Important Considerations When Selling A Home
There are many exciting reasons why a homeowner decides selling a home is a necessity: maybe you need to relocate for a new job or for retirement, or maybe you need more room for a growing family. There are also many unfortunate reasons why someone decides that selling a home is a necessity: loss of a job, divorce, or loss of a loved one. No matter the cause, when you decide to sell your home, arm yourself with information, partner with a trustworthy Realtor, and start packing!
Setting The Price
Setting the price for selling a home is probably the single most important step in the sales process and, for the homeowner, it can also be the most challenging. The challenge to you as a homeowner is to satisfy your need to get the highest price for your home while at the same time satisfying a buyer’s need to get a good value. You have to wear two hats, and the faster you can master that skill, the faster you’ll sell your house.
Contact An Experienced Realtor
When you work with a Realtor to help in selling a home, you have a tremendous advantage over homeowners who choose to sell on their own. Realtors have access to accurate, up-to-the-minute information about home sales in your area; knowledge of local, county, and state regulations on real estate transactions that affect you; the ability to market your home on more websites than you’ve ever known to exist; and a wide network of colleagues and peers who work with buyers everyday — buyers who are looking for a home just like yours.
Remember These Important Facts
There is no correlation between what you paid for your house (cost) and what a buyer is willing to pay for it in today (market value). Today’s market determines today’s value.
There is no dollar-for-dollar return on improvements and upgrades you’ve made to your home. Ten thousand dollars spent on an updated kitchen does not mean the home is worth $10,000 more than it was before. However, certain improvements (bathrooms, kitchens, basements) will attract more buyers and that can create competition which drives the price up. On the flip-side, other improvements (an in-ground pool, sauna, cedar closets) can costs thousands of dollars but won’t be attractive to a majority of buyers — some of whom may see these features as nice but unnecessary or too costly to maintain.
There is no truth to the (mis)belief that real estate agents want to “give your house away.” Believe me, I haven’t given one away yet! As Realtor, my job and my goal is to market your home to as many people as possible; help you find a qualified buyer within in a reasonable timeframe; negotiate favorable terms in the contract; and help you receive the highest price for your home.
How does the sales process work?
As a seller, you determine many of the steps involved in selling your home. For example, the remaining balance on your mortgage determines the type of sales transaction; you determine when your home can be shown to buyers; and you decide which offer to accept and which offers to reject. However, the buyer’s financing also drives the sales transaction and guides a lot of the process as well. Each situation is different, but here’s a guide that hits all the major points.
- Sign a Listing Agreement, including required disclosures, with your Realtor and work with her on the remaining steps throughout the process.
- Prepare your home to be photographed and for installation of a yard sign and lockbox.
- Make your home available during weekdays and weekends and accept showing requests from potential buyers.
- Negotiate and accept an offer — your home is now “under contract.”
- Cooperate with and execute all contractual contingencies (inspections, appraisal, etc.).
- Negotiate any buyer-requested or lender-required repairs and follow-through with agreed upon repairs with a licensed contractor – keep the receipts.
- Order and deliver condo or HOA documents to the buyer.
- Schedule settlement time and location with the title company.
- Pack and move your belongings. Make sure the home is free of debris and clutter; leave the utilities on.
- Cooperate with the buyer’s final walk-through of the home.
- Attend settlement. Deliver keys to the buyer as well as the receipts for repairs. Notify buyer of utilities disconnection date. Receive proceeds from the sale.
- The title company will record public documents with city, county, and state offices as well as disburse final mortgage pay-off to your lender.
What is a standard sale?
Selling A Home in a standard sale is probably the most straight-forward and most commonly executed real estate transaction for sellers, buyers, and real estate agents. A standard sale is a two-party transaction involving a seller and a buyer. In a standard sale, a seller usually has equity in the home and is current on the mortgage payments — that means they are also more likely to have the financial ability to keep-up with ongoing maintenance of the home. Most sellers go a step further by painting, de-cluttering, landscaping, and even staging the home to prepare it for market. These homes are usually in good condition and show well to buyers. At the very least, standard sale sellers are looking to break even from the sale, but the vast majority of sellers obviously want to make a profit.
Additionally, in a standard sale, a seller is required by law to provide certain disclosures and addenda about the condition of the property and the utilities as well as supply homeowner’s association and/or condominium association documents to the buyer. A buyer can expect to negotiate with a seller on several terms of the contract including price, repairs, and closing cost credits. However, in a competitive market when multiple offers have been delivered to the seller, buyers are advised to put their best offer forward first — the fewer contingencies, the stronger the offer. Since standard sale sellers are not distressed, so to speak, they have the flexibility to reject a lowball offer and wait for a better one with favorable terms to come along. Depending on the buyer’s financing, a standard sale can go to settlement in as quickly as 30 days or even shorter if the buyer is paying hard cash.
A short sale occurs when a property is sold for an amount significantly less than the homeowner owes the bank for the mortgage. In a short sale, the bank (i.e., the “third party”) agrees to accept the short payoff amount. All short sales require third-party approval. The homeowner must supply the bank with evidence of a financial hardship (loss of a job, divorce, high health care expenses, etc.) that prevents his ability to repay the loan.
Short sales typically take longer to settle than a standard sale because the bank needs time to review the necessary documentation which could include multiple liens with multiple banks or other entities. In a best case scenario, a short sale can be approved in a minimum of 90 days whereas standard sales can settle as quickly as 30 days or less.
For the homeowner, a short sale has a less negative impact on credit scores than a foreclosure because an actual agreement with the lender has occurred and all parties accept the terms. Buyers who purchase a short sale property do so at fair market value — not at a discounted or bargain price. The bank will appraise a short sale property before the sale is approved, and the assessed value is what the house will sell for.
Short sales are purchased on an as-is basis; the seller is typically not permitted by the bank to make repairs. Unfortunately, many short sale properties have been neglected and are in disrepair because of the homeowner’s financial inability to keep up with even routine maintenance. Occasionally, some banks will approve minor repairs that the buyer’s lender requires, and they typically allow for some closing cost assistance to the buyer.
For sellers and buyers alike, when entering into a short sale transaction, remember to be patient, work with a reliable Realtor, and be prompt and responsive to all requests for documents, information, and signatures.
By definition, foreclosure is a process; it is neither an event nor a type of property. A foreclosure occurs when a homeowner no longer has rights to a property because he’s consistently failed to pay the mortgage in a timely fashion. Remember this point: most people we call homeowners are in reality borrowers who may become homeowners once the mortgage is paid-in-full.
Therefore, a mortgage is simply a lien on a house which a borrower gets to live in and enjoy for 30 years while paying off the debt. Until that time, the house belongs to the bank. When a borrower doesn’t pay the mortgage, the bank comes to take it back and sell it in order to recover at least a portion of the debt that the borrower failed to pay.
The Foreclosure Process
Foreclosures can last for months or even years, but they all begin when a borrower stops paying the mortgage. Usually after the third month of missed payments, the bank must, by law, record public notice with the county and give official notice to the borrower of its intent to foreclose.
After receiving this official notice, a borrower enters a pre-foreclosure grace period and offered housing counseling, and the options of a loan modification, repayment plan, or a short sale.
If the borrower declines these options, the process continues, and a date for foreclosure auction is set by the bank. The date is recorded with the county and official notice is delivered to the borrower. Multiple public notices of the auction must be announced in the newspaper. If any of the newspaper announcements are omitted or late, the foreclosure process starts over from the beginning. Additionally, if at any point the borrower’s mortgage is sold to a different bank or servicer, the foreclosure process starts over from the beginning.
Auction of the property can take place at the courthouse, at the property, or even online. The borrower has what’s called the “right of redemption” which means he can, up to the last minute before it’s sold at auction, pay the outstanding debt in cash and redeem the property. Otherwise, the property is sold to the highest bidder who must pay the balance of the mortgage and all delinquent taxes — in cash.