The process of selling a home begins months before the property is even made available for sale. The seller first must view their home objectively to determine what needs to be cleaned, what needs to be repainted, what needs repaired, and what needs to be disposed off. The seller should ask themselves “If I was buying a home, what would I want to see?” The goal is to sell a home that looks its best, attracts buyers, and maximizes space.
Selling a home is a significant event and the seller should be sure they have a good reason to sell whether it be a job relocation or the need for more space to accommodate a growing family. The motivation homeowners have to sell their home will effect negotiations so be sure to discuss your needs and desires in detail with your real estate agent.
Selling a home is a very emotional process. You may be anticipating an exciting and desirable move to your dream home or be anxious and scared about a move across the country to a place you know no one. You can be filled with nostalgia and uncertain if you want to leave behind the home where your children took their first steps and spoke their first words or you can be fully prepared to move past that portion of your life and start fresh in a new home.
If you do not have a pressing matter pushing you to sell, consider the following aspects:
Selling a property has inherent costs in selling and relocating. Consider the cost of the real estate commission, closing fees, and moving costs. Prepare for these to total as much as 15% of the sale price. The lower the amount of equity, the more substantial financial effects.
Ask your agent if the home prices in your area are trending upward or downward?
Are the homes selling quickly or are they on the market for a long period of time?
What time of year will your house be on the market?
Will it be for sale in the spring where home-buying is prevalent or in the middle of winter? How are interest rates?
What is the state of the economy?
How is the local job market?
Is the job market strong or are employees fearful of staff reductions?
Currently, capital gains tax laws are relaxed so that most Americans do not end up having to pay tax on their profits related to real estate. However, if you have not lived in your home for a long period of time, you may end up having to pay. Contact your lender to discuss the loan terms for more clarity.
Alternatives to Selling
If you plan on selling because of a high crime rate in your neighborhood, bothersome neighbors, or the desire for more space, first consider what other options you have available. A simple fix can be installing a security system, building a fence around your property, or adding space through room additions.
Prepare to Sell
Many homeowners when deciding on a listing price, start with the amount they purchased it for, add a markup, and use that number. This is not the correct process to ensure that the listing price accurately reflects the market value.
Utilize the following strategies when determining listing price:
A pre-sale inspection wards off costly surprises that can arise when the buyer solicits a home inspection. Inspections typically cost around $300-$400 but when you consider the scenario in which the inspection reveals substantial termite damage or the necessity for a new roof, it is worth the price. The discovery of significant problems can affect your choice to sell in addition to affecting the sale price.
Many states will now require that the seller and agents discuss any issues that will affect the buyers decision to purchase the property. Be thorough and comprehensive with your agent so you are aware what needs to be disclosed and whether repairs should be made or the listing price altered.
You want to spend as little amount of money as possible when preparing your home to sale and making repairs. Repair cracked walls, chipped paint, and broken windows and then focus on smaller repairs such as replacing cabinet handles, and repainting rooms. Refrain from expensive remodels or renovations like installing new flooring or remodeling the kitchen.
Neutralize the Decor
You want to appeal to as many buyers as possible and even if you find some aspects charming, the buyer would not. Replace out-dated carpeting, paint eccentric colored walls, and minimize the amount of personal possessions in view. You want the buyer to walk into your home with a neutral palette so they can envision how the home would appear with their furniture and belongings.
Set Your Price
The value of your home is what the buyer is willing to pay at any given time. The final listing price will depend on a variety of factors. If you need to sell fast or the market is a buyers market, you may have to settle on setting the price below market value. If the housing market is a seller’s market and you are likely to receive multiple offers, consider setting the price above market value.
When determining your initial listing price:
Ask an Agent
You may consider having multiple agents view your home and give you their opinion of the likely selling price. A comparative market analysis (CMA) will show you the prices of comparable home that were recently sold, homes on the market, and homes that did not sell. Learn how to read to the CMA. The homes that are on the market are your competition. Meet with your real estate professional to determine why they were included in the CMA and if any other comparable homes are not included. Be cautious because some agents will advise you to under-price your house to elicit a bidding war while others may suggest an outrageously high price with the goal of lowing the price a few weeks after you choose them as the listing agent for your home.
Get an Appraisal
Once you have an idea of what you want your price to be, get a pre-sale appraisal to confirm the listing price. Appraisers take into account comparable sales and a plethora of other information to determine the amount of the appraisal.
Accept an Offer
The first offer may come rapidly or it can take months. This is one of the most emotional times for the seller. In strong markets, sellers can reasonable expect to receive multiple offers and while the buyer and seller hope to arrive at a win-win agreement, both would prefer receiving a “bigger win”.
Do NOT rush negotiations
Take your time so that you can receive offers face-to-face rather than over the phone. Consider all the offers received and evaluate whether or not the terms are as favorable to you as to the buyer.
Determine the lowest offer you’ll accept
Be very cautious about who you share this number with you and you may choose to keep it to yourself. Allow for this number to change while your home is on the market. Do NOT express your lowest price expectation to potential buyers.
Get everything in writing
This protects both you and the buyer. With the proper documentation of the process, you minimize the probability of confusion and legal issues.
Do NOT get personal
You want a comprehensive understanding of the buyer’s motivation and the buyer will want a comprehensive understanding of your motivation as well. Avoid discussing your situation in terms of a need to sell. If you are given an offer you find insulting, do not overreact.
Even if it is a buyer’s market and the ample amount of listings makes selling challenging, there is no harm in countering an offer. This is especially true if the offer is particularly low.
If selling in an active market, have procedures in place when you receive more than one offer at a time. This makes it easier to accept an offer and is an advantage to you.
Close the Sale
In this stage of the selling process, the buyer will be focused on obtaining financing. You, the seller, are responsible for keeping the property in the same condition as when the buyer last viewed it. The date of closing should be clearly specified in the sales contract and any contingencies should have a deadline for the buyer to sign off on. Be diligent in ensuring that the buyer meets these deadlines.
Prepare to deal with any problems that can arise. Some common problems are:
Unsatisfactory home inspection
Solution: If it is an extensive and costly repair, you may end up splitting the cost of the repair with the buyer or giving the buyer a cash credit at closing to account for the cost of repairs. If the fix is trivial or you are selling in an active market, you may be able to complete the sale without any concessions on your part.
Preventative measure: Include specific inspection contingencies in the sales contract and make sure that the contract does not allow for the entire sale to be renegotiated solely because of the inspection results.
Solution: In the event the buyers appraisal is lower than the agreed-upon sales price and the lender refuses to issue a mortgage, the deal could potentially fall through. If you think the buyer’s appraisal was wrong, ask for another appraisal. You can also renegotiate your price or offer seller financing for the difference in order to sustain the deal.
Preventative measure: Provide the appraiser with the most recent comparable sales in your neighborhood and ensure the home is in top condition at the time of appraisal.
Liens, lawsuits, or judgments on the title
Solution: Title problems take several forms that includes unsatisfied liens against your property, delinquent taxes, and encroachment on property lines. To clear the title to transfer ownership, you need to pay any liens or delinquent taxes. Title companies frequently deal with encroachment issues and they can be resolved with an insurance policy.
Preventative measure: Check the title for any liens or other issues that will delay or prevent a sale.
Solution: Occasionally an uncertain buyer will choose to back out of the deal regardless of what consequences arise. If this is the case, work with the buyer’s real estate agent to ascertain the problem and if possible, offer a solution to reassure the buyer and preserve the deal. If the deal cannot be saved, you may be able to keep the buyer’s deposit.
Preventative measures: Try to determine the buyer’s motivation prior to accepting an offer. Ensure that the sales contract enables you to keep the security deposit in the event a buyer backs out.
Prepare to Move
Make a file
File all the closing and settlement papers and include the receipts for any and all home improvements you made while you owned the property. You will need these numbers for your next tax return.
If you are planning on purchasing another house, determine the amount you need to put aside for the down payment and moving costs. If you made a profit on the sale, it may be in your best interest to put a minimal amount as a down payment for your nest home and invest the rest. However, this depends on the tax situation and the way the numbers play out so be sure to consult with a financial advisor. If you do not plan on purchasing a new home right away, if may be best for you to opt for a combination of long-term and short-term savings and investment plans.
Close on your next house
Prior to issuing the checks at closing, be certain that your sales proceeds are in the proper place. Complete a final walk-through of the property immediately prior to closing to avoid any last minute surprises.
Mail change-of-address notices
Prior to moving, send a change-of-address notice to all creditors, professional associations, and publications in which you subscribe.
If you are simultaneously closing the sale of your property while purchasing a second home, it is very important that you switch off the utilities at your previous address and turn on the utilities at your new address around the date of closing.