How To Sell A House By Owner In California

FSBO, or for sale by owner, is a method of selling your home without a listing agent. In this selling scenario, the seller handles an agent’s responsibilities. So the seller will have to price the home, arrange showings and negotiate the deal. When you choose this route of selling your home, you can eliminate the cost of a listing agent’s commission which is usually around 3$ of the house price.

It is important to note, however, that an FSBO sale doesn’t mean you won’t need any professional help. Instead, you will need the help of an attorney to prepare or review critical documents, ensuring that all your paperwork is correctly filled out.

When you opt for this type of sale, you are competing with homes with the extensive marketing resources of a real estate agent. So you want to ensure you are giving your home the best chance of looking like the homes listed by realtors to attract potential buyer attention.

If your home sale provides you with a profit, you will be assessed for capital gains tax. You can avoid these taxes if you are eligible for an exclusion from the IRS. What are capital gains? These are any profits you make from selling an asset that has been appreciated. Say, for example, you bought a house for $250,000 and resold it for $500,000. Your capital gains would be the difference of $250,000, and your taxes could be assessed against that total. 

In California, capital gains are taxed at the state and federal levels. California’s Franchise Tax Board taxes capital gains as regular income at the state level. You will pay between 1% to 13.3% in tax on your gains, depending on the tax bracket you fall into.  

At the Federal level, it gets more complicated. First, you will find short or long-term gains taxes. For example, if you sell a house within a year of purchasing it, this is considered a short-term capital gain. These are taxed as ordinary income, and the percent you pay is dependent on your tax bracket.  

Long-term capital gains are profits after owning a home for at least one year. These gains are taxed based on the location of the house within California. 

The FTB and IRS offer a capital gains tax break for some homeowners. They will exclude up to $50,000 capital gain for a single filer and up to $500,000 for a married couple. To qualify for the entire exclusion amount, one will need to meet the following criteria. 

• You are selling your primary residence.
• You owned the home for at least two years within the five years occurring before you listed the house for sale. 
• You have lived in the home for at least two years within the five years before listing the house for sale. These two years do not have to be consecutive over five years. Exceptions are made to this rule for persons who are disabled, served in the military and were deployed, persons in Foreign Services, persons in the Peace Corps, and persons in the Intelligence Community, as it is not uncommon for these individuals to not live in homes as they have to be away due to work or disability. 
• You didn’t acquire the home by swapping one investment property for another. This is known as a like-kind exchange. 
• You have yet to claim this exclusion on any other property within the last two years. 
• You will not be expatriate tax, that is, renouncing your citizenship and taking residence in another country. 

You may still qualify for a partial exclusion if none of the above apply. For example, if you had to sell your home because your workplace location changes, if an unforeseeable event is causing you to move, or if you have a health issue causing you to move. 

Reporting your Capital gains taxes in California is done with the IRS Form 1040. This form can also be used to report capital losses if that is the case for your home sale. 

In addition to capital gains taxes, there are also transfer taxes that you will pay. This is a transaction fee that is tacked on to the sale of any property, including land with a building or land-only sale. This tax varies based on the location of your parcel within the state. General law counties and cities charge 55 cents per $500 of the property value or amount paid. This amount can increase if you sell in a charter county or city. 121 California cities have charters. Then some cities use a tiered transfer tax system, so the more significant the purchase price, the greater the taxes paid. 

Here’s what to do to take complete control of your California home sale. 

1. Research your home’s market value. 
2. List your property on websites like Zillow, and select the “home for sale by owner” option. 
3. Write up your purchase and sale agreement, getting the necessary help if you need it. 
4. Create an escrow account for your home with a reputable escrow company. 
5. Make a list of all the required legal disclosures for the buyer. 

When you find a buyer, they will be responsible for the financing arrangements and the home inspections. In addition, you may need to obtain a home warranty and title insurance policy. The title company can help you with the final paperwork. You will only need to transfer the deed to your buyer when the negotiations are complete. 

If this seems like a process you would rather not deal with, you can always opt to have us buy your house for cash. We do it fast, and this way is much easier. You won’t have to worry about navigating the complexities of a traditional listing, and we ensure a quick and easy process leaving you with cash in hand. 

We offer you the After Repair Value of the house, and if you accept, we will purchase the property from you. You do not need to pay for repairs, inspections, or insurance, and you won’t lose any money in commissions for an agent. We take care of all the legal requirements and will do any necessary repairs. You can get a zero-obligation, no-hassle quote by contacting us today.  

This is a challenging task. You will need to do all the prep work, list the house yourself, and do all the marketing and advertising. You will also need to do the showings, the contracts, the negotiations, and the legalities, and you will have to close. No matter where you are in the process, you can always change your mind and get an agent to help you.

Is Selling A House Yourself Hard?
Yes, selling a house yourself can be challenging if you want to make top dollar and are unwilling to go with a cash buyer. However, a National ASsociatio of Realtors Study from 2021 revealed that people who used a real estate agent could sell their homes for, on average, 26% higher than those who chose to sell their homes alone.

Taking a cash offer is by far the easiest way for you to sell your house. However, even if you go the traditional realtor route and find a buyer in a couple of days, the closing phase of the sale can take weeks and even months. 

When you list your home, you can’t predict if you will get an offer from a cash buyer or a prequalified home buyer with a loan. However, you have a higher chance of seeing the latter as 78% of buyers finance their home purchases. 

When working with a financed buyer, steps such as a lender-ordered appraisal or inspection add time. The processing of your buyer’s loan can take 50 days or more, according to data from Ice Morgage Technologies from December 2022. 

No matter how well you plan, you can expect a slower home sale when selling your home the traditional way. The good news is you have an alternative option. You can request a cash offer from a real estate investor or us, which will speed up the process considerably. The benefits of this house-selling option are: 

• You can receive an instant offer
• There is no risk that the financing will fall through
• You won’t have any real estate agent commission fees to pay 
• You won’t have to make any costly repairs
• The home sale can be closed in a matter of days or weeks instead of months
• With no lender involvement, your sale timeline will be shorter

When opting for a cash offer, you will have to weigh the pros and cons of the option before making your final decision. You may find yourself with a lower offer. Investors don’t have any emotion in buying and intend to rent your home or flip it to make a profit. But the upside is that you don’t have to factor in home prep or repair costs. So if you have a rotted deck or need to install a new front door, you won’t need to do that to sell to a cash buyer. Suppose you factor in the cost of any repairs to be done plus the 3 to 6% agent fee. In that case, you may find that selling to a cash buyer, though with a lower overall offer, you will end with a more net profit at the end of the sale. 

This is a significant concern for most homeowners when they are ready to sell their homes. Should you choose to deal with a real estate agent or sell independently? If you proceed to sell on your own, do you even know how to sell a house for sale by owner?

It pays to weigh the pros and cons of each situation before making the final decision. But the answer is no; you do not need a realtor to sell a house. Just know that homes for sale by owner often get less marketing exposure if you are trying to figure out where to list your home or how to market it, so it brings it to the right eyes of your potential buyers.

How quickly a house is sold depends on the home and market conditions. In late 2022, the average house stayed on the market for 56 days. This metric tracks when a place is listed to when it goes under contract with the buyer. But outside of this, you have to consider the time it will take to close. Data from Ice Mortgage Technology shows that the average number of days to complete a house purchase with a loan is 50 days. So from listing to close, you may have to wait over three months. This needs to take into account the time you have to spend preparing the house to be ready for the market.

In 2023, interest rates are rising, so home sales are declining. The National Association of Realtors has indicated that pending home sales have reduced by 4%. This makes the market very competitive. So sellers were in a stronger position a year ago.

Since 2020 mortgage lenders have become overloaded due to low-interest rates and other factors. Because of this, in January 2021, the average days to close went as high as 57 days. With increasing interest rates, there has been a bit of normalizing seen in interest rates recently. And remember that all the info quoted here is just averages.

Bigger banks will have more internal red tape that could lengthen the process. But, at the same time, other lenders may be able to close much faster, especially if they are familiar with navigating the quirks of the local market.

Now that you know how to sell a house by owner, which will be your choice? Will you choose to sell your home with a real estate agent or sell for cash fast?