and able to spend on marketing. Some sellers find their costs can quickly escalate in the absence of a pre-defined budget. The culprit is usually newspaper ads. Several unplanned runs in the local newspaper can quickly increase the overall cost of marketing a home. Holding costs are the final variable in the equation. Unfortunately some sellers find themselves in the position of marketing a home that they no longer occupy. Mortgage payments, real estate taxes, insurance costs, utility costs and maintenance costs are a primary concern for these home owners. You can avoid the holding cost scenario by getting your selling plan in place before you commit to your new home. In today's market your first priority should be your selling plan, followed by your buying plan.
Other financial considerations
You have other financial considerations regardless of your chosen marketing plan. Factors such as your mortgage payoff, your pending real estate taxes, and your closing costs will affect the size of your check at closing. You can estimate your proceeds at closing by completing a simple spreadsheet called a seller net sheet.
Estimating your closing proceeds
The seller net sheet will calculate your closing proceeds after you enter key variables such as your mortgage payoff, sales price, sales commission, pending real estate taxes, and closing costs including the real estate transfer tax. It can be a useful tool as you evaluate your marketing options. For example, you can use the seller net sheet to evaluate different sales commission scenarios to estimate the impact that each scenario will have on your closing proceeds. Fell free to contact us for your own copy. We'll be happy to email one to you.
seller net sheet example
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About us
This information is provided courtesy of Dan Miller and Shawn Kriewaldt of Keller Williams Realty and DaneCountyMarket.com. For more information, please contact Dan at 608-852-7071 (danielmiller@kw.com) or Shawn at 608-212-5743 (shawnkriewaldt@kw.com). Don't forget: if you're buying or selling, whether your timeline is 3 months or 3 years, we can help.
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