How I sold my house in 90 days with no broker (Orlando: mortgage, credit)

[jbravo]

This forum has been good to me; I’ve learned so much, from great advice on how to search for a neighborhood (nice thread in general forum titled “Tips for ‘Feeling Out’ a City”) to septic tanks (much more common than I ever imagined in FL, even in some rather expensive real estate.) So, let’s see if I can give a little back.
I went from putting a “For Sale by Owner” to contract through closing in less than 90 days. While I was doing this I read a number of posts regarding the market and advice on buying/selling in this market. I refrained, as much as I could, from posting myself on the subject while I was still in the process myself; however, now seems like a good time to post some observations I made and my own experiences.
Ok, first thing first, if you are selling your property, whether through a broker or by yourself, the first question that comes up is what is my house worth? The harsh reality of this is that your house (or, for that matter, your neighbor’s or anyone’s) is worth exactly what someone is willing to pay for it, not a penny less or a penny more. Other’s in this forum have pointed this out, I am not the first; however, I will try to be the first that attempts to explain this seemingly obvious fact by various means.
Let’s start out by an example given to me by a very successful broker in Melbourne, Fl in 2004. It is a good example but requires your patience. She had listed a property and found a buyer that desired the property but had no money for closing costs and had credit problems. She wrote a contract for an amount substantially above asking price with the understanding that at closing the sellers would secretly give money to the buyers so that they could close. However, the property did not appraise at this above asking price and two months had elapsed since the property had first been put on the market. What did she do? She took the original MLS asking price and added 3% to that asking price and put that as the new re-listed asking price. Her logic was that the market in Melbourne was appreciating by 25% annually and that therefore since she had marketed the property at the correct price it should now have appreciated 3%!
So much info in one example! Firstly, you should know that she was correct. The original buyers now found some cash and wrote another contract at the exact amount of the new asking price which, strangely enough, was very close to the earlier contract price that had not appraised; however, now, as you might have guessed, it now did appraise!
Now, a question: if it is so easy to understand that the market in Melbourne was so crazy that real estate was appreciating at 25% annually (3% in two months!) why is it so difficult to understand that real estate can come down one percent a month, or, for that matter, 1½ % a month?
The above was not rhetorical, there is an answer. So long as prices are, in fact, appreciating 25% annually, then price matters nothing, nothing whatsoever. If you couple that logic with the loose mortgage practices of the past 5 years (or, as I hinted above, fraudulent mortgage applications) then what this amounts to is a vast number of people playing with monopoly money and buying real properties.
Contrary to popular opinion, the real pros of real estate investing did make a killing in this market from the late 1990s through 2002-2004 (when they knew the party was over because even waiters and hairdressers were getting in on the action.) But they got out even as amateurs were being lured by the promise of easy credit and easier profits. But it was the fraudulent mortgages and ridiculous lending standards that made the bubble, not the original investors (they did know what they were doing and when to get out.)
So now prices are coming down, as real people looking at a house to live in, not as an investment, are asking how much can I afford?
It might surprise a lot of readers (Muggy, are you there?) that I had at least 2 dozen people look at my house because they were interested in buying it. They asked about taxes, HOA fees, utility bills. They came with tape measures to see if their bedroom furniture would fit, they opened closets and pantry doors. They walked inside and around the house and checked the boat slips and ramp to the lake and they looked at the club house. Oh, there are, and, there were buyers out there. So what’s the difference? In June of 2005 they would not have opened the closet doors to the secondary bedrooms or asked about the utility bills; rather, they would have been asking about comps!!
Not one person did!
So, how much is my house worth. Well, it is a 1500+ sq feet concrete house that was built in 2005 by a three time JD Power and Associate winner for new home buyers in the Orlando area. It is an Energy Star home. It has beautiful mature palm trees 30ft in height which I had planted, porcelain flooring, even in the screened back porch, and, real hardwood blinds. The community has access to one of the cleanest spring feed lakes in all of Central Fl (considered drinkable water in an emergency) There is no public access to this lake. And do you know what? None of this matters.
I looked at the most recent sales comparable to my house and knew that the closest was a house that had sold for 217K about six months earlier (it’s a small community) that was smaller than mine and had no upgrades and was frankly, just not as “nice” as mine. I decided to just go by square feet and ignore the upgrades in my house.
I put a sign out with a price of 229K and my neighbors got angry at me; I was “giving away my house!”
Yet, I got no reply. None. I lowered it to 225K a week later. Nada.
Then I waited a month. Zippo.
Lowered it to $219K and got two phone calls.
Paid $295 for a “flat fee MLS listing” to list it on the MLS. The deal is I offered a 3% commission to a buyer’s agent if he/she brought a willing buyer. (No listing agent commission and I reserved the right to sell it myself and pay no commission, that is pay $0.00 dollars.)
No agent called.
Decided to temporarily take it off the MLS. Put the “For Sale by Owner” sign at 209K (pretty much the same as asking 219K and paying the 3% commission.)
Finally got action. About a dozen people came by. They loved the property. In fact, they came more than once; to re-measure or bring a friend to see it. Yet, I couldn’t close anyone.
I had bought in March 29, 2005 and it was now Feb. I had wanted to close on or closely after March 29th, 2007 in order not to have the liability of capital gains tax.
I was playing a tough game, I had waited until close to my 2 year mark in order to not have to pay taxes, and yet, I had been very much aware that the market was crumbling underneath my feet. Now what to do? I should now point out that I had bought the house cash in 2005 for 178K and put about 8K into it and that there was no mortgage on it. Since I was not playing with monopoly money the answer was simple. I was not going to risk a further deterioration in prices where the house would sink another 10% and I would lose 20K.
I wrote 199K on the sign and put it back in the MLS at 209K. (This is not allowed, you can not offer it privately for a lower price than you offer it in the MLS for, but hey? This is real life. And, if found, the only penalty would have been that the listing would have been removed.)
Now all he** broke loose. Buyers coming out of the woodwork. Of course the 199K was not really 199K. Oh the price was 199K, that was true enough; however, at that price I told them that they would pay all closing costs and that I took with me all appliances. There were no offers of plasma TVs ( I own a 50 inch Panasonic plasma, the buyers saw it, even asked me how much I had paid for it, but no such offers from me; rather the reverse; at that price, I take the washer and dryer and the fridge. (As well the $500 fan I own. Yeah, it’s way overpriced, even with the real palm fronds that are hand woven and gorgeous metal work on it. When the potential buyer that in fact did end up buying the property asked if the fan came with the house, I answered that if he wanted the fan, I would leave it; however, the $500 price would be added to the contract. He did not want it that badly.)
I blew a great deal where the buyer offered 200K (no broker)and allowed me to stay in the house until December and we were to close on April 2. I blew it because I stuck to 202K. I blew it for a measly 2K. Did I need to stay in the house? Well, I just rented next door (literally) for 6 months. I need the time since I am building my own house. (acting as owner/builder not hiring a contractor; rather, hiring my own subs) So, yes, I did blow that one.
But just days later I got two offers on the same day! One was through a broker (She called and I ran out the door to take the “For Sale by Owner” sign that I had at 199K out of the ground.) The other offer was a doctor (yes, not all doctors live in multi-million dollar homes. At least not after they have been recently separated.) for 199K.
I went with the doctor at 201K were I ended up paying the usual share of the sellers costs at closing (which ended up being just a little over 2K, so that was a wash.)
For those quick with the math, the reason for the choice is that by this time I was offering 3% and a 2K bonus to the broker; therefore, both offers were almost identical. (with the broker’s offer I would have paid half the customary seller’s closing costs of doc stamps and seller’s title insurance.) The choice was one of whom did I think had the best chance of getting to closing. The doctor won out over the broker whom I am sure would have done a number of inspections and found this and that, etc.
So, I did close on April 11th. Two weeks after my target date. Oh, as to those that said I was giving my property away. I neglected to tell you that they too were selling their houses, through a broker and were unsuccessful and as they have to move for work reasons will now lease their house. Here’s the punch line: at a loss of $600 a month!
There’s more to say in part 2 if I find interest in the thread.

p.s. The same applies if the houses in your neighborhood sell for $400K. Just double the figures.

[leavingcali]

Great post. My hubby and I want to sell out condo in CA. The prices are going down really fast, so we know we won't be able to get what we could have gotten for it 2 years ago, so now the goal is to just not lose money. I can't decide if we should use a realtor or do FSBO. Maybe we'll try FSBO first and see how it goes.

[tallrick]

It goes to show, just lower the price to what someone is willing to pay. This is something more sellers will have to learn.

[verobeach]

Sorry but I disagree. If you HAVE to sell then you have to sell and you must do what you can to attract buyers. But if you don't have to sell then sit tight, just like the buyers are sitting tight, because the pendulum always swings.

[MyHomeIsInOcala]

What a Great Post Jbravo!

You did not lose anything, Still made a little something and you did not "put it to" a new buyer! Good Job!

If your neighbors where so concerned, they should have bought your house for an inflated price! hahahah

[jbravo]

Originally Posted by verobeach

Sorry but I disagree. If you HAVE to sell then you have to sell and you must do what you can to attract buyers. But if you don't have to sell then sit tight, just like the buyers are sitting tight, because the pendulum always swings.

I have enjoyed reading your posts.
Just a point. No, I did not HAVE to sell.
I lived 2 years and 2 weeks in the house. I lived close to the equivelant of "rent free." The first year I even lived close to tax free.
How?
Well, first years taxes were taxed on unimproved land since it was new construction. Taxes for 2005 were $125!
As to almost "rent free" here's how that goes: I lived in the house 24 months for around $7200 total (both years taxes, insurance and HOA fees. Utilities, of course, not included as that is a cost whether one owns or rents)
That comes out to having lived with a "rent" of $300 a month!
And I "made" a 7% tax-free return (15K +-) !!
So why sell now?
Good question.
Is 200K tied up in a house the best investment of my money? Remember, this was cash, no mortgage (although the analysis of renting versus "owning" with a mortgage is fascinating.) Remember my neighbors who did not "give away their house," they will be paying out of pocket $600 a month to cover the difference between the rental income and the motgage+insurance+HOA fees+taxes(which will now dramatically go up and that's not included in the $600 calculation.) That means that they will "pay" $7200 a year to "not give the house away." By the by, ask some brokers, rentals are going down in a lot of places; as houses don't sell, "investors" put them up for rent and their is a glut of homes on the market for rent!
But, you ask, you will be living somewhere, your not going to live under a bridge are you? So, you sold, now what?
Good question.
If I were not going to build a house as an owner/builder (note: I will be asking for advise on that subject in a separate thread) I would rent, and invest elsewhere. Does anyone in this forum think prices will rebound to 2005 prices within 18 months?
Anybody?
Didn’t think so.
Your post and my answer touch on other issues which I plan to post on a seperate thread, something like "How I sold....part2"
This is trully a huge subject.

[vpcats]

JBravo....I'm not selling my house yet but Congrats on your sale! Good job.

Wanted to ask you how you like that Panasonic plasma 50"? I had one up until about 1 week ago. Had it for about 40 days and it SEEMED like it was making a hissing sound. It actually also ended up being too big for where I wanted to put it, so anyway we returned it and got a Sharp Aquos 46". I miss those extra inches!!! but the Sharp is really nice - it's LCD, not plasma.

[macguy]

Originally Posted by verobeach

Sorry but I disagree. If you HAVE to sell then you have to sell and you must do what you can to attract buyers. But if you don't have to sell then sit tight, just like the buyers are sitting tight, because the pendulum always swings.

And what time frame are we talking about? The value of anything is what it can be sold for today to a willing buyer. It may be worth less in the future or more and that future could consist of years. Plus there is a cost to ownership, not to mention just as they will get more when they sell they will pay more for the next place if prices go up. It can be a push in the long run and just waste a lot of time. People have lives to get on with.

[jbravo]

Originally Posted by vpcats

JBravo....I'm not selling my house yet but Congrats on your sale! Good job.

Wanted to ask you how you like that Panasonic plasma 50"? I had one up until about 1 week ago. Had it for about 40 days and it SEEMED like it was making a hissing sound. It actually also ended up being too big for where I wanted to put it, so anyway we returned it and got a Sharp Aquos 46". I miss those extra inches!!! but the Sharp is really nice - it's LCD, not plasma.

I love the Panasonic. Hooked it up to the Bose system but I did also notice the hiss. Consumer Reports had warned me about sound possibly not being that good but it was really bad; however, the picture quality in hi-def is unreal (or, rather, life-like quality super real!) But the Sharp Aquos 46 doesn't suck either.

[Annie of Oldsmar]

Enjoyed your posting Bravo!!
Bravo for you and for posting your experiences here, so as to share with all of us your experiences. We all can learn from other's experiences, that's the name of the game.
Annie