1. Deciding to Sell
The decision to sell your home is a big one. You may have been living there for a long time or just a few years. It could even have served as an investment for you whether intentional or not. Regardless of the use of the house, special attention needs to be paid to make sure it is a smooth sale. There are multiple factors to consider in this process including but not limited to deciding on a listing price, how long you are willing to market the house, what repairs and/or upgrades need to be made, and how to get the most amount of people through the property.
At this point, that is what your home is…a property. Putting yourself in the right frame of mind is key to a smooth transaction. Since you have decided to sell, you need to remove as much emotional attachment as possible. You may have raised your family in the house but that does not add any value as far as the potential buyer is concerned. Throughout this guide we will be going step by step throughout the process to set you up for success throughout the entire process.
2. Pricing the Property
Finding a price to list the property at is a pretty simple process. The goal here is to find the highest amount that a buyer would be willing to pay for the property. This is done by preparing a comparative market analysis, also known as a CMA. First we find comparative properties to yours that have either, recently sold, are currently under contract, or are listed and waiting for an offer. Obviously the most important ones are the recently sold, since we know the price and terms that were accepted. This is followed by the ones that are currently under contract. We at least know that the asking price was reasonable enough to warrant an offer, but we most likely do not know what the price and terms are and may not know that this property will even appraise for that price. One inference that we may be able to make is that if the days on market time is relatively short, than there is a better chance that they received close to list price, possibly even more. The last category are the active listings. These are your competition. There is a possibility that these properties are overpriced and won’t sell, but at least you know what your current competition is.
When selecting the types of properties that we will be using as comparables, there are multiple factors to look at:
1. Distance – How far away is the property located from yours. Closer properties will hold more weight. If they are in the same neighborhood or subdivision, that would be ideal.
2. Neighborhood – If not in the same neighborhood, is it similar? Does it have similar features such as gated, community pool and parks? How do the neighbors maintain their homes? What is the quality of construction of the builder? What schools are in its boundaries?
3. Size – We will look at building size and lot size. In addition to square footage, there is number of bedrooms, bathrooms, other rooms, parking spaces and types.
4. Features – Does it have a pool, spa, fireplace, solar panels, golf course/hillside/waterfront lot?
5. Upgrades and condition – How are the finishings in the property and is it in need of repair.
Once we take all these factors into consideration, we can arrive at an appropriate price. The next thing we will need to take into consideration is time needed to sell. If you are in a hurry and have a specific reason while the sale needs to occur quickly, it may be wise to lower the price slightly from whatever we arrive at as fair market value for the property. This will usually yield more and better qualified buyers that will have a better chance at closing quickly.
One thing to be careful of is avoiding overpricing the property. Some agent may come in and promise you the world, but ultimately they cannot force someone to pay more than the property is worth especially if the buyer is relying on financing and is contingent on an appraisal. In the meantime you may be missing out on qualified buyers that are not seeing your property in their search results or are assuming that you will not come down enough on the price to make it worth their time viewing the property or submitting an offer.
When you arrive at a listing price, your net proceeds will need to be calculated. This process will take into consideration the listing price and from that your payoff and closing costs will need to be subtracted from that amount to arrive at the amount that you will be receive from the sale. In some situations this number could be negative and then this will be the amount that you will need to pay in order to complete the transaction.
3. Preparing the Property for Sale
Part of getting the highest possible price for your property is the presentation. At this point in the process, we will walk through the property and make a list of any repairs that need to be made. Some of these will be items that you have been meaning to fix, others may be items you may not see as an issue, but they are sure to come up on an inspection report and may deter a buyer from following through on the purchase. There is no requirement that these items be repaired, but then it is likely that you will not yield the price that you want.
After the repairs, we will look at possible upgrades. It could be that replacing carpet and putting on a new coat of paint could greatly increase the appeal of your property. Sometimes putting $5000 into upgrades could give a return of $10,000 more on the sale, but of course you will need to be able to put the money in ahead of time and that may not always be feasible.
After these checklists are created, it is time for the decluttering. Eventually you will need to pack anyway, so use this time to start packing up all the little things that may have a lot of meaning to you, but will be hurdles to getting a potential buyer to picture the property as their new home. First step is to remove all the personal touches. This includes photos and yes, even the kid’s artwork on the fridge. These items show the potential buyer that it is your home not their new home. After this, attack the smaller items, specifically in the kitchen and bathrooms.
A good rule of thumb is to go from front to back. Depending on the layout of your property, there will be a specific path that most people will use when viewing the house. Start with the first thing they will see which is the front yard. Then go room by room in order of what they will see first. This is based on the importance of curb appeal. First impressions are important and if someone likes the first thing they see, they will be more likely to look past issues they find with the property. Conversely, if their initial impression is less desirable, then they will be more likely to look past the parts of the property they like and dwell on the negative aspects.
One more thing that can be done to prepare a property for sale is staging. This can be adding or replacing furniture and/or decorations to give the property a more finished and welcoming feel. This is especially advantageous in a vacant home that may have rooms that seem small but once there is furniture in them it can show that they are still functional.
Now that the property is ready to be shown we will need to take pictures, measure rooms, put a sign in the front yard, and install a lockbox for access.
4. Marketing the Property
Now the property is ready and it is time to announce it to the world. This is when people will be seeing the property both online and in person.
The primary marketing feature is the Multiple Listing Service. We will input all the important information as well as pictures to convince the potential buyer to come view the property. Unfortunately many agents leave out vital information, take bad pictures, or even none at all. This greatly hurts the property’s chances of being shown. This listing will be available for agents to see and to send to their clients. Along with the actual MLS, this data gets pushed out to a number of other syndication sites. It is also available through agent sites such as resourcephx.com.
If the property is in an area that has a Realtor Tour, we will include it on the tour providing it fits the guidelines. Realtor Tours are a group of agents that get together to preview and critique the listings. Not only will they keep the property in mind if they have any buyers looking for that type of property, they also will give feedback such as how well it is priced or what could be done to the property in order to help get an offer. We will work to get the property on one of these tours as soon as possible, but sometimes there can be a wait.
Open houses are another marketing tool that can be used to sell the property. They can be effective, especially in a highly sought after neighborhood that may not have a lot of available listings. Weekends are best in order to maximize the amount of traffic. Saturdays are usually better late morning to mid-afternoon whereas Sundays are usually better in the afternoon.
During this marketing period, you will want to keep the property as clean as possible. You never know when someone will want to take a look at the property. Some sellers like to give special instructions such as giving extended notice or only show between certain times. Although this can be done, it is highly discouraged. In our fast paced world, many agents will not give check to set up appointments until they are leaving to meet their client. Also, sometimes the client will contact the agent to see a place right away. Many times while working with a buyer, we will change search parameters while out looking at houses. Tablets and smartphones give us this ability and unfortunately the buyer doesn’t always want to wait. All this can be very inconvenient for a seller, but in order to get the best offer in the least amount of time, you will want to keep the house ready to be shown at all times.
Agents and prospective buyers alike can provide valuable feedback to help expedite the sale of the house. If they are constantly saying the price is too high, than it probably is. Also, we will try and find out why they have not written an offer after viewing the property. If there is a consistent reason, than it would be wise to address the issue. We will also be monitoring the other homes in the neighborhood while it is listed in order to see what the competition is like.
5. The Escrow Period
Once a buyer decides that they would like to purchase your property, they will send over a formalized offer. This document will be at minimum 11 pages and spell out the terms under which they are offering for the purchase of the property. The most important one here is obviously purchase price, but others such as closing date, who pays certain fees that go with the transfer of ownership, type of financing among others will be included as well.
Now you will have three decisions to make. You can accept, decline, or counter the offer. In order to make this decision we will need to take a look at all the terms and analyze them to see if you feel the offer is acceptable. Any of the terms that are not, we can modify in the form of a counter offer. This keeps the original terms of the contract accept the ones that you would like to change. This is an important decision since the seller cannot change their mind once the offer is accepted. The buyer, however, will have that right during the inspection period, which is most commonly the first 10 full days after contract acceptance.
An important item is to make sure we have a bona fide buyer involved in the transaction. If they are obtaining financing, they will be providing a pre-qualification letter. This letter will show how far they have gone in the process of being pre-approved for the loan. We will contact the lender that they are using and try and gauge how likely they are to be able to qualify for the loan. If they are a cash buyer, we will require a proof of funds letter showing that they have enough available cash on hand to close the transaction.
Once you and the buyer have came to an agreement on what terms are acceptable, we are under contract. At this point the buyer will deposit earnest money and open escrow. The earnest money is the money that you will receive as damages if they fail to close on the property and do not back out within one of the acceptable time periods. They will also deliver the contract and contact information to the title and escrow company.
After escrow has been opened, they will most likely be scheduling inspections and an appraisal. You will need to make sure that utilities remain on during this time and that access is allowed. They will notify us of the scheduled time, so there should be no surprises. Once the inspection period is complete, they will prived a Buyer’s Inspection Notice. Here they have a similar three options as you had before. They are to accept the condition, back out of the transaction, or accept as long as you make certain repairs to the property. It will then be your opportunity to make all, some, or none of the repairs. A credit in lieu of repairs may also be given.
If the buyer is obtaining financing for the purchase, an appraisal will be required. After the appraiser has given their opinion of value, the buyer will have 5 days to back out if the number comes in lower than the purchase price. If they wish to proceed then the bank will require the difference to be paid in cash by the buyer. If the buyer is unwilling to do this, you may lower the price to continue with the transaction. If you are unwilling to lower the price, the buyer can give a cancellation notice and receive a refund of their earnest money. If they fail to do so within the allotted 5 days after the receive the inspection report, but cancel anyway, then you will be awarded the earnest money as damages and we will put the property back on the market.
Once repairs have been agreed upon and made, appraisal is finished, and buyer has obtained loan approval, it is time to close the transaction. You will be responsible for signing the HUD-1 statement, which shows an itemized list of all charges involved in the transaction, the deed to the property, any seller affidavits, and possibly some other documents as well. If there are proceeds from the sale, the escrow company will deliver a check or wire the funds directly to your bank account.