This is the Ultimate Guide for Selling a House. If you are thinking to yourself “I need to sell my house” then you are in the right place! We didn’t call this the Ultimate Guide for Selling a House for no reason! This is everything you need. This guide we explore the different options you have for selling a house in detail. Some of the strategies might surprise you.
Also, check out our previous article “Options for Selling a House”, which explores each selling option in full detail.
Top Reasons Why People Sell Their Houses
First, we will explore why people might need to sell their house. The need to sell a house, whether quickly or on your schedule, can arise for a variety of reasons. Each seller’s situation is unique. So, if you are thinking to yourself “I need to sell my house”, or you are already actively trying to sell your house just know you are definitely not alone.
Individuals decide to sell their house every day for a variety of reasons. Below we detail the top reasons why people sell a house. We have grouped these reasons into four buckets, which are 1. financial, 2. a change in a person’s circumstance/situation, and 3. Investment properties.
The first bucket of reasons why a person might need to sell their house is financial related reasons. There are several reasons that can be grouped into this bucket. The top financial reasons are listed below.
- Increased/unforeseen financial hardships: issues such as loss of employment, increased tax rates which become unaffordable for a home owner, increased expenses, and unexpected financial events, such as unforeseen car repairs, job loss, etc. might make it impossible for a person to pay their mortgage and escrow bills.
- Inability to pay for your home’s repair costs or deferred maintenance: things break (ie. furnaces and hot water heaters) and deteriorate (ie. roof, siding, windows) over time. Due to lack of financial means many people cannot afford to repair these items due to their large cost. In turn, instead of letting the house deteriorate or be destroyed they are forced to sell their house instead.
The next bucket of reasons why a person might decide to sell their house in is all related to a person’s change in circumstances or life situation. Sometimes these life events, whether foreseen or unexpected, nudge or even force a homeowner to sell a house.
- Upgrading or accommodating a larger family: sometimes people experience a change in their life, whether it is financially positive, such as more income, or a growing family, that requires them to find a new house.
- Downsizing: when the kids go off to college and eventually move out, or when homeowners get older and can’t take care of a large house by themselves, sometimes it is best to move.
- Divorce: when married couples divorce many times their home is sold and the proceeds are divided.
- Death in the family: when a family member passes away the house is sometimes sold. Reasons for this are because the house becomes too large or too expensive for the surviving family member(s). Also, the surviving family member(s) may sell the property because of the large number of painful memories they associate with it.
- Retirement: It could be that a home that a family once loved is just not the right fit anymore. Individuals are retiring and moving to 55+ communities as well as condo complexes in their desired location. Rather than keeping their current house the retirees just sell it.
- Relocation: Very similar to retirement, when someone needs to (or wants to relocate) to a different location they will most likely sell their home.
- Families outgrow their property: As families expand their once beloved house becomes too small so they are forced to sell.
- Health problems: Unfortunately, people’s health can change suddenly and unexpectedly. When someone is unable to care for themselves, nevermind their property, sometimes the best thing to do is to sell their house and move in with family or in an assisted living facility.
The last bucket of reasons a person might decide to sell their house in is related to investment properties. These are a mix, but sometimes landlords sell their house to get cash needed for another investment and sometimes the hassles of being landlord are just too much to deal with.
- Absentee owners: being an absentee owner, or managing an investment property in that is not in their immediate location can be hard and stressful. It can also be costly as the individual must use a property management service in their place. Given the right circumstances, such as lack of time to manage the house or terrible tenants, an absentee owner may just decide to sell the property instead of try to manage it from a far.
- The tired landlord: whether a landlord is a local or absentee they can grow tired of being a landlord. This is typically known as the tired landlord problem. The landlord may be tired of the bills, the years filled with constant headaches, and their problematic, difficult and non-paying tenants. Also, they might be in a tough spot facing required repairs that they just cannot afford to fix. Lastly, they may be going through an eviction case, which is very difficult, costly and time consuming to deal with.
Being a landlord can be a real headache and put the landlord under extreme financial and emotional stresses.
Your Options/Strategies for Selling a House
No matter what the reason why you have decided to sell your house, you have different options for selling it. These options for selling include using a realtor, selling as a for sale by owner, and selling to a “we buy houses” company. If you want to read about each option in detail, check out our “Options For Selling a House” article.
The best option for the seller will depend on 1. Their situation, 2. Their desired level of involvement in the selling process, their 3. Desired timing to close the sale, and 4. Their end goals of the sale.
Also, when determining the best option for selling a house, it is important to understand that every seller has three levers to consider. The first is net profit ($) from the sale. The second is timing, specifically how fast the seller wants/needs to close the sale. The last is convenience, or how much effort they want to put into the sale and how much hassle they want to deal with. A seller can realistically expect to achieve one or two of these factors, but not all three.
We will discuss each option briefly below.
Sell a house with a realtor:
If getting the highest price (although maybe not the highest net profit) is your key objective when selling a house and timing is not an issue (you are in no hurry) then a realtor may be the right option for you. A seller would ideally achieve a higher agreed upon sales price (although maybe not that much higher in terms of the net profit), but sacrifice a quick sale (time to close) and some convenience.
Although a lot of people consider selling a house with a realtor as the most convenient method, this belief is not necessarily true unless the house is in excellent shape and if it is a rental then it is vacant. It will still be the seller’s responsibility (and hassle) to keep the house clean and in immaculate appearance at all times as they could get a call at a moment’s notice for a showing.
If the house is a rental with tenants it will still be the seller’s responsibility (and hassle) to coordinate showings with the tenants, make sure they keep the property presentable, and keep the tenants from not telling potential buyers every negative aspect of the property.
There are also the added costs, both upfront and at the closing table when using a realtor. Unless the house is perfect the seller will need to make repairs and updates to the property before the sale and/or as part of the inspection process.
At the closing table, the seller has to pay:
- their realtor’s commissions, which are typically 6+% of the sales price of your house
- their share (and possibly the buyer’s share) of the closing costs, which are typically $1200-1500 or up to $5000+ if you are paying theirs (including escrow credits)
At the end of the day the seller can expect a net profit that is much lower than the asking price they received. In our article “Selling a House in Cleveland? Learn your Options” we gave an example of what a property owner in might expect for a net profit on a property they were selling, which we highlight below:
“At closing John’s net profit is not what he expected. The house sold for $75,000, which is 12% under his asking price. Further decreasing his net profits John spent $5,000 on repairs before even listing, paid a $5,000 repairs credit to the buyer at closing, paid $1,250 for his closing costs, paid a $1,500 closing cost credit to the buyer, and had to pay his realtor $4,500 for their 6% commission. The total costs John incurred to sell his property was a whopping $17,250.
At the end of the day (not including the taxes he had to pay [or the holding costs of the long sales time]) John takes home a rough net profit of $57,750.”
Selling a house via a for sale by owner sale:
The next option a seller has is to sell their house as a for sale by owner on a classified or self-listing site, such as Zillow.com or forsalebyowner.com. This strategy is similar to the option of selling with a realtor, but much more involved for the seller.
This would be a good option if the seller needs to get the highest price, timing is not a factor, he doesn’t want to pay or deal with a realtor, and he believes that he can deal with the inconveniences and hassles of managing the entire sales process himself.
Similar to if he were selling with a realtor, unless the house is in excellent shape, and if it is a rental property it is vacant, the sales process is most likely going to be a real headache.
When a seller is doing a for sale by owner sale he doesn’t get the services and help of a realtor. This means he will have to do at a bare minimum the following activities: market the property, host the open-houses, coordinate the showings with buyers, their agents and keep the property in pristine condition.
If the property is a rental property, he will also have to do all the activities talked about above.
In terms of net profit, he is going to be looking at a similar end number as if he sold with a realtor. The only thing that would change is that he wouldn’t pay the realtor commission and fees. However, the costly repairs he would need to make both before and after listing, as well as his own and the buyers closing costs, etc. are the same. In the end, he saves himself from paying a realtor’s commissions and fees, but incurs a lot more work, hassle and inconvenience.
Selling a house to a cash home buyer
The last option is to sell a house directly to a cash home buyer (a “we buy houses” company) for cash.
You are probably not aware that there are investment companies who buy houses for cash that will make you an offer to buy your house fast.
These firms buy for investment purposes and have cash which allows them to close much faster than a traditional sale. This allows you to sell a house without even putting it on the market and close quickly.
This option is by far the easiest and fastest of the three options we have discussed.
Selling a house to a cash house buyer might be the only way to sell a house for some sellers that need to sell a very fast.
This could be when a seller is at risk of losing their house by a fast-approaching deadline (think mortgage foreclosure or tax foreclosure) that don’t have time to sell on the MLS with a realtor to a conventional buyer. It could also be when they need to relocate and don’t have the money to pay for two mortgages.
Selling a house to an experienced cash buying company also is probably the best solution for landlords with tenant-occupied properties. If you sell to an experienced cash buyer you don’t have to worry about showing your home (and the scheduling nightmare that goes along with it), making any repairs, problem tenants driving away potential buyers, honoring the tenant’s current lease, holding onto the property and selling in the future.
Lastly, selling a house to a we buy homes company may be the best option when a seller needs to sell a house that has a lot of required repairs or deferred maintenance that they cannot afford to pay for. This is true even if the house is in disrepair.
If a seller sells to such a company they will most likely achieve maximum convenience and the fastest speed to close. However, they will sacrifice some on price (though not as much as you would think considering the earlier examples above).
You should be aware that these firms don’t pay top dollar (market price) for properties. This is because they pay all of the seller’s costs that a seller would have to pay in a realtor or for sale by owner sale, they pay for all the repairs to the house, and because they are a business and have to make a profit to support their investors.
To understand how their cash offer is made, these companies will make a fair cash offer based on the current, as-is market value of the house. This means they will offer you what the house is worth in its current state, not after all costly repairs have been made and the house is completely remodeled.
We buy homes companies will buy your property directly from you, the seller, very quickly, in “as-is” condition and for cash without any realtors involved.
If working with a reputable cash house buyer you will not have to pay any closing costs or fees, any realtor commissions, or fees. You will also not have to make any major or minor repairs, including cleaning, painting, decluttering, etc.
When considering the price trade-off when going with a house buying firm it helps to remember back to the example of John, the seller who sold his house with a realtor.
Using a realtor the cost to sell his house was $17,250 total for a house that sold for $75,000. Worse yet, this $17,250 seller cost doesn’t even account for the time he spent on the sale (he worked for free). It also doesn’t consider the holding costs he incurred (mortgage, insurance, taxes, etc.).
If John had sold his house as a for sale by owner he still would have incurred costs of $12,750, again not accounting for even more of his time he spent (he worked for free again) or his holding costs.
Now consider the economics of selling to a we buy homes company. If the same seller sold his house to a cash home buyer the sale would have happened 5-6 months faster (meaning he would have been back to life that much faster), he would have incurred $12,750 – $17,250 less in costs, and he would have had a heck of a lot less inconvenience, hassles and days of pulling his hair out.
Of course, selling to such a company doesn’t make sense for all home sellers.
It makes the most sense for people that don’t have the time or energy to deal with getting their house fixed up and put on the market.
It makes sense for motivated sellers who want to or need to get on with their lives.
This is also a good solution for sellers that don’t like the idea of having dozens of complete strangers going through their house.
It’s helpful with tenant occupied properties. It is also the best solution when you need to sell quickly and don’t have 5-6 month’s time to wait.