Takeaways
- There’s a strategy for every home seller’s situation, some using a Realtor and some not!
- Talk first with a Realtor so you know all your options, and the pros and cons for your situation
With a Realtor
All the below strategies have everything in common with a normal listing – putting them on the MLS, marketing, buyers’ agents, etc.
Short Sale
What is “short” about a short sale? It’s not the timeline. Short sales are notorious for being one of the longest, slowest ways of selling a home.
What is “short” is the amount of money the bank is getting back versus what they’re still owed. If your agent prepares your seller’s estimated net and it is a negative number, you may have to pay money to sell your home. If you don’t have that money, it is possible to try to sell your home while the bank accepts less than the total amount due on the payoff.
This is a “short sale”. It will damage your credit, though not nearly as badly as a foreclosure would. It is also a very difficult way to sell, because buyers and their agents know that dealing with short sales and the banks are difficult and unpleasant.
I recommend avoiding a short sale unless it is the only thing between you and foreclosure.
Owner Financing
An interesting option for some homes is offering owner financing. You must own your home free and clear – no mortgage. Instead of the buyer using a lender, you are the lender. Usually it comes with a bigger down payment, 10-25% (which you get in your pocket), and a higher than market interest rate. It’s almost like renting out your home, without the burden of owning it, and a large upfront payment followed by monthly mortgage payments for 10-30 years.
I might recommend offering owner financing if your home is worth less than $40,000, because most banks will not lend below that amount. There are loan originators who can help guide the process as well as credit check buyers. Buyers might not be able to qualify for a traditional mortgage for reasons not related to their credit worthiness.
Loan Assumption
These are not common now, but they will be when mortgage rates go back up. Instead of getting a brand new mortgage, a buyer can “assume” your loan. They can get a second, smaller loan to cover the rest of cost of the house. This is a great benefit to offer buyers if you have a low, fixed interest rate.
The exception might be if you have a VA loan. VA loans can be assumed, but your full entitlement won’t be restored until the buyer pays off the loan (which might be okay, as you can buy up to two homes with a VA loan, anyway).
Without a Realtor
For Sale By Owner
Selling a home by yourself isn’t that unusual, right? I see “FSBO” signs all the time.
Actually, only about 8% of homes sold in America are sold FSBO. That percentage has actually dropped since 2000, even while online tools have proliferated to help homeowners sell themselves.
Selling your home yourself may include posting it online to various websites like Craigslist, Zillow, local Facebook “buy/sell” groups, militarybyowner.com, and a multitude of other sites.
Auction
I’m not referring to the county foreclosure auction, or the tax lien auction. Similar to selling FSBO, sellers can use online auction sites like Auction.com or Hubzu.com to sell their homes. These sites are most often used by banks to sell foreclosures.
Having people bid up on your home sounds great in theory, but auction sites are probably not the best source for buyers. Many auction sites do no allow contingencies for buyers, meaning your home will not appeal to buyers using a lender (about 80% of Fort Hood area buyers).
Sell to an Investor
Selling directly to an investor is a final way of selling your home. I wrote an article explaining in detail what you can expect in a situation like this. Generally, expect to accept a steep discount, but there are also major advantages like a very quick close and no repairs required. Consider it if you inherited a home, have major repairs that you don’t have money for upfront, or need money faster than a few months.
Conclusion
Most sellers are best off listing their home the traditional method. But if your situation is a little bit different, there is a solution somewhere for you. Real estate has a lot of creative solutions because every home is unique. Some not discussed here include wraps, subject-to-financing, or donating it to charity.
Talk to an agent to find out your best path forward. I personally will walk you through each scenario, including renting, and make a recommendation based on your unique circumstances and priorities.