State of Minnesota
More about
Attorney General
Lori Swanson


Minnesota Attorney General's Office

1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101

(651) 296-3353
(800) 657-3787

M - F 8 am - 5 pm

TTY:(651) 297-7206
TTY:(800) 366-4812

Housing

Home Sellers Handbook

SECTION TWO: YOURSELF OR AN AGENT?

Meet the Klines

Jim and Cindy Kline knew it was time to move when they began tripping over Jim’s endless stacks of books, Cindy’s tasseled lampshade collection, their growing family of pets and each other!

Meet Ellen Bower

Ellen Bower decided to move when she got a phone call: "Ms. Bower? This is Tom Jackson at the Environmental Protection Agency in Washington. Can you be here by September 4th? We want you to be our new national mosquito expert."

Your first big decision is whether to sell your home yourself or use a real estate agent. Some sellers feel more comfortable relying on the expertise of a real estate agent, while others want to avoid paying a commission.

The Klines have heard that real estate agent commissions can be as high as 7 percent and they aren’t excited about paying that much to sell their house. They are thinking about selling their home themselves. Agent-free selling is what people in the real estate industry call “FSBO” (pronounced “fisbo,” which stands for “for sale by owner”).

If you’re not under any time constraints, you might want to give selling your own home a shot. If you fail, you can always hire a real estate agent later.

Pros and Cons of Being a FSBO (“For Sale By Owner”)

The number one reason to sell your home without an agent’s help is to avoid paying a real estate commission. In Minnesota, real estate commissions run as high as 7 percent of the home’s sale price, although you may be able to negotiate a lower rate.

Time and expertise are also major factors in determining whether or not to sell your own home. Do you have a minimum of one hour per day to spend on advertising, screening buyers and showing your home? FSBOs need the flexibility to schedule showings at convenient times for buyers. If your home isn’t shown, it won’t get sold.

Business savvy also helps. When negotiating the sale, will you be able to keep your cool if a buyer wants to knock a couple of thousand off the price because the home is “obviously going to need a complete redecorating job?” Agents are used to negotiating and can be objective about the value of your home. Can you say the same about yourself?

And, as a FSBO, you won’t have access to the Multiple Listing Service (MLS) used by real estate agents to locate homes for buyers. This computerized service lists homes for sale and homes that have sold by neighborhood, price and features. However, you may be able to list your home on the Internet with a variety of companies for a fee.

Tips For FSBOs

If you’re still unsure about whether or not to sell your own home, find out more by talking to several people who have tried to sell their homes themselves and get a book from the library or bookstore. Sometimes, school districts offer adult education classes on selling your own home.

Additional Tips Include:

  • Keep your home clean and ready to show at all times.
  • Price your home according to what similar homes have sold for in your area — not by how much cash you need from the sale of your home and how much you paid for improvements.
  • Consider selecting an agent in advance to list your home if you can't sell it in a few weeks. Get the agent's advice about pricing and repairs.
  • Hire professionals to help you along the way. These can include a closing agent and/or a real estate attorney. You will also need a home inspector if an inspection is required by your city.
  • Keep a notebook with potential buyers' names, addresses and phone numbers so you can follow up with them.
  • Don't stop advertising your home when you receive a bid. A buyer's offer may not survive the negotiating process.
  • Prepare and make copies of a fact sheet about your home to hand out to potential buyers. Have a blank purchase agreement for interested buyers to take with them.
  • If you're having trouble selling your home, consider offering a sales commission to a buyer's agent. Determine what commission will entice local agents. By offering a sales commission, you'll still save what you would have paid a listing agent to advertise your home.
  • If you want help advertising you home, consider hiring a company that specializes in sales by FSBOs. They will also assist you with legal documents and the terms of the sale. Look for them in the real estate section of your Yellow Pages, or get a referral from another FSBO.
The Klines have decided to become FSBOs. Jim and Cindy think they can split the responsibilities that go with selling their own home. They hope to put the money they would have spent on an agent into a new house. Their next home will have an extra room for a home office, and enough space for their dogs, Mo and Curly. The Klines have placed ads for their home in the newspaper and in a local real estate publication that is free to the public. They also designed a yard sign and flyers with snapshots of their home for bulletin boards at local businesses.

Hiring A Real Estate Agent

Ellen Bower is in a frenzy! Since she heard she got the mosquito job in Washington D.C. she has flown out there twice to find a home, has gone to three going-away parties and has been tying up loose ends at her current job. In her “spare” time, she’s been painting and cleaning her house to get it ready for sale. With all she has to do, selling her home herself is out of the question. She needs to hire a real estate agent with the time, experience and connections to get the job done quickly.

If you’re thinking of hiring an agent, interview several different agents. Talk with friends and family about agents they’ve used. Find an agent who will work on your terms. Make sure what you’re asking is realistic, however. Here are some things to discuss with prospective agents:

  • "Have you sold homes in my neighborhood in the last year?" If the answer is yes, ask for the names, addresses and current phone numbers of the sellers, as well as the sales prices of the homes. If the agent hasn’t sold homes in your area, find one who has. They’ll have a better feel for the market in your area. And, if the agent won’t give references, be skeptical. Don’t accept excuses about why he or she can’t give you the information.
  • "I'm not willing to pay the commission that you're asking." Many agents will give you the impression that their commission is not negotiable. However, their fees are always negotiable. For example, Ellen Bower hopes to negotiate a lower commission because she lives in a popular development. Other homes on her street have sold quickly, so she thinks her home will be easy to sell. (Of course, this is what most people think!)
  • "Are you willing to put your sales strategy in writing?" To make sure you get the services you’re paying for, ask interested agents for their sales strategy before you hire one. When you agree to list your home with an agent, you could be forced to pay the commission even if you don’t get the service promised. So when you find an agent you like, ask to make the commission contingent on the agent sticking to his or her sales strategy. Any understandings you have with the agent should be in writing in the listing agreement. (See Appendix for sample listing agreement.)
  • "What will you tell potential buyers when they ask whether the price is negotiable?" Make sure the agent will convey the information you want to be conveyed to buyers.

A final note about agents: Your real estate agent is obligated to get you the best possible price for your home as quickly as possible. Ask your agent to send you copies of your MLS sheet and any other marketing materials for your home. Also ask the agent to call at least twice a week to update you about potential buyers. Make sure your agent knows you are going to hold him or her accountable for getting the job done!

What Listing Agreement Should You Sign?

If you choose to sell your home with the help of a real estate agent, you'll have to decide between an exclusive or nonexclusive listing agreement.

The sample exclusive agreement we’ve provided in the Appendix is the most common in Minnesota. (There are several types, so read your agent’s agreement thoroughly. The Attorney General’s Office does not endorse any particular form of listing agreement.) This agreement provides that the listing agent earns a commission out of the sale price when your house sells within the time period specified. Chances are good that lots of agents will be showing your home if it’s listed in the MLS. An agent who successfully brings a buyer to you shares the commission with your listing agent. Your listing agent can sell your home without the help of another agent, too. In that case he or she keeps the entire commission. The drawback to an exclusive listing is that you will pay your listing agent a commission even if you end up finding the buyer yourself.

Few agents like to admit it, but you can also choose to sign a nonexclusive or open listing agreement that allows you to list your home with several real estate agencies. Under this agreement, whoever sells the home gets the commission. If that person turns out to be you, you don’t have to pay a commission. A nonexclusive agreement can create healthy competition between agents. But it turns off many real estate agents. The best situation for using this agreement is if you have a very saleable property.

What Should Your Agent Do For You?

Your listing agent has several responsibilities:

  • Conducting a marketing strategy and market analysis to help you set a fair price for your home.
  • Advertising your home. This includes placing newspaper ads, internet ads, providing a lawn sign and listing your home with MLS.
  • Negotiating the terms of the sale with buyers, including contingencies and counteroffers.
  • Reviewing and filling out contracts. In complex selling situations (for example, if the property is party of a contested estate in probate, or if you're a separated or divorced couple selling the home) you may want to hire an attorney experienced in real estate matters.
  • See the transaction through to the closing.

Have A Complaint About An Agent?

If you have a complaint about your real estate agent’s conduct, contact the Minnesota Department of Commerce at (651) 539-1500 or 1-800-657-3602. The department licenses and regulates real estate agents and investigates complaints. The Minnesota Realtors Association also takes complaints and arbitrates disputes and can be reached at (952) 935-8313 or 1-800-862-6097.

SECTION THREE: KEEPING UP APPEARANCES

Ellen Bower’s dinner parties have left their mark on her beige dining room carpet. At the Klines, Mo and Curly have scratched the door each morning when it’s time to go outside. To Ellen Bower and the Klines, these little imperfections are just part of the nostalgia of their homes. To potential buyers, however, they might be reason to look elsewhere.

When looking at your home, put yourself in a buyer’s shoes. Inexpensive improvements can go a long way toward attracting buyers. Cleaning the carpet or applying a new coat of paint won’t cost much and could substantially raise the value of your home. But be cautious about more expensive improvements. Adding a first floor bathroom or updating your kitchen might raise the value of your home, but luxuries like swimming pools and saunas might not. Some amenities may turn off buyers who don’t want the hassle of upkeep and the possibility of increased real estate taxes.

When the Klines were ready to sell their house they spent $500 on quick and easy improvements. They started by organizing Jim’s books and renting storage space for all of Cindy’s lampshades. Then they hired a landscaper to plant some flowers and replace dead patches on the lawn. A few large red geraniums and some colorful petunias made a huge difference in the “curb appeal” of the home. Next, they painted the doors, including the one that Mo and Curly scratched. Finally, they hired professional cleaners to scrub their house from top to bottom and shampoo their carpet. When they were done, the house looked so nice that Jim said to Cindy, “Why do we want to sell?”

Easy Improvements to Increase Your Home's Value

  • You never get another chance to make a first impression: Paint or stain your front door; add polish to brass fixtures such as address numbers and door knobs; trim the bushes; plant colorful flowers; and lay down a new welcome mat.
  • Cut the clutter: Have a garage sale to get rid of junk; straighten the cupboards and closets; and get rid of piles of papers or newspapers that you just haven't had time to read.
  • Clean and Shine: Make sure your home is spotless and fresh-smelling. You may want to hire a professional carpet cleaner and air out any smoke or pet odors.
  • Paint: Your taste may be unique. Tone down wall colors and wallpaper prints by painting or papering rooms in neutral colors like beige and white. These appeal to a greater number of people. Spackle is cheap. Fill holes and cracks first.
  • Fix leaky roofs and other moisture problems: Water stains on the basement walls or bedroom ceilings can raise red flags for potential buyers. If you cannot afford to fix water damage, explain the problem to buyers...you will be liable for any problems you know about but don't disclose.
  • Get the bugs out: Exterminate any pests such as ants, termites or rodents. One termite can send a potential buyer running.
  • Pay special attention to the bathrooms: A bathroom must be sparkling. Replace any vanities, soap dishes, wall coverings or carpets that aren't "hotel clean."
  • Make small repairs: Little things are the mark of quality. Tighten loose knobs; fix leaky faucets; oil squeaky door hinges; and replace any dirty furnace filters, drain catches and torn screens.

Hiring a contractor to repair or enhance your home before you sell? Keep these tips in mind:

  • Decide whether to hire a specialized or general contractor based on the work you want completed. Before agreeing to hire a contractor, get three bids or at the very least two estimates so you can compare costs for the work you want completed.
  • You may want to ask a contractor for references. Don’t be bashful about asking a contractor for this information. Follow up by contacting those references to find out about previous jobs the contractor has completed and the level of customer satisfaction.
  • The State of Minnesota requires home improvement contractors to be licensed and bonded through the Minnesota Department of Labor & Industry. Contact the department to verify that the contractor is legitimate. If you hire a contractor, make sure the contractor has all the necessary permits and insurance before any work is started.
  • Before construction begins, have the contractor provide you with a written contract. The contract should outline the terms for payment and should provide information regarding the work schedule or any other agreement made between you and the contractor.
  • Document the progress of the work performed and be sure to keep any invoices, permits or documents related to the work in a file. If you experience a problem with the contractor and the work performed, these records will be important.
  • If you need assistance in resolving an issue with your home improvement contractor, the Minnesota Attorney General’s Office has prepared a consumer handbook entitled: Citizen’s Guide to Home Building and Remodeling. To order this free publication or if you have questions you may contact us at the following:

Minnesota Attorney General's Office
1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101
(651) 296-3353
1-800-657-3787
TTY: (651) 297-7206
TTY: 1-800-366-4812

SECTION FOUR: SETTING A PRICE

Pricing your home is part art and part science. As marketing experts say, "Your house is worth what someone else will pay."

So what will someone pay for your home? Usually a buyer will offer to pay roughly what similar homes have recently sold for in your neighborhood. As a general rule, location is the biggest factor in pricing a home. Features such as size, number of bedrooms and bathrooms, fireplaces, porches, and the general condition of your home are also important. You can find the price of homes similar to yours in different ways:

  • Multiple Listing Service (MLS): Real estate agencies subscribe to this constantly updated computerized service that lists homes for sale and homes that have sold. It shows homes by price, neighborhood and detailed features. Because no two homes are exactly alike, a real estate agent is likely to compare your home with many different other homes when determining a price.
  • Newspaper: While newspapers don’t give a detailed description of homes that have sold, they do report addresses and prices. Keep track of the average selling price of homes in your area. Back issues of papers are available at local libraries.
  • Internet: Some companies are using the Internet for listings, so don’t forget to surf for prices.
  • Real Estate Publications: Usually free in newsstands, these flyers also have listings organized by location.

Why Not Start High?

It seems sensible to price your home higher than the amount you’d be willing to take. Buyers usually offer less than your asking price. However, pricing your home too high can scare off potential buyers.

In a tight housing market — one with lots of buyers and few sellers — you can ask more than you might in an average market or depressed market. But be prepared to drop off your price if the buyers aren’t biting.

What could you lose by starting high? First, it may take months to find a buyer willing to pay your price (assuming such a buyer exists). Real estate agents might not spend as much time showing homes that they think are over-priced. Second, you miss out on attracting a larger pool of potential buyers. The more buyers, the better the chance they’ll engage in a bidding war for your home. When two or more buyers are competing for a house, they might even bid more than the asking price!

Even if you do receive a high bid on your home, keep in mind that if an independent appraiser finds that the house isn’t worth the bid price, the buyer will have difficulty getting a loan for the purchase price.

$Pricing Tip$

What you paid originally for your home and the cost of improvements is irrelevant. When you price your home, only the current market value matters! If the market has slumped since you bought your house, you may owe more on your mortgage loan than you could currently sell your house for.

The Klines spent $6,000 last year updating their master bedroom and bathroom (new wall paper, plush carpeting and new tile). They’d like to recover their investment but they know that adding $6,000 to the asking price makes their house more expensive than any other sold recently in their neighborhood. However, they think in the current housing market, they just might get their asking price. Stay tuned to see what offers they get!
Ellen Bower has decided to price her home lower than others in the neighborhood. A similar home in her development is for sale at $77,000. She paid less than $60,000 for her home five years ago and now has priced it at $72,000. Property values have risen in the area, but neither she nor her real estate agent think the market supports the high price her neighbors are asking. By undercutting their price, Ellen thinks potential buyers will be more attracted to her house!

Should You Offer Financing Help To A Buyer?

Remember the early ’80s when interest rates were as high as 17 percent? It was a tough market for sellers. They often offered to help buyers finance a home. While some still may do so, such financing is less common today. When interest rates are lower, buyers can get good financing terms from traditional lenders.

If you have a hard-to-sell property, however, you might consider a contract for deed. The buyer would pay you, not a lender. You essentially would be the “lender.” The danger is that you would still be required to make the mortgage payments if the buyer doesn’t.

You can also offer to let a buyer assume a loan, if your loan is assumable. This is a good strategy for attracting buyers who may be able to afford your home, but can’t qualify for a loan through a lender because of a poor credit record or short job history. But again, you may continue to be liable for the mortgage payments. Don't enter into a contract for a deed or allow a buyer to assume your loan without good legal and financial advice.

If your buyer doesn’t qualify for a loan, you may consider paying discounted points. While it is uncommon in Minnesota for a seller to pay points for a buyer, it is an option. Points are the “up front” interest a lender charges a buyer for a loan. One point equals 1 percent of the total loan amount. Points enable a buyer to get a lower interest rate on the loan. Your buyer may qualify to buy your home at a lower interest rate if you help by paying points. Ultimately, paying some points may save you from putting your house back on the market.

If you pay points for a buyer, they may be tax deductible. Consult an accountant or tax attorney about the amount that may be deductible.

What If Your House Doesn't Sell?

Your house isn’t selling. Where did you go wrong? It might not be anything you did, instead, there could be a number of contributing factors. Maybe it is the time of the year. House sales tend to pick up in the spring and summer months. Or perhaps you need to do something to spark new interest in your home. Try one of these:

  • Lower the price. Maybe you’re asking too much. Review the information on pricing your home at the beginning of this chapter.
  • Raise the real estate commission. By raising the commission, you might catch the attention of real estate agents and increase buyer traffic.
  • Offer a homeowner’s warranty. You might want to consider offering buyers a homeowner’s warranty if your major appliances, electrical or heating system, or central air conditioning unit are older models. If anything goes wrong with these appliances, the cost of repairs will be covered by the one year warranty you purchase for $400 to $600. You can find out more about a homeowner’s warranty through a real estate agent or on the Internet.

Next Page: Accepting an Offer