Thinking about divorce?
Here’s what to do about your house
FEBRUARY 1, 2019
If you’re thinking about getting a divorce, deciding what to do with your house is a major challenge and can add to an already stressful situation. After all, for most families, their house is their largest asset and most young families do not have enough equity to pay the expensive fees that are associated with selling. You may be asking “how much will it cost to sell my house”, “how will the proceeds get divided up” and “do I have enough equity to pay for the closing costs and Realtor commissions”?
If neither spouse wants to continue to live in the home or if neither spouse can afford to buy the other out, then the best option is to put the home up for sale. If this is the case, there are a few things you should consider before contacting a local realtor. If this sounds like you, don’t worry as this article will explain all of your options and will provide tips on what you should do.
Determine how much equity you own
The majority of home buyers choose to use a mortgage to finance the purchase of their home. If you took out a mortgage, keep in mind that the majority of your initial monthly payments went towards paying off the interest on the loan while only a small percentage of the early payments went towards accruing equity in the home. This is an important concept to understand when calculating how much equity you actually own and can influence what you decide to do.
Calculating how much equity you own is important because selling your home comes at a cost. There are fees associated with selling such as Realtor fees, closing costs and applicable taxes. If you don’t own enough equity in your home, these fees may come directly out of your pocket as opposed to being paid out of the equity you own in the home.
Choosing the best way to sell your house
There are three primary ways to sell your home — using a Realtor, selling directly to an iBuyer or real estate investor, or selling your home for sale by owner (FSBO).
Option 1: Using a traditional 6% realtor
Most folks decide to sell their home using a local Realtor. That being said, not all Realtors are created equal. For example, depending on your location, the typical Realtor commission is 6% of the sales price of your home. This fee is paid at closing and typically comes out of the equity you have accrued in the home. Of this 6% commission, 3% is paid to the listing agent and 3% is offered to a buyer’s agent to incentivize them to bring their clients to your house. Realtor fees can amount to $18,000-$30,000 or more depending on the value of your house.
In return for their commission, your listing agent should help you determine a fair listing price by researching comparable homes that have recently sold in the neighborhood. They should pay for professional listing photos and put your home on the local Multiple Listing Service or MLS which is a platform that Realtors use to see available inventory. Your Realtor may also choose to market your home directly on social media or create marketing material such as flyers and postcards. Once you receive an offer it’s your Realtor’s job to help you negotiate the best terms and guide you through the closing process.
Option 2: Using a flat-fee Realtor
The flat-fee model is quickly gaining popularity as homeowners continue to find it hard to justify the 6% commission most traditional Realtors charge. This also happens to be the model we offer at Felix Homes Realty. Under our flat-fee model, you only pay a $3,500 flat listing fee no matter the price of your home. As for the buyer’s agent’s commission, we still recommend you offer them the market-standard commission to incentivize them to bring their clients to your home although we leave this completely up to you. Like the traditional Realtor model, the full commission is paid at closing only if your home sells. The simple comparison is ($3,500 flat-fee + 3% buyer’s agent) VS (3% traditional agent + 3% buyer’s agent). On average, our clients end up saving roughly $15,000 in realtor commissions.
Even though you are paying less in Realtor commissions, you shouldn’t expect lower quality service from a flat-fee Realtor. In fact, many of our Realtors used to work at traditional firms such as Keller Williams, Remax, and Century 21. With Felix Homes, your dedicated agent will be by your side throughout the entire process. Like the traditional model, your Felix agent will determine a list-price for your home by analyzing recent sales in the neighborhood, schedule professional listing photos, upload your listing to the MLS, negotiate the terms of the sale, and walk you through the closing process. In fact, at Felix, our goal is to go above and beyond what a traditional Realtor would provide which is why we include a complimentary home staging consultation with an interior design consultant and promote your home on social media platforms such as Facebook, LinkedIn, and Instagram to get your listing in front of the estimated 52% of first-time homebuyers.
Option 3: Selling to an iBuyer or real estate investor
This is a great option if you need to sell in a hurry. An iBuyer is a company that will purchase your home directly from you and then flips it for a profit. The biggest drawback of this model is while it is convenient, it comes at a hefty price. Most iBuyers purchase homes at a 15%-17% discount to fair market value. This large fee can make selling to an iBuyer nearly impossible for homeowners who do not have a substantial amount of home-equity.
Option 4: Selling ‘For Sale By Owner’
Selling your home FSBO may sound like a great way to avoid paying Realtor commissions altogether. In reality, most folks who decide to sell their home themselves typically still offer a buyer’s agent a 3% commission. Furthermore, most homeowners do not have the tools necessary to accurately price their home. Going by online valuation estimates such as Zillow’s Zestimate may cause you to leave tens of thousands of dollars on the table and many appraisals may determine that your home is worth more than a buyer is willing to pay which would result in your listing sitting on the market for a long period of time. It can also be a hassle to schedule showings, negotiating the terms of the sale and navigating the closing process without the help of an experienced Realtor.