What are the Pros and Cons of Listing Your Home for Sale by Owner?

/in , , , , , /by

We live in a “Do-It-Yourself” culture. With the internet and its vast resources, people can teach themselves to do just about everything on their own now and save thousands of dollars while doing so. You can use the internet to self-publish your novel, completely redo your entire kitchen, or list your home for sale.

For Sale By Owner, is a growing phenomenon in real estate, and it is the top choice of many people looking to sell their home.

What Does “For Sale by Owner” Mean?

When someone lists a house as “For Sale by Owner,’ it simply means that the homeowner is listing the house without any assistance from a real estate agency. Instead, the home is being directly listed and sold by the owner of the home. This means that everything in the process that would previously go through an agency including but not limited to, inspections, negotiations, open houses, and showings, will instead be handled by the owner of the home.

Like most business strategies, there are both pros and cons to choosing to sell a home For Sale by Owner.

Pros

  1. Opportunity to Save on Costs– The number one reason many sellers choose to sell their homes themselves, rather than include a real estate agent in the transaction, is to save on costs and get more money out of the sale. In most real estate transactions, the real estate agent is paid for their work by collecting a percentage of the total sale. Without a real estate agent conducting the sale, the sellers will not need to pay a commission.
  2. More Control of the Sale and Negotiations– When an offer is accepted on a home, and the inspection is conducted, a new game of “back and forth” begins as the buyer and seller negotiate until they agree to a deal that both believe to be fair. In some cases, this can be settled in a matter of two emails in a couple of hours. However, in many cases, this back and forth can go on for weeks before both parties come to an agreement. When a real estate agent is involved, this correspondence will go through them before it reaches the seller. Sellers sometimes see the “middle-man” as an extra barrier to the negotiation process. Many people find a more direct approach to negotiations to be a benefit of selling a home without an agent.
  3. May Be More Appealing to Buyers– Just as the above points may appeal to sellers, they may also appeal to the buyers as they are often hoping to purchase, close on, and move into their new home as soon as possible. As a seller, your For Sale by Owner home may appear more attractive to a buyer who is also looking to cut out the extra person in the transaction, and speed up the process.

Cons

  1. May Not Appeal to All Buyers– While some buyers may see a For Sale By Owner home to be an easier process, others may want the guidance of a seller’s agent to help guide the transaction. If this is the case, some buyers may eliminate your home as an option before they even have time to view it. By using a real estate agent, your home will be listed on the Multiple Listing Services (MLS), allowing a vast majority of Buyers the ability to view your home.
  2. Ease of Showing Your Home to Attract more Buyers: When using an agent, the agent will schedule showing and do their best to attract potential buyers to view your home to encourage more traction that will result in an offer.
  3. Higher Risk of Contract Complications– When you use an agent, you will likely be going through the process a professional who has walked through the steps countless times before. Unless you deal with contracts and home negotiations every day, you may not have a clear idea about what specifics to look for, and what loopholes to avoid. Many times, without professional or legal help, you could agree to something you did not intend to.
  4. Could Cost More in Time and Money– While cutting a real estate agent out of the transaction may end up saving you the extra closing costs, it might not always end up saving you money in the end. Many times a real estate agent can advise you through the process, and help you to avoid extra or unnecessary costs. If you are not familiar with the process or the logistics behind it, you could end up spending more money than you save.

Five Steps to Take If you are Thinking About Listing Your Home “For Sale By Owner.”

  1. Research and Understand the Market– First and foremost, you must remember that you will be dealing with experts in the field, and to get the most out of the endeavor, it is essential to make yourself a sort of expert as well. Before you list your home, be sure to research both the market and the process. Be sure to cover all your bases to leave no room for error.
  2. Clean and Organize the Home– Most real estate agents have an eye for the details that need to be changed, fixed, or decorated in a home to appeal to the buyer. They know how to display the home and capture the listings in a way that will generate more interest. Without an agent, this responsibility will fall on you as the seller. Be sure to take the time to present your home in a way that captures the best aspects and appeals to your target.
  3. Look for Platforms to List and Market Your Home– One of the most important aspects of selling a home, with or without an agent, is marketing. Real estate agents have access and experience with all of the most effective marketing and selling platforms for homes. When selling a house as For Sale By Owner, it is important that you do your research and ensure that your house is listed on all of the necessary channels to get it seen.
  4. Consult with a Legal Real Estate Expert– As mentioned before, no matter how much you research the process, it is hard to compete with experts in the business. To avoid signing into a flawed contract, be sure to get an expert’s opinion on the matter.

If you are looking to sell a house For Sale By Owner, but you are looking for a legal eye to review any contracts or documents contact Tannehill Law for legal expertise to assist you in the process every step of the way.

 

The Benefits of Forming an LLC for Holding Investment Properties

/in , , , /by

Over the past decade, investors have flocked to the real estate market. From house flips to rentals, a real estate investment can be a lucrative way to get more out of your extra income. However, when making an investment of this magnitude, it is essential to ensure that you are taking the path for best return. For many, this path might include forming an LLC to hold these investments.

What is an LLC?

LLC stands for “Limited Liability Company.” It is a separate entity formed to separate personal and business operations and limit personal liabilities that may occur.

Why Form an LLC? 

As mentioned before, an LLC keeps a divide between personal and business affairs. There are a variety of reasons people find this separation to be helpful when accumulating investment real estate: 

 

  • Liability Protection- Real estate is a significant investment, and like all significant investments, the payoffs can be huge, and so can the losses. When someone enters this market, they are prepared to gamble, however, they may be less likely to gamble with their family’s values. By investing under an LLC, you are personally protected from most liability claims that may arise with the property. For instance, if you rent out the property, and the renter gets injured on the property, they may file a lawsuit. If the property is held by an LLC, the suit will be filed against the LLC rather than against you personally, as an individual. 
  • Company Shares– Many people prefer to enter an investment with a trusted partner rather than taking on the entire gamble on their own. By forming an LLC, you can sell shares of the company to let multiple people in on the benefits and losses that the investment might experience. Additionally, creating a business operating agreement for the LLC partnership will allow a clear understanding of roles and expectations of the business and partners involved. 
  • Tax Write-Offs– No one likes a fight against the IRS, and while you can write business expenses off on your personal taxes, it can get a lot more complicated. For example, you may write off your cell phone plan because you use it for business, but you may be questioned if you also use the cell phone for personal use. Writing off expenses, under and LLC, tends to simplify the process, and allow you to get a fair return for expenses with less of a fight. Keeping expenses separate and clean under and LLC allow for better track of business and personal expenses when filing an annual tax return.  

 

When an LLC is Not The right Fit

While there are many benefits of forming an LLC to invest in real estate, there are also times when this option may not be the best fit for your unique interests:

 

  • Owner Occupied Residences- Many investors find luck by investing in multi-family homes or duplexes where the investor will occupy one of the homes and rent out the other unit. While this can be a successful business model, you may run into trouble securing financing for this plan under and LLC because you will be occupying the home. Additionally, individual tax benefits for an owner-occupied home outweigh the tax benefits of an LLC. 

 

Whether you are thinking about purchasing your first investment property, or your third, it is important for you to discuss your options to help ensure that you get the best deal while also avoiding any legal or tax consequences. A real estate attorney is an essential role in the process.

Contact Tannehill Law today if you are seeking professional legal guidance to assistance you in your next real estate investment.