Home Selling Guide
Introduction
If you’re thinking about moving, you’re not alone. Americans now move every
seven years, on the average. Most often, it’s a change in your family, your
career, or the fulfillment of a dream that makes you think about moving.
For instance…
You may be expecting a child and you want more room.
You’ve gotten an exciting job offer that requires relocation.
Your dream is to move out of the city and into the country or vice versa,
and you now have the means to make that happen.
You want to take care of an elderly parent.
Your neighborhood is changing and you want to move to where your
friends live.
However, for some people the whole process of buying a home and moving can
be a little overwhelming. If that’s you, then this guide is your ticket to less stress
and more satisfaction as you find your dream home and buy it.
Let’s meet some other people who are planning an upcoming move:
Elise and John Smith and their six-year-old daughter,
Amy. The Smiths are expecting a new baby and they want
more space than the 1,400 square feet two-bedroom, twobath
home they’re in now offers. They live in California.
Veronica Jones, a single woman. Veronica has heard about what a
great investment buying a home is, so she’s taking advantage of a
great new job offer to relocate from Austin, Texas to Raleigh, North
Carolina. In the process, she’s moving from an apartment into her
very first home.
Can you sell your home yourself or do you need an agent?
Some people are in a position to devote the significant amount of time and
energy necessary into selling their homes. Others are just too busy. Another
factor is the knowledge necessary to sell a home...it’s very complex process and
there are a lot of things you have to know. We’ll look at both sides.
The primary reason people sell their own homes - For Sale By Owner, or FSBO
(“FIZZ-bo”) is the misconception that they will make a bigger profit on the sale.
What people fail to factor in is the time value of their money. Let me explain.
To sell their home, the Smith’s will need to devote about an hour a day to the
process. And many times, it won’t be an hour that they can schedule in advance.
Prospective buyers call at all times of the day and night, and they usually want
showings at night and on the weekends.
Both of the Smiths make about $40 an hour. The average home in their
neighborhood takes 90 days to sell. So that’s 90 hours that the Smiths have to
spend selling their house. So there is a hidden cost of their time, and at $40 an
hour, that cost is $40 x 90 = $3,600.
Another factor to consider is that your Realtor has sold many more homes than
you can, and he or she is very familiar with all the negotiating tactics that buyers
use to get a lower price. Statistically speaking, FSBO sellers get a lower sales
price than Realtors do for the same home.
Why? Here’s the thing: when buyers see FSBOs, they expect a bargain. They
expect a lower price. Thus, you can’t get as much as a Realtor can get you,
even factoring in a commission of 5-7%.
Your ability to sell your house depends on various factors like the strength of the
market, your asking price, your willingness to negotiate with potential buyers, the
condition of your house, and a few other things.
If you choose to do a FSBO, be aware that:
You will need to plan to devote about an hour a day to cleaning,
vacuuming, dusting, answering phone calls, placing ads, and showing the
house.
There will be demands on your time at inconvenient hours.
Many buyers will want to see the home outside of working hours - that
means nights and weekends.
To get a buyer, you’ll have to keep your cool when strangers troop through
your home and make comments like, “We’ll have to totally redo that, so
you’ll need to take a few thousand off the price.”
You will have to pay fees to advertise in local magazines and on websites.
After weighing the options, the Smiths are going to try to sell their
home themselves. John is placing ads in local free real estate
magazines and on websites, Elise is cleaning up and taking digital
camera photos, and Amy is “helping” as her mother and father
make flyers.
A Realtor can relieve a lot of the stress and pressure by making sure that
everything that needs to be done is done, and that things happen in the right
order.
Veronica is all excited about moving to North Carolina. Her job
demands have increased, and she’s working sixty-hour weeks. She
flies out to North Carolina once a week, and she has very little free
time. For these reasons, she’s chosen a Realtor to sell her home. “It’s
a load off my mind,” she says.
Realtors usually have a network of contacts that they can call in if you need help
cleaning, making repairs, or upgrading flooring and wall surfaced (think carpet or
tile and new paint.) Thus, you have some leeway: you can do your own repairs,
upgrades, and cleaning and just let the Realtor handle the selling, or you can ask
the Realtor to bring in contractors do all that for you for a fee.
Easy ways to prepare your home for sale
You’ve probably heard that location, location, location is important…but after
potential buyers arrive at your location, you must have curb appeal. This means
that when potential buyers drive up to look at your house, what they see from the
curb should appeal to them so much that they get out of the car to look inside.
Put yourself in the mind of a buyer. She has a list of ten properties she’s driving
around to look at that day, so she’s not going to get out to go inside the house if
she doesn’t love what she sees outside. Buyers decide within two or three
seconds whether to get out and look or keep driving, so the appearance of your
front yard and exterior of your house is critical. To assess your curb appeal, start
from the street and work your way to the house.
Is the grass neatly edged around the curb, driveway, sidewalk, and
walkways?
Has the grass been mowed recently?
Are there flowers near the curb or other appealing features?
Are trees and bushes neatly trimmed, or shaggy?
Are all flowerbeds mulched? Mulching makes them look very nice and
well cared-for.
If tree limbs are hanging over the roof, blocking windows, or hanging too low, cut
them. Shrubs should be neatly trimmed. If you have flowerbeds, they should be
weed-free and planted with brightly-colored blooming flowers. If you don’t have
flowerbeds, put some in and plant flowers or buy some flowers in pots and stage
them where they look good (such as beneath windows or lining walkways.) The
grass should be mowed frequently and all walkways and driveways should be
edged and pressure-washed.
Elise Smith asked a neighbor to look at the Smith’s house from the
street and suggest improvements. “Your grass is brown in
places,” the neighbor said, “and you’ve got empty flowerpots sitting
by one bed. There’s bare dirt in one bed, and those big bushes are
overhanging the driveway. Some zinnias would really brighten up
the flowerbed by the street, too.”
If the exterior of your home is brick or stone, pressure-wash it and point up the
mortar. For wood exteriors, touch up paint or repaint. A garage door that faces
the street should be clean and undamaged. Consider painting window frames
and the front door. Wash all windows and repair damaged screens.
To assess the effectiveness of what you’ve done , ask a neighbor or someone
walking by to tell you what they find attractive about the exterior of your home
and what they would like to see improve, just like Elise did. It’s hard to be critical
of your own home; you tend to overlook things because you’ve gotten used to
them.
As to the interior of your home, the best investments you can make are: new
paint, new carpet, and improvements to the kitchen and bathrooms. You may be
able to skip new carpet if your carpet is less than three years old and you don’t
have pets, but if there are stains, you’ll want to have your carpet cleaned or
repaired - whatever it takes to remove the stain.
Today’s buyers focus heavily on kitchens and bathrooms, so consider upgrades
such as better lighting, new appliances, tiled flooring, a jetted bathtub, and highgrade
fixtures. Brushed nickel is very stylish right now for fixtures.
If you are living in your house while it is being shown, you may need to do some
serious clutter-busting. Go through your home and look for things you can store,
sell, donate, or throw out. Then take a look at your furniture. Any furniture that is
old, stained, or scarred should be gotten rid of or stored.
Additionally, you should strive for a minimum of furniture in a room. It doesn’t
cost that much to rent space in a mini-warehouse and store furniture, and you’ll
recoup the cost many times over when you sell your home. Why is it important to
clear our clutter and only have a few pieces of furniture in each room? Because
it makes the rooms look bigger.
Also, if you have unusual colors for wall paint or wallpaper, or carpet, consider
spending the extra money to replace them with neutral colors like light brown or
beige so that your home will appeal to the widest possible range of buyers.
Appliances that don’t work or need repair should be fixed and all appliances
should be cleaned. Consider replacing carpet with tile flooring, too - people love
tile these days.
One of the first things Veronica’s Realtor did was to do a walkthrough
of her home, noting suggestions for improvement. Veronica
didn’t want to pay for everything the Realtor suggested, but she did
agree to the four major things: new carpet in the master bedroom and
guest bedrooms, new interior paint, replacement of the stained stove,
and a new countertop and tile floor in the master bathroom.
To get buyers to see your home as theirs, buy a new outdoor doormat that says
“Welcome Home” and put it outside your front door. Another way to achieve that
effect is to bake bread or spray vanilla room scent when people come to see your
house. The reason is that both of those aromas spell “h-o-m-e” to prospective
buyers.
Another thing you’ll want to do is to depersonalize your home; remove all photos
of you and your family and friends. Why? Photos mark your home as yours,
and you want buyers to be able to imagine it as theirs.
If you have pets, be diligent about cleaning up after them. Clean cat boxes daily,
sweep the floors every few days, and put pets outside while the house is shown.
Special tip: when buyers come for a showing, they are typically standing on the
front doorstep for 90 seconds. That means they are looking all around in that
area. Pay particular attention to your front door and the area immediately around
it, up, down, and sideways. Repaint, stain, and make it sparkle.
Picking a price
One reason why buyers love For Sale by Owners (FSBOs) is that owners
typically under-price their home. In the few instances that they don’t, they go to
the other extreme and over-price their home. If you’re under fair market value,
you’re giving money away. If you’re over, your house just won’t sell. And the
sad truth is that on the average, FSBOs sell for significantly less than a Realtor
could get for the same property.
How do you determine fair market value if you’re doing a FSBO? You could
ask a Realtor to comp it for you, but that’s a little deceptive, because the
Realtor is doing work that you don’t plan to pay him or her for. “Comp” means
“comparative”, and refers to the process of looking up houses similar to yours
that have sold recently and finding out what they sold for.
For instance, if your house is a 4 -bedroom, 3-bath, with a 2 -car garage and is
2,200 square feet, the comps might be the following houses that have all sold
within the last three months:
A 2,400 sq. ft. 4-3-2 for $240,000
A 2,100 sq. ft. 4-2-2 for $230,000
A 2,500 sq. ft. 5-2-2 for $250,000
So in this case the average is $240,000, and that is what your home’s
estimated market value would be. Should you price it at that? It depends. If
houses are selling fast in your neighborhood, and there are not many of them
on the market, go for it. However, if there are a large number of houses on the
market and you notice they’re taking about six to eight months to sell, you might
want to price your house attractively at $230,000.
Remember, though, you can always come down on the price, but you can’t
come up, so it’s best to start a little high. Buyers will make you an offer at a
lower price, and you’ll negotiate. If you price your home at $240,000, a buyer
may offer $210,000. You’ll counter with $230,000, they’ll counter with
$220,000, and hopefully you’ll meet in the middle at $225,000.
Pricing is an area where a Realtor can really help. Besides doing comps, he or
she specializes in one or two neighborhoods and has a feel for what the market
will pay. Every neighborhood has a rhythm to its markets, its sales and its
prices. Your Realtor is in tune with that.
Market your house
Now that you’ve gotten your house in shape to show and you’ve determined a
price, you can hand it off to the Realtor to sell and quit worrying.
If you’re doing a FSBO, though, this is when you will need to devote time to
selling your house. In particular, you will need to market it. Be prepared for
knocks on the door at all hours. Sure, a simple yard sign sounds convenient,
but it becomes much less so when you’re trying to have dinner or sleep and
people are ringing the doorbell.
Finally, the Friday night came around that Elise and John Smith
had been planning for. They’d gotten a baby sitter for Amy and
were just about to step outside to go out to dinner when the
doorbell rang. “Hi, we were driving by and we saw your sign,” the
couple at the door said. “If the house is still for sale, we’d like to
see it now. Is that OK?”
Elise and John glanced awkwardly at each other. This was going
to ruin their reservation at the hot new restaurant…but they
really needed a buyer. John opened the door wider. “Come on
in,” he said, trying not to sigh.
The next day, Elise was home alone and three young men
knocked on the door. They said they wanted to see the house,
but John has warned her not to show it alone. She asked them
to come back later, when John would be there. They left and
never returned.
Some of the people who want to see your house will be mere tire-kickers who
aren’t serious buyers, and some will be the real deal. The best way to handle
this is to list your cell phone number (so you can turn the phone off at night),
and prepare a voicemail that pre-qualifies buyers, like this:
“Hello, you’ve reached the seller of 123 Elm Street. The house is 2,400 square
feet, has four bedrooms including a large master suite with a jacuzzi, two other
bathrooms, a three-car garage, a fenced backyard, hardwood floors and berber
carpet, and a 200 square foot wood deck. The asking price is $240,000. We’re
having an open house on Saturday, June 4th, from one pm to one-thirty. If you
have questions, please leave your name, phone number and a brief message.
I look forward to speaking with you.”
Why should you hold an open house? Because it allows you to show the
house on one particular day as opposed to having to prep it multiple times for
multiple showings. Notice, too, that I’ve listed a half-hour for the open house.
The reason for keeping your open house short is that you WANT many buyers
there at the same time. This fosters a sense of competition and can lead to a
bidding war or a very good on-the-spot offer. And that kind of thing will bring
you more money.
If all of this sounds like a huge hassle, it can be. That’s why letting a Realtor
handle the sale of your home is the most stress-free option.
Veronica’s Realtor talked with her in advance to find out the best
times to bring buyers over to see the house. He also made it clear if
he or another Realtor had a buyer who wanted to see the home right
away, they would call first to see if it was convenient. Veronica
never had to worry about strangers catching her in the bathtub, or
men appearing on her doorstep at night.
Understanding the legal forms
Selling a home requires quite a few legal steps to close the deal. With a
Realtor, you don’t have to worry. He or she will take care of all that and will find
you a title company with a real estate attorney who will handle the legal
aspects.
If you are doing a FSBO, you may want to consider hiring an attorney to help
through all the contracts, if you feel uncomfortable with the all the legalese.
There are quite a few pieces of paper to sign off on, and the requirements vary
from state to state. Generally, you’ll need:
Sales agreement - this is the master contract that must include certain
things, including the precise legal description of the property (not the
same as the address) as recorded with the county, the price, the means
with which funds are to be paid (usually a combination of cash and thirdparty
financing, or there can be seller financing.), the closing date, and
what is included with the property.
Property condition disclosure - also known as the Seller’s Disclosure. In
this document, you must, by law, list all known defects. If you don’t, you
can be sued. The trend is to over-disclose, listing every little thing you
know is wrong.
Lead-based paint disclosure - homes built prior to 1978 may contain
lead paint. You must fill out a disclosure stating whether or not your
house has it.
Third-party financing addendum - this is mainly something the buyer
does. It states that the buyer’s offer is contingent upon their ability to
obtain financing for at least X amount at Y per cent interest rate or
better.
Loan Assumption Addendum - if you have an assumable loan in which
the buyer can just take over the deed and payments without going
through the qualification process, this document spells that out.
Seller Financing Addendum - if you offer to carry a note for the buyer,
this is where the amount, rate, period and terms are spelled out. Many
sellers decide too quickly not to do this, but if you don’t need the cash
immediately, you should consider it if you can get the buyers to pay a
good interest rate.
Promissory Note - this is the promise to pay the down payment.
Notice of Termination - terminates any lease that may be in effect. This
comes into play if your property is a rental or if you own a multi-unit
building and live in one unit.
Warranty Deed - this document guarantees (or warrants) that the seller
has clear title to the property and that they do own it. It also guarantees
that if the title ever fails, the seller will compensate the buyer for any
losses. The latter is almost never an issue later, however.
Quit Claim Deed - this deed transfers the owner’s interest in the property
to the buyer, but does not guarantee that there are no claims against the
property. Try not to use this one…it has too many problems.
What kind of offer should you accept?
You Realtor can give you guidance on what types of offers are best. It’s not quite
as simple as the best price. One somewhat deceptive tactic that some buyers
use is to offer the highest price, so that it gets accepted, and then start asking for
concessions for things that are found unacceptable during an inspection.
An offer will include:
The purchase price, including how much of it is cash and how much is
financed.
How much earnest money the buyer is putting down - this is part of the
sales price, and it is only refundable under certain circumstances.
A possible option period in which the buyer has a right to inspect the home
and cancel the offer with a refund of earnest money. In Texas, option fees
are typically $100 and non-refundable.
The date by which the sale is to be completed (closing date).
Various things may also be designated, such as:
- Who pays for a new survey if required
- Who pays for certain repairs
- Who pays for maintenance that needs done
- What appliances come with the property
- Any conditions or qualifications. The most common one is that the offer is
contingent upon the buyer being approved for a certain amount of
financing at a certain interest rate or better.
- A deadline for how long the offer is valid.
Your Realtor should also present you with a pre-qualification letter from the
buyer. If you’re selling the house yourself, when a buyer makes an offer ask him
or her to supply you with a pre-approval letter from his/her lender. If they don’t
have pre-approval yet, ask them to get one within two weeks.
Worst-case scenario: the buyer has put in an offer, you’ve accepted it, and you
line up a closing. You take your house off the market because you’ve got a
buyer. Weeks go by, and then right before the closing the buyer can’t get a loan
for what he needs to buy the house. Now you have to re-market the house.
When you record your voicemail to pre-screen calls, say: “Pre-approved buyers
are preferred.” That pre-approval letter demonstrates the buyer’s ability to buy
the house. The pre-approval letter is very common and the buyer should be able
to get one in a week or two.
Be aware that pre-approval or pre-qualification is not a guarantee - it’s an
estimate. A buyer can be pre-approved or pre-qualified and then fail to actually
qualify for a loan.
The Smiths wanted to get their money’s worth out of the house and
they priced it at the top of what they thought it was worth. It’s
now been on the market for four weeks without even a nibble.
Elise has been trying to get John to just get a Realtor. They even
went to marriage counseling about it. Finally, after the fifth week
with no offers, John throws up his hands and they get a Realtor.
Meanwhile, Veronica has already gotten five offers. Two of them
were more than 5% below her asking price, but one was at the asking
price and one was $2,000 above. The Realtor is using this as leverage
and he has told the buyers’ agents that “We are in a multiple-offer
situation, so please put in your best price.” This nudges the highest
offer up to $5,000 more than the asking price. Veronica is delighted
with her Realtor.
The ins and outs of closing the sale
After the buyers make an offer and you - with the help of your Realtor - select
the one that represents the best deal, you may go back and forth a few times on
terms. That’s normal. Once both you and the buyers have signed the same
exact version of the offer, you have a deal. Now it’s time to close the sale.
Making sure that the buyer has the financial means to buy the house is
absolutely critical in the closing process. Without financing, the deal will not go
through unless it’s an all-cash purchase. If a mortgage isn’t obtained by the
buyer in a timely fashion, the transaction can drag on a lot longer than you would
want.
Your Realtor should ask the buyer if he or she has been approved yet, and give
them a deadline. If the buyer blows the deadline, yet still eventually gets
approved, you have two options. If you have no other buyers, you can push
back the closing. If you have other interested buyers, you can have a back-up
offer waiting in the wings. Or your Realtor may invite buyers who previously
submitted offers to re-submit if they’re still interested.
In your sales agreement, there should be a stipulation that says the buyer will
seek full pre-approval immediately after signing the contract. (The contract does
not close the deal, it merely seals the offer. The closing is where the property is
actually sold.) Your Realtor should give the buyer a small, friendly reminder after
you’ve signed the agreement.
Don’t let up. Check on the progress of the buyer’s financing. Your prospective
buyer should obtain their pre-approval letter within two weeks. If two weeks goes
by and they haven’t gotten it and they don’t give you a good reason, consider
refunding their earnest money and putting the house back on the market.
Earnest money is money that the buyers put up to show they’re serious about
buying your house. Typical amounts range from ¼ to 1% of the agreed-upon
price. On a $240,000 home, that would be $600 to $2,400.
This money applies to the purchase of the home. If the buyers back out of the
deal, they forfeit the money. But if they have a clause that the offer is contingent
upon their obtaining financing and they can’t get it, you have to give that money
back.
In some states, Realtors deposit the earnest money into an escrow account at
the title company. If you’re doing a FSBO, don’t spend it the earnest money
once you receive it. Don’t even put it in your checking account. Instead, it pays
to spend a little money with a title company to set up an escrow account to keep
things on the up and up. Then, at closing, the title company knows where the
money is and can credit it towards closing.
Title search and title problems cleared
A title search is performed by a title company in the county in which the property
is located. The search is done to make sure that the seller is selling what they
claim to sell and that there are no outstanding liens or judgments against the
property and no clouds on the title.
Buyers can also get title insurance, which guarantees that if there is a problem
later because of something the title company didn’t catch, the title company will
cover any expenses.
Most title companies have a real estate attorney on board, and he or she can
clear up any issues with the title, or at least advise how to proceed.
Inspection
Most lenders require an inspection, and even cash buyers will generally want to
pay to have one done. An inspector walks through the property and assesses
the condition of the roof, the ducting, the heating, cooling and ventilation (HVAC)
system, the appliances, the plumbing, the wiring, the drainage, and other things.
He writes up a report and gives it to the lender.
Repairs
You’ll get a copy of the inspection report from the inspector, and then you can
negotiate with the buyer on what needs to be fixed. For some items and in some
situations, it might be better to offer the buyer an allowance on the sales price
than to fix or replace whatever.
For instance, if your carpet needs to be replaced, rather than guessing what the
buyer would like, you may wish to get an estimate for putting in medium -grade
carpet and then discount that amount to them on the sales price.
Full mortgage approval
To reiterate, it’s critical that you make sure your buyer has obtained full mortgage
approval. If you don’t, the deal can fall through at the last minute and then
you’ve wasted time that you could have spent getting a qualified buyer.
Final walk-through
This process is necessary if you’ve made in repairs in response to the buyer’s
requests. The buyers walk through the house with you, looking at the repairs to
make sure they are satisfactory.
Loan document is signed by buyer
This is something that the mortgage company handles. It occurs when mortgage
financing is offered to the buyer and he or she signs off on it, accepting the loan
and its terms.
Seller signs off on title
You will sign off on the title or deed at the closing. This is when you legally sell
the property. You receive money from the buyer and their mortgage company
and in return you sign over the property.
Deal is closed
Congratulations - you’ve now sold your home.
After hiring a Realtor, Elise and John have finally gotten offers on
their house, and two of them are good ones. They’ve accepted the
best one and are excited about their upcoming closing.
Veronica is out celebrating with her new co-workers in North Carolina
after closing on selling her old house and getting a nice check for the
profits. She’s sent an email to all her old friends in Austin,
recommending her Realtor highly.
Conclusion
Getting your home sold - thousands of people across the US do it every day.
And most of them get the most money from using a Realtor to sell their home.
With so many stressors in today’s world, why not make life a little more stressfree…
and get the price you deserve for your property?
|
