Real Estate the Ramsey Way - How to Sell Your House Without Getting Screwed

Episode Date: November 6, 2023

When you sell your house, you want to get as much money as you can for it so you can use that money for a down payment on your next house. So, how do you know you’re getting the best possible deal (and not being screwed over)? In this episode, learn about when and how to sell your home—the right way. Helpful Resources:    Find the only real estate agents in your area endorsed by Dave Ramsey.

Dave Ramsey here, and you're listening to Real Estate, the Ramsey Way, where you learn how to make the most of your biggest financial asset, your home. Today, we're talking about how to sell your home without getting screwed and how to do it with as little stress as possible. You'll hear from callers about some common but tricky situations a lot of homeowners bump into sooner or later when selling. Sergei is with us to start off this hour in New York. Hi, Sergei, what's up?

Hey, how are you, Dave? Great, man. How can I help? I got a question for you about selling the house. We've never done it before. We purchased the house. Now we are looking to purchase another house planning on. And obviously, question came up to sell our house that we have right now.

And there's, when we go through realtor, there's 7%. We have to pay for selling our house. and since, you know, I'm starting to, started to listen to the show and working on eliminating our own debt and we've done it. We've finished the step two. So now we always constantly, me and my wife, we're always thinking about, you know, everything reasonably when we plan things and everything. So now we plan about this and there's 7% and it bugs me. I don't have peace in my heart to sell the high. house.

You ever had a toothache? Have you ever had a toothache? Yes, I did before. Absolutely. Did you use pliers or a dentist? Dentist. Okay. There's some things you don't do yourself because you don't know what you're doing.

You told me you didn't know what you're doing. Right. I've had friends. This is your most expensive asset. When you make a mistake selling a piece of real estate, it ain't $10, dude. I mean, when you make a mistake selling a piece of real estate, it's tens of thousands of dollars. And you're in a whack-a-doodle world right now for real estate. It's cray-cray out there.

This ain't amateur hour, man. You definitely want a pro in your corner. It's going to save you more than 7%. Oh, and by the way, let me help you with this. It's not 7%. It's 3.5 because some duber realtor will bring you an offer if you'll agree to pay them for their buyer's portion of 3.5, and you're only going to end up saving the seller's portion, which is 3.5. and now we're really down into you're going to lose it.

A monkey can sell a house right now, but will they sell it for the right price and without a bunch of errors that cost you tens of thousands of dollars? I wouldn't sell my own house right now, and I've had a real estate license since I was 1978. You're going to make more, and you're going to have a lot less hassle, and, you know, I just, I don't even work on my own cars anymore. I don't know.

I used to open the hood and get a nine, 16th and adjust the... I could watch this on YouTube and fix it myself. Well, I mean, there wasn't YouTube then, but I mean, I could set the timing on the Monty Carlo 350, right? I mean, I could do all that. I open the hood now and it looks like a freaking spaceship under there. I can't even touch that stuff.

I don't fix... Every time I try to fix my car now, it costs me more than it would have cost me to have somebody fix my car because I break something. And that's what you're going to do, Sergee. Don't do it. Yeah. I've had a family member who did for sale by owner, and it was the worst nightmare. and I had tried to warn them to stay away from that, but there are such costly mistakes you make.

You're not reaching the bigger market because realtors have access to the MLS. They take better photos. They understand strategy and staging and what is going to cause someone to pay more money. And so in the long run, you're going to make more on that purchase by going through a realtor.

Well, and here's the thing. Okay, let's pretend you get one of these houses that people are going bananas, okay, where you get like 60 offers or 40 offers or something. The seller, it's almost impossible. emotionally for the seller to manage that process and clean through that and get the best possible deal and deal professionally with the other 39 who don't get the house. I mean, you've got to have some communication lines open.

You have to have a process. Basically, you're conducting a freaking auction in a lot of these situations, and you've got to know how to manage that logistically and what the law says about it. You get yourself in a pinch, man. I wouldn't do it. I mean, you can do what you want to do, but I think you're getting a. bargain at 7%. If you get a good real estate agent, I mean, if you've got Uncle Charlie who got his license three weeks ago and he wants you to do it because he's family, no, Charlie's dumb as you are.

Don't do it. You know, he doesn't know what he's doing either. No, you get a high-octane, high-quality real estate agent that knows what they're doing. It does a couple of hundred transactions a year. When they step in, I mean, you're never going to feel the tooth when it comes out. That's true. And everyone who's worked with one of those amazing realtors goes, that was worth every single penny I pay. them. If you get a good one, you get a bad one, it's like anything else. But I mean, and it's the same thing. I mean, I don't do my own taxes. I don't write my own will. I don't work on my own car and I don't pull my own teeth. You know, there's some things. And you've got all your teeth. So that tells me, you've done well. That's what's working out. But the DIY thing,

I mean, there's some things you feel that way about and you're wrong. And this is one of them. It's the actual normal market data, and I can't really talk about it in this market, but the normal market data is that a realtor sold house with a high-quality real estate agent will sell for more than 7% more than the non-real estate agent sold house. That's normal. In this world, who the crud knows, I mean, because you don't even know what they're going to sell for. An asking price is now suggesting starting point. You know, it doesn't even mean anything anymore.

asking price used to be suggested starting point. I'm going to offer less. You offer less. You're not getting the house. You can forget it now. In most of these markets, that's where we are. Well, and you're relying on a sign in the yard and then uploading to whatever site will allow you to upload your iPhone photos that were crappily taken. And so when you work with a realtor, they know the professional photographers.

They understand how to stage it. They understand how to market it well. They understand every strategy around contingencies. And this is the kind of market we're in. you're hiring a marketing professional for 7% I mean and if you were doing something else that was a 700,000 dollar transaction and it was a complicated transaction you wouldn't think anything about paying the attorney that did the transaction or whoever whatever is it's part of the process and a complicated thing and I just highly recommend it all the data that's out there in a normal market says

that you're worth that they're worth it um in this market, they're probably more than worth it. And those of you thinking about buying a house, same deal. Get you a good buyer's agent. Because, I mean, if you go on Ramsey Solutions.com and click on ELP for real estate, endorsed local provider, Ramsey trusted real estate agents that we trust. They're all high octane. We've vetted all of them. We know what they know what they're doing. We, you know, and if you're going to buy a house in this world, you've got to, you know, you've got to get some advice. Like you got to have somebody go, no, those people are gone crazy. Walk away from that deal. It's a bad deal.

Yeah, you get too emotional when it's just. you. Yeah. And you get bought in on this one house and you start to make stupid decisions. Ephraim is with us in Atlanta to start off this hour. Hey, Ephraim, what's up? Hey, Dave. First off, what you've done for me and my wife and our family's just been incredible. We've listened to you. We've read your books and you've just been life-saving. So thank you for that. Well, thank you. Actually, you did it. I just told you what to do. How can I help? Well, so I've been married for about 30 years to my incredible wife. We are living in the house that we've raised our girls in.

So we're at the point now where we're empty nesters. And of course, like a lot of people have a house that we just, it's too big for our needs right now. So with the housing market being what it is, I threw out the ideas of my wife to consider selling it. And her point was, well, if we sell high, we got to buy high. Well, she's right about that. countered that with going into living in an apartment in an area that we love. It's a multi-use development with retail, with restaurants. We're there probably three or four, not five days a week, and we love it there.

So I propose that we get an apartment there for a year or two enjoy living there and wait for the housing market to come down and then be ready when that time comes to build a house or move into one or whatever options we want to move forward with. we can. But she's, I think it's a lot of sentimental that she doesn't want to sell the house. But the rental is about $4,000 a month, which we could easily afford.

And we would make probably close to half million dollars on the house net. Okay. So she, her, her ultimatum was, we'll call Dave Ramsey and see what he has to say on it. Oh.

Oh, I'm the tiebreaker. Yeah, she will. I don't know if I can handle all this responsibility. A lot of pressure, I've got a lot of pressure here. All right, so let's change a couple of, a couple of the variables in the conversation. Okay. Sure. Number one, I'll give you a 99% chance that the housing market is not going down.

Okay. It has gone down two times in the last 100 years, the 1930s and in 2008. It's the only time it's called down. Okay. And then it snapped right back, almost instantaneously in the 2008. Less than a year. Even the areas like, for instance, Las Vegas was the worst hit by the bubble burst. It was overbuilt.

It was the fastest growing city in America. And it basically, the bubble exploded there. And we saw values come down pretty substantially. And it was 18 months and they were all back. and then it's gone nowhere but north since then. So I don't predict housing is going to go down at all in this turn, in this round. My personal, I do think it's going to slow down its rate of increase, but that does defeat your premise, okay, as far as renting until then.

So is there a property in the area you're talking about buying a condo, for instance, that you guys could just buy and move into? Well, we could. Okay. hypothetically there is actual properties around the area you're talking about where you're not a renter yes it's obviously very very difficult to find it you have to be ready to to almost make a cash offer because it's it doesn't it's not in the market long okay okay so if you could pull that off it changes the discussion i'm not going to tell you to go rent you're going to lose that argument so she wins

okay uh okay because i think you're going to end up going in the hole with a rental a and values are going to increase, albeit not at the rate they're currently increasing. So you're going to lose money two different ways by going to be a renter. I'm not opposed to you moving to that area and moving into a less expensive property and selling your property and buying high and selling high, which is her point. But buying high and later buying higher after having rented. No, I'm not doing that one. Usually, and Dave, you and Sharon just did something similar.

So y'all have lived this. Ephraim, normally I see couples have this conversation and it's all about the house and the math. And this is a much bigger conversation, which is we're sliding into phase three, right? We've had our time together. We've raised kids and we're empty nesters and we built a tremendous home together

and a tremendous life together. The next phase is, what do we want this next season to look like? And that it will include discussions about home where we live and do we want to go to coffee shops and concerts. We want to be that couple. We want to move out to the country. But that's a broader conversation that as a part of that conversation will involve grieving the, the, leaving the house that you raised your kids in.

It's got a lot of cool memories there. And it will. What do you all thoughts about renting the house? Renting it out to others? Yes. Why do you want out of it so bad? I'm just ready for change. It's a 5,000 square foot home.

home that just we live in the keeping room, kitchen, and bedroom. Yeah. Okay. So I think that's the part y'all need to start talking about before we try to do a real estate deal. I'm with John. So the two of you need to get aligned on what the future picture is of your life and what the future picture is. Okay, it's a smaller, more efficient use of the square footage for you. for her what is the future picture and then what is the thing that we can do that has all of the future

pictures in common yeah okay um and uh and you know you're going to give up some of you know like if you have five things i want your bottom two you might not get in terms of forced forst ranking and she has five things she might not get her bottom two and that's kind of what sharon and i just went through honestly um we did a little bit of a similar discussion and we had this huge house and it was a good time to get out of a huge house. And so it's kind of stage two empty nester for us. And it was a good opportunity to cash in. But we did immediately or simultaneously buy another property half the size that we moved into

as a temporary measure until someday we build. And but we had a lot of different goals with that that we both aligned on the future. Now, the deal is, I think if you'll start, if the two of you'll sit down, like John said and start working on a future picture. Let's paint the picture together what five years from now looks like. All right, now, what has to be true for us to get to that picture? Then you're going to start making moves that are going to cause you to sell this house, move downtown into a smaller condo as a temporary move than later on build or something like that.

You're going to develop a game plan to end up at the same place. This can be a romantic, fun. It's exciting. The word we kept using over and over is, this is a pain in the butt, and it's an adventure. There you go. We're signing up for an adventure. And, you know, moving is a pain. Renovating a houseboy moved in slightly was a pain with no workers available. Moving is a pain. Did I mention moving as a pain? That's the worst.

Kind of like I have a root canal. But it's an adventure. And those are the steps we took to get to where we wanted to be five years from today. If you're thinking about selling your home, there's one thing you need before you're 100% ready. a top-performing high-octane, high-protein real estate agent who knows your market like one of our Ramsey trusted agents. Our agents bring experience and confidence to the table, plus they've been vetted by our team to make sure they put your needs first. Use the link in the show notes to see Ramsey trusted agents near you or go to ramsysolutions.com slash agent. Aaron is with us in Austin, Texas.

Hi, Aaron. How are you? Hi, dude. Hi, George. How are y'all doing today? Great, man. What's up? So I've got a question about selling my house. I'm just taking on a promotion, and so I'll be selling within the next 30 days. And I listen to you religiously, so I kind of know your answer, but I want to make sure instead of using a real estate agent, I was thinking about selling it myself and using my brother-in-law who's an attorney to do all the paperwork to save and the realtor cost. I did speak to a real estate agent that pulled us the house back in 2018.

And based on the comps right now, she had told me about a month ago that she felt very comfortable listing the house at at least $2.30. or I'm sorry, 330. And so I was wanting to go a little over that. And I'm looking at maybe $20,000 in the fees. So I just, he would be doing it for free, my brother-in-law. So I just wanted to get your thoughts on that. Okay, your brother-in-law is not doing anything that the real estate agent does. When you sell a house, you typically use a title company or a closing attorney to close the house.

And you pay a closing fee. And the closing fee is not that much money. So you're not really saving anything that the real estate agent. The real estate agent doesn't close the house anyway. They just are the marketing agent and they sell the house for you. Help you with the negotiation. Help you walk through the whole sale process and all the details. But when you finally get to closing is the only time that you're using an attorney.

You don't use an attorney to draft a sales contract on a residential property. The sales contract's just written up by an agent. But what about the profits? though. The profits. From the sell of the house, don't they get like a 6% on the profit of the sell to house? No, they get 6% usually of the sale price of the house.

And there's lots of research out there that shows that you will get on average more than 6% for the house because you used a professional agent that knows what they're doing. And so the typical house sold through a typical good, high-quality realtor sales for more than 6% more than the typical FISBO for sale by owner like you're talking about doing. Because you don't know what the flip you're doing. I mean, you already stumbled around your pricing just in describing it to us. So, Aaron, let's walk through this. If you do it for sale by owner, let's say you're able to sell for 300 because you can't do any

marketing and you're hoping someone drives by, whatever it is. If you get a good real estate agent, you can clean it up, stage it well, professional photos, MLS listing, the whole nine yards, you might sell for $3.35. which means you made 35 more on that sales price than if you did selling it on your own. And let me tell you, here's what's interesting. Let's pretend with this for a second, okay? Let's pretend that there was a house next door to you that was the same price with the same features for sale with a real estate agent.

And your house is for sale by owner with the same price as the real estate agent house next door, okay? Which is the way that you would pocket the commission, right? got to sell it for the same amount, correct? Right. And you put 6% in your pocket if you didn't use a real estate agent in that scenario. And if that buyer looks at these two houses that are identical, basically, or they're on the same street or they're next door to each other, they've got basically the same features and

the same price, and he comes and knocks on your door, instead of knocking on the other door, you've got to know what he's thinking. Hey, I'll be able to get this house cheaper because this guy's not having to pay a commission. wouldn't he? Yeah. And guess what? You can't save the commission as the seller, and the buyer get a cheaper price save on the commission as the buyer, both.

It's the same commission. You both can't save it. And so it doesn't end up happening is what happens. And so it ends, and your time on the market is longer. You're more prone to make mistakes with the valuation and what you put it on the market for. The mistakes in negotiation are horrendous. the things you leave out of the sale contract that cost you a deal because you don't know what you're doing. This is your largest asset.

All you're hiring when you're hiring a good real estate agent is a consultant that knows what they're doing. Now, I don't want you to hire a bonehead real estate agent that got their license that doesn't know what they're doing and doesn't sell any houses. That's sweet if you got your license and you don't sell any houses, but you're not really a real estate agent. Okay, the people that sell, you know, 40, 50, 100 houses a year, That's a consultant that knows what they're doing. They're worth their money. They're high octane, high protein. And that's how you get after it.

And so, you know, just know. I would use a good real estate agent. I've had a real estate license since I was, you know, since I was 18 years old, 1978. And it's not unusual. Well, I actually own a real estate company too now, but as an internal as part of our property management process. so I use them, but they are real estate agents too.

They know what they're doing to sell a property for us. We don't sell many properties, hardly at all. But when I listed my personal residence and I sold it last year in 2020, I listed it with a real estate agent. Again, full disclosure, I own the company. But I didn't keep the commission. I paid the agent to commission that works here, work for me. You know, and I know what the flip I'm doing.

But I also know enough to know that I don't know. I'm not up on every little thing that's going on out there right now because I'm not doing deals every day. I don't do 100 transactions a year personally. So I want somebody that does if they're going to help me with the marketing of a high dollar asset. Get a real estate agent. And don't necessarily go back to your old agent. Your old agent might be fine.

But go to Ramsey Solutions.com, click on ELP, get one of our trusted people that has a high-octane, high-protein track record. Interview three or four people. if you were going to hire somebody and pay them 20 grand, which you are, or 10 grand, which you are, you know, you would interview more than one, you know, you're not getting a haircut. You're selling your house. That's right. This is a big, biggest transaction of your life, probably.

So this is not amateur hour. I don't trust myself to do it, and I've got a pretty fancy camera. And I feel like I've been in the marketing world, but this is another ballgame. And I just hired an electrician. Could I have YouTubeed it for hours and probably got it wrong, got to fight with My wife got electrocuted, all to save on the electrician's fee? Absolutely. But I decided, I'm going to let the pros do it.

And that's how I feel about it. I don't pull my own teeth. Yeah. I like to see you try, Dave. I've got a dentist. Just tie it to the doorknob and run. Just grab that pair of needle-nose pliers and have at it. Mark is with us in Nashville.

Hey, Mark, how are you? Good. How are you, Dave? Better than we deserve, man. Thank you. What's up? Hey, so we've been listening, me and my wife have been listening to your show for the past six years, and we're able to pay off all our student loan debt and follow the baby steps. And we kind of got off the beat path a little bit recently, and we bought a piece of land.

We live in the Nashville area. And we're kind of facing this decision now. we want to be completely debt-free, and if we sell our house and rent, we'd like to build a property or build a house on this piece of land in the next three to four years, we would be able to pay off the rest of the land and be completely debt-free and actually be able to save a little bit more money for a month while renting. and we were just kind of wondering if that was a smart idea or I know there's just so much going on with the real estate market in Nashville. We're just not sure what to do. I have a really good income, so we'll be able to save a lot of money in the next few years. Good. What's your income? Anywhere from 230 to 250.

Excellent. Very, very good. Good. Okay. What's your house payment? Like $900 a month? No, you don't sell your house. You can't rent cheaper than that. Well, we have to pay money on the land as well. Yeah, but you've got to pay money on the land if you sell the house and rent. Right, but we would be able to pay off the balance of the land if we sold our house.

Oh, you'd take the equity out of the house and do that. Okay, so what do you owe on the land? Yeah. We owe about 260,000. What are you all in your house? About 200. Okay. What could you sell the house for?

About 500. Okay. I would just sit right there, dude. I'd sit right there and I would plow through this land. It's hard at the money at this land, hand over fist and get it paid off, and then start talking about building a house on that land. Okay. I guess we just feel like, you know, in the next three to four years, like, if we sold our house, it would take a lot of risk out of everything.

If you want to sell it, sell it, okay? You don't need me to do that, okay? But you've got to live somewhere, and you have a $900 house payment on a house that's going up in value while you're pulling off all these other tricks. and you're abandoning both of those good things to go ahead and get the land paid off. That's what I wouldn't do. Okay. But you can do whatever you want to. It's obvious you make a lot of money.

You're doing great. None of these things are in the stupid column. It's just a matter which one's going to be the fastest, most expedient. But, I mean, you priced rent in Nashville, right? Yeah, we, in the area that we're looking for the same-sized house, would be about $2,500 a month. Yeah. And I make about $20,000 a month.

I know. What you make a month is the static piece of information in either one of these scenarios. But the two things, what we're comparing against is $900 a month that goes up in value or $2,500 a month in the middle of the table on fire. Yeah. Y'all just want out of debt. Is your motivation, Mark, for asking the question? Because you guys just want to be, pay everything off, and it just feels better.

and then you're renting? Like, is that what you're, is that what you guys are feeling, both of you? I guess it just feels more simple and it just because, because I know that, like you say that the housing prices are supposed to go up, but there's a chance also that they could go down. And I just feel like. If you're going to sell, you want to sell now. I think you're making a mistake because you really do think house prices are going to go down and I think you're wrong.

Especially in Nashville, Mark. Right. I think you're wrong. Yeah. I think you've been hanging out with the wrong people at the bar. Oh, my gosh. And they're all talking. Maybe.

I don't know. No, they're all talking trash. No, I want to hear Mark. Your friends are all talking trash. I want to hear Mark, what you have to say. I really do, because I hear the same thing. So go. For our specific scenario, you know, in the next three, four years,

that how much our, it's like how much our house is really going to go up? And is that worth the risk of keeping it for that long? What's causing? you mark to think that what's causing you mark to think that your house price is going to go down here in Nashville why why do you think that I don't know that it's going to go down but I don't know that the amount that it'll go up but why why are you coming to these conclusions give me like data give me reason because the the price of our house has more than doubled in the past six years and I just I don't see that amount of increase at the price

percentage of increase. I think it's, I mean, it may increase, but I don't know if that increase over three to four years is going to be worse. The risk of us keeping the house versus being out of debt. The risk of the debt on the land? Yeah. Like, say, well, the debt on our house and the land, like, if, say if something happened to my job or something in the next three to four years, it would be pretty, pretty,

I don't know. You could sell either one or both of these properties. Yeah. Yeah, I guess I'd just worry about if the demand will still, if there's still going to be the demand. At the core of all of this back and forth in your verbal is you really don't, you are really worried that house prices are going to go down. You really do believe there's a high probability they're going to go down. And that's at the core of your question. And that's why I think you're wrong.

Okay. Now, you can do what you want to do. There's no real downside except a little bit of lost money on you selling your house today. but so sell it today and go pay off your land and go rent. But then go back and look when you finish this transaction three years from now and see what that house that you sold did. And then we can determine if I was right or not. But, you know.

And Mark, let me say this, though, because the market is softening, it is making people be like, oh, wow. So, yes, houses are going back to what they actually are valued at and what appraisal is coming in at. Not some bidding war. Yes, versus in Nashville. we all knew this like three months ago, I mean six, nine months ago, someone here at the office, they got 56 offers over a weekend.

And it was like 200 over asking. I mean, just you hear the craziest stories. You heard the craziest stories. You're not going to have that. You're not going to have that anymore. So. But that doesn't mean that the value of your home is going to tank because, no, supply is not going to catch up with demands here in the near future.

And I think that, and I honestly do think that there are still these areas around the country. We talked about this last segment. Assurance has 25,000. employees in downtown Nashville. Amazon has 25,000 employees in the health care industry in Nashville. That's just two companies. You can't bag a house in Nashville right now because these huge corporations have moved in here and made it their headquarters.

Okay. And they're moving out of New York. They're moving out of California and they're moving in here and setting up shop because we're a tax-free income tax-free state. But again, if you were in Houston, Mark, if you were, I mean, another place, maybe we could have another discussion. Not in a market that's going to crash, dude. Now, again, if you want to do this, the only thing you've lost is whatever you didn't make on your house.

And so it's not a huge, like, nothing here in the stupid column. But what I want to teach you and people listening is when you make decisions based on feelings instead of real data, on negative feelings, fear, it almost never leads to good financial consequences. and so at the core of your concern, at the core of your question, is a false assumption that real estate in Nashville, Tennessee is going to go down in the next two years. It's not. It's not. If it does call me and I'll buy your house.

It's not. Okay? Seriously. All right, folks. I hope you're getting the idea that selling your home is always. is a big deal financially and emotionally. So you should only make a move like that if it makes sense for your individual situation. Bottom line, as long as selling your house won't hurt you financially, you'll probably

in a good spot to sell. Now, if selling improves your financial situation, that could be a no-brainer. But if selling would make things worse, either by sinking you further into debt or making your payments unaffordable, then be patient and stay put. You'll be thankful you did in the long run. Thanks for listening to this episode and go ahead and share this with someone you know who's thinking about selling a home. And make sure to check out our next episode about real estate investing. I'm excited about it, and we've got a ton of requests for it.

You don't want to miss it.