Selling Step 1: Evaluation: Get Ready to Sell Your Home
Millions of homes are sold each year, and while each transaction is different every seller wants the same thing - the highest price with the least amount of hassle and aggravation.
Home selling is more complex than it used to be. As a seller you need to be aware of a range of issues and deal with many complex forms. You also need to know that buyer agents represent buyers and are working to get the best deal for their buyer clients.
Successfully selling your home requires experience and training in areas such as real estate, marketing, financing, negotiation and closing – this is the very expertise REALTORS® offer.
Know Why You Want to Sell Your Home
First, you should have a clear idea why you want to sell your home.
Selling a home is an important matter and there should be a good reason to sell, such as moving to a new community, needing more space, retiring to a smaller home or moving closer to family. Your reason for selling can impact the negotiating process so it's important to discuss your needs and wants in private with the REALTOR® who lists your home.
To get an idea of whether it’s a seller’s market or a buyer’s market, many people start by looking at online or printed real estate guides to research the current market and the price of comparable properties.
Is Your Home Ready to Be Sold?
The home-selling process typically starts several months before a property is made available for sale. For best results when selling your home, you need to look at your home through the eyes of a prospective buyer and determine what needs to be cleaned, painted, repaired and tossed out.
Ask yourself: “If I were buying this house, what would I want to see?” The goal is to show a home which looks good, maximizes space and attracts as many buyers - and as much demand - as possible.
When Should You Sell?
The marketplace tends to be more active in the spring because parents want their children to be settled and enrolled before the beginning of the school year. Spring is also when most homes are likely to be available.
Generally, the selling market is more active from Labor Day to early December, and then January to about May. Summer and Christmas are usually the slowest times of the year for house sales.
Owners are encouraged to sell when there is a need or desire to sell, the property is ready for sale and the seller has chosen a REALTOR® to work with.
How Do You Improve Your Home's Value?
Ideally, you want to be sure that your property is competitive with other homes available in the community. REALTORS® see many homes and can provide home-improvement suggestions that are consistent with your local marketplace and cost-effective in terms of what you will be able to recoup through the sale.
The general rule in real estate is that buyers seek the least expensive home in the best neighborhood they can afford. In terms of improvements, this means you want a home that fits in with the neighborhood but that is not overimproved. For example, if most homes in your neighborhood have three bedrooms, two baths and 2,500 square feet of finished space, a property with five bedrooms, more baths and far more space would likely be priced much higher and would likely be more difficult to sell.
Improvements should be made so that the property shows well, is consistent with the neighborhood and does not involve capital investments that cannot be recovered from the sale. Furthermore, improvements should reflect community preferences.
Cosmetic improvements, such as carpeting, paint, wallpaper and landscaping, help a home " show" better and often are good investments. Mechanical repairs, which ensure that all systems and appliances are in good working condition, are required to get a top price.
Prepare yourself to sell your home by evaluating why you want to sell, and when to sell and by improving your home and property to enhance its value to buyers.
Working with an experienced REALTOR® will give you valuable expertise and advice to guide you through the complex process of selling your home.
Selling Step 2: Get a REALTOR® When You Sell a Home
Before placing a home on the market you should identify REALTORS® in your community who can assist with the sale.
Why Use a REALTOR® to Sell Your Home?
REALTORS® are members of the NATIONAL ASSOCIATION OF REALTORS® (NAR) and must adhere to a strict Code of Ethics, and have access to a wide range of classes, seminars and certification opportunities. Local REALTOR® groups are active in community matters, and individual members are routinely involved in neighborhood organizations.
Essentially, local REALTORS® are community experts. They track real estate trends, share neighborhood concerns and participate in local matters. They're good neighbors who are in the business of helping others buy and sell homes.
How Do You Choose a REALTOR®?
Many communities have independent real estate agents and realty brokerages. You can find a local REALTOR® in local advertising; by referrals from other agents, neighbors, lenders, attorneys, financial planners and certified professional accountants; and on the Internet. Recommendations of an agent’s past clients can be valuable.
Most people choose an agent who is a relative or friend, who was referred by a relative or friend, or who was their agent for a previous sale. After that, an agent might be chosen because of a referral by one of the professionals noted above, or from a marketing piece, ad or For Sale sign.
It can be a good idea to interview more than one agent – even three or four – before selecting one to work with. These interviews are a good opportunity to consider such issues as experience, track record, market knowledge, marketing approach, professional network, representation, certification and fees.
What Should You Ask a REALTOR®?
In some cases, sellers elect to meet with only one REALTOR® while other meet with several. Whatever your preference, there are a number of questions you will want to ask, including:
- What services do you offer?
- Do you work alone or with a team or partner? What will your role in the sales process be and what will their roles be?
- What type of representation do you provide? Different states have different forms of representation: some real estate agents represent buyers, some represent sellers, some facilitate transactions as a neutral party, and in some cases different agents in a single firm may represent different parties within a transaction.
- What is your track record?
- What is your market knowledge?
- What kind of professional network do you have?
- What are your certifications/designations?
- What experience do you have in my immediate area?
- In the current market, how long should my home remain listed to get the highest possible price? Because all homes are unique, some will sell faster than others. Several factors can impact the amount of time a home remains on the market, including changing interest rates and local economic trends.
- How would you price my home? Ask about recent home sales and comparable properties currently on the market. If you speak with several real estate agents and their price estimates differ, that's OK, but be sure to ask how their price opinions were determined and why they think your home would sell for a given value.
- How will you market my home? At listing presentations, real estate agents provide a detailed summary of how they market homes, what marketing strategies have worked in the past and which marketing efforts may be effective for your home. Ask your agent which media they use, e.g., Web, flyers, real estate papers, TV, open houses, etc.
- What is your fee? Fees are established in the marketplace and not set by law or regulation. Typically, real estate agents who list homes are compensated on a performance basis, and are not paid unless the home sells under the terms and conditions that are acceptable to the seller.
- What disclosures should I receive? State rules require that real estate agents provide extensive agency disclosure information, usually at the first sit-down meeting.
- Will I be able to get an unconditional release from the listing agreement if for some reason I decide not to sell? A listing agreement is a contract that shows the real estate agent’s obligations and outlines the terms under which your home is being made available for sale. Although the length of the listing agreement negotiable, a 90 day term is common.
What Should You Expect When Working with a REALTOR® to Sell Your Home?
Once your home is listed with a REALTOR®, she or he will immediately begin to market your home according to the most appropriate conventions for your community.
Your REALTOR® should keep you informed as the marketing process unfolds and as expressions of interest are received. In time, the marketing plan may be modified to reflect buyer reactions and changes in the marketplace.
REALTORS® will also help you find any lawyers, inspectors or other professionals needed for your real estate transaction. Your agent will help you understand, evaluate, write and deliver offers and counteroffers.
Your REALTOR®’s expertise and experience is a valuable resource in the complex undertaking of selling a home. Your REALTOR® will help you every step of the way.
Selling Step 3: Set the Listing Price
All owners want the best possible price and terms when selling their home. Several factors, including market conditions and interest rates, will determine how much you can get for your home. The idea is to get the maximum price and the best terms during the window of time when your home is on the market.
In other words, home selling is part science, part marketing, part negotiation and part art. Unlike math where 2 + 2 always equals 4, in real estate there is no certain conclusion. All transactions are different, and because of this, you should do as much as possible to prepare your home for sale and engage the REALTOR® you feel is best able to sell your home.
What is Your Home Worth?
What homes are worth boils down to “what the market says it’s worth.” A home “value” also depends on who you ask: there's the price owners would like to get, the price buyers would like to offer and the point of agreement between buyer and seller that actually results in a sale.
In considering home values, several factors are important:
- The value of your home relates to local sale prices. The same home located elsewhere could have a different value.
- Sale prices are a product of supply and demand. If you live in a community with an expanding job base, a growing population and a limited housing supply, you have a seller’s market, and home prices will likely rise. Alternatively, if the local community is losing jobs and people are moving out, then you'll likely have a buyer's market.
- Listing prices should not be inflated. You should be strategic in setting your listing price and be sure not to overprice your home, because you may not be able to sell it. The longer a home is on the market, the more “stale” it gets, and the more likely that buyer agents will tend not to show it and that buyers will think there is something wrong with the home because it is not selling. If you overpriced your home, you many eventually have to bring the price down to even less than what you could’ve got if it was priced properly in the first place. And you will have lost the initial flurry of interest that new listings generate.
- How quickly the owner needs to sell can affect sale values. Owners who " must" sell quickly will have less leverage in the marketplace. Buyers may think that the owner is willing to trade a quick closing for a lower price - and they may be right. Conversely, owners who do not need to sell quickly may have more marketplace strength.
- Sale prices are not based on what owners " need." When an owner says, " I must sell for $300,000 because I need $100,000 in cash to buy my next home," buyers will quickly ask if $300,000 is a reasonable price for the property. If similar homes in the same community are selling for $250,000, the seller will not be able to sell for $300,000.
- Sale prices are NOT the whole deal; look also at terms and conditions. Which would you rather have: a sale price of $200,000, or a sale price of $205,000 but where you agree to make a " seller contribution" of $5,000 to offset the buyer's closing costs, pay a $2,000 allowance for roof repairs, fund two mortgage points, repaint the entire house and leave the washer and dryer?
How Do You Set a Listing Price?
Because all transactions are unique there is price flexibility in the marketplace. The amount of flexibility depends on local conditions.
For example: you're selling a townhouse and there have been five recent sales of the same model townhouse and prices ranged from $200,000 to $210,000. You now have an idea of how your home might be priced. In a strong market perhaps you can ask for $210,000 or a little more. If the market has slowed, $210,000 may be a reasonable asking price, but perhaps more than you could get for a final sale price.
Here's another scenario: you live in a community of Victorian-style homes, most of which were built in the 1920s. All the homes are different in terms of size, condition, modernization, style and features. In such a neighborhood, an average sale price is just a statistic without much practical meaning. On a single block one home may sell for $400,000 while another is priced at more than $1 million. The average price may be outrageously high for one home and staggeringly low for another.
Knowing what listing price to set for your home can be difficult. That is why it is valuable to work with a REALTOR®. Because experienced REALTORS® have handled many transactions, they're familiar with the terms and conditions that went into individual sales, not just published sale prices that may not reflect various premiums, discounts, terms, conditions and adjustments. And, importantly, REALTORS® know of the latest sale prices among competing houses and can offer that information to the home seller.
Selling Step 4: Market Your Home
Marketing a home requires a specialized approach because each home is unique, the marketplace is always in flux, interest rates frequently change and new buyers search for homes each day.
In such a dynamic marketplace, you can get best sales results by working with a REALTOR® who can craft marketing plans tailored for individual homes, market conditions and buyers. Experienced REALTORS® base their marketing efforts on extensive training, what has proven successful in previous transactions and ongoing research into industry best practices.
How REALTORS® Can Help You Market Your Home
Selling can entail a variety of marketing strategies. REALTORS® can assist in marketing your home to potential buyers in several ways:
Preparation: Before being placed on the market, homes must be in "show" condition. REALTORS® can explain what repairs and upgrades are required and that are most likely to produce the best results and give the best return on investment.
Pricing: REALTORS® do more than price homes for sale, they also construct sale terms designed to hasten the selling process. It may be, for example, that a home priced at $150,000 with a 2 percent seller credit to the buyer at closing will be far more attractive to purchasers than a home priced at $147,000. Why? That 2 percent credit is worth $3,000 to the purchaser at closing - the time when buyers are most likely strapped for cash.
Marketing: REALTORS® will execute strategies and programs to get the home sold. Typically this includes placement on the local MLS and real estate Web sites, as well as related marketing, advertising and networking. Open houses, office tours, agent access to the home via the use of a lock box and networking with both local and out-of-town agents are also common.
Much of an agent’s work will be quiet and unseen - yet important. The telephone calls, the work with contacts, the follow-ups with open-house visitors, conversations with ad respondents, the Web postings and other outreach efforts are all part of the process required to sell homes.
There are no universal marketing standards for real estate because marketplaces are localized. For instance, open houses may be common in some communities but rarely used in others.
A REALTOR® holding an open house typically advertises that the home will be open for a given period (e.g., 2-5 p.m. on Sunday). During the open period, the REALTOR® hosts the home while the owners leave for a few hours so that buyers will feel comfortable having a good look around the property and asking questions.
The REALTOR® will provide literature, maintain a visitor log and answer questions. By interacting with visitors, the REALTOR® will seek feedback regarding the home and opportunities to follow up with prospective purchasers.
Marketing Your Home on the Internet
Your REALTOR® should advertise your home online. The Internet is a vital marketing tool for home sellers and has two important roles in the real estate selling process.
First, it is a "place" to view real estate 24 hours a day, 7 days a week and all from the comfort of home or office. There are many real estate sites, including individual agent sites, real estate franchise and brokerage sites, and also industry sites.
Second, and equally as important, the Internet offers immediate communication via e-mail and instant messaging and gives REALTORS® and consumers more opportunities to keep in touch.
Marketing your home works best using a combination of marketing strategies, knowing the local market conditions and having contact with buyers and other agents. Working with an experienced REALTOR® gives you valuable expertise in all areas related to marketing your home to buyers.
Selling Step 5: Offers, Counteroffers and Negotiation
Selling your home involves both business and personal issues: you will have people looking at your house, and buyers presenting offers and counteroffers; and you’ll have to deal with bargaining, negotiating and signing documents.
REALTORS® assist owners in the offer, counteroffer and negotiation process, offering advice and counsel as offers are received and by working closely with legal counsel, tax specialists and inspectors as required.
What is an Offer?
When you put your home on the market, you are essentially making an offer to buyers: for a given number of dollars and other terms they can acquire the home. Buyers, in turn, can respond with several options:
- accept the offer
- decline the offer
- make a counteroffer
The process of making offers varies around the country. Typically, the buyer’s agent will present a written offer to the seller through the seller’s agent. The seller, in turn, may accept the offer, decline it or make a counteroffer.
What is a Counteroffer?
A counteroffer is nothing more than a new offer with different terms. Offers and counteroffers reflect the back-and-forth activity of the marketplace. It's a common, efficient and practical process - but also one that may contain tricky clauses and hidden costs. Because of this, and because counteroffers are common, it's important for buyers to remain in close contact with a REALTOR® during the negotiation process so that any proposed changes can be quickly reviewed.
What is an Acceptable Offer?
The goal of every seller is to have a line of buyers outside the front door, each bringing higher and higher offers. And while this has been known to happen, in most markets there is some balance between the number of buyers and sellers. To determine whether a buyer's offer is acceptable, the seller should consider the following questions:
- Has the buyer accepted the asking price or something close?
- Has the buyer buried thousands of dollars in discounts and seller costs within tiny clauses and contract additions?
- Is there a possible better deal than the buyer's offer? If a home has not attracted an offer in months, then the seller needs to recognize that each month costs are being incurred for mortgage payments, taxes and insurance.
- Do you have enough time to wait for other offers?
- What if no other offers are received?
- What if several offers are received? Do you choose the higher offer from the purchaser with questionable finances who may not be able to close, or a lesser offer from a buyer with preapproved financing?
- What are the contingencies and what time period do they last for if other offers are received?
In each case, the owner - with assistance from a REALTOR® - will need to carefully review offers, consider marketplace options and then determine whether an offer is acceptable.
Contingencies and “Subject to” Clauses
Buyer offers often contain contingencies or “subject to” clauses that must be met before the contract is considered binding. Contingencies can include the following:
- approved financing
- buyer selling an existing home
- satisfactory home inspection report
- test results for environmental factors including radon, mold and water quality
- termite inspections
Work with your real estate agent to make sure that any buyer contingencies have a time clause, also called a kick-out clause, which limits the contingency to a short time period (say 12, 24 or 48 hours) should you receive another acceptable offer. This makes sure you are able to pursue other offers without undue restraint.
How Do You Negotiate?
No aspect of the home buying process is more complex, personal or variable than bargaining between buyers and sellers. This is the point where the value of an experienced REALTOR® is clearly evident because he or she knows the community, has seen numerous homes for sale, knows local values and has experience negotiating realty transactions. Also, your agent, from experience, can help you avoid getting locked into a deal that’s likely to fall through because of the prospective buyer’s finances.
Real estate bargaining typically involves compromises by both sides. It's not war; it's not winner-take-all. Instead, negotiating should be seen as a natural business process: buyers should be treated with respect, and owners should never lose sight of either their best interests or their baseline transaction requirements.
There are a lot of considerations, not just price, in making and negotiating offers. This is where the working with an experienced REALTOR® can guide you to a win-win negotiation.
Selling Step 6: The Sale Agreement and Closing
It might seem that once a sale agreement has been signed that the selling process is complete. Not only is it not over yet, but some of the most complex aspects of a real estate transaction now begin.
Once a contract for the purchase of a home has been accepted, a series of inspections and checks are typically required to satisfy buyers and lenders. REALTORS® help owners complete the transaction process by assisting with the many requirements found in a typical sale agreement. The real estate agent also helps the seller prepare for closing, that is, finalizing the sale.
What’s in a Sale Agreement?
A sale agreement sets a purchase price for the home and a series of terms and conditions. For instance:
- Contracts routinely depend on the ability of a buyer to obtain financing and/or sell their current home, which is why most sellers prefer buyers with mortgage preapproval letters.
- A growing percentage of transactions involve a home inspection, or a physical review of the home by a trained and independent observer. Generally the buyer’s agent arranges the inspections, which the buyer typically pays for.
- Lenders will establish numerous conditions before granting a loan. They will want a title exam, title insurance to protect against title errors, termite inspections, surveys and an appraisal to assure that the home has sufficient value to secure the loan.
When Should You Close?
With online transaction management now available, closings can occur within a week in some areas - at least in theory. In practice, it takes time to arrange financing, conduct inspections, obtain appraisals, locate replacement housing, contact movers, pack and actually move.
While instant closings are not practical, neither are closings too far in the future. The problem with closings much past 60 days is that loan rates are difficult to lock in. If mortgage rates go up, it's possible that the buyer will no longer be able to afford the home and thus the deal may fall through.
The result of these considerations is that most homes close within 30-45 days after a sale agreement has been signed.
Completing the Agreement: What are Your Final Obligations?
It's important to look at the sale agreement and review your obligations. For instance, if you have agreed to paint a room or replace the dishwasher, such work must be completed before closing. Your real estate agent can discuss your agreement and the steps that you need to take to complete the transaction.
What Happens During Closing?
Before closing, buyers typically have a final opportunity to walk through the property to ensure that its condition has not materially changed since the sale agreement was signed.
“Closing” is also known as "settlement" or "escrow." It is usually a brief office meeting to sign and complete the paperwork needed to finalize the sale transaction. One of the best parts of settlement is that there is very little that buyers and sellers need to do. All necessary papers have been prepared by closing agents, title companies, lenders and lawyers. This paperwork reflects the sale agreement and allows all parties in the transaction to verify their interests.
Settlement is increasingly computerized and automated. In many cases, buyers and sellers don't need to attend a specific event; signed paperwork can be sent to the closing agent via overnight delivery. Some areas have services that allow most of the transaction to be completed online. If buyer and seller are present, they may be at the same table, or they may complete their papers separately.
Whatever the process, the outcome of the closing is the following:
- Property title is transferred from seller to buyer.
- The buyer receives the keys to the property.
- The seller receives payment for the home.
- From the amount credited to the seller, the closing agent subtracts money to pay existing mortgage and other transaction costs.
- Deeds, loan papers, and other documents are prepared, signed and filed with local property record offices. Usually the closing agent also completes the paperwork needed to record the loan.
- Transfer taxes are paid and other claims settled, including closing costs, legal fees and adjustments.
The closing agent handles both the settlement papers and related documents.
Selling Step 7: Moving
Even the smallest home contains a lot of furniture, clothes, kitchen equipment, pictures and other items. For a short move, it may be worthwhile to transport small goods by yourself, but larger items may require a professional mover. Your REALTOR® can give you advice on the moving process.
How Do You Plan a Move?
The time to plan your move begins once you've decided to sell your home. Some of the things you do to prepare your home for sale can actually help with the moving process, e.g., cleaning out closets and the garage, basement and attic.
Your planning will be guided by how far you plan to move:
- Moving locally: If you move yourself you'll need to get moving supplies and organize a van rental.
- Moving a long distance: You'll likely require an interstate mover and the use of a large van.
- Moving internationally: Contact the embassy of the country you’re moving to for information. Be aware that some items that are entirely common at home can be prohibited in foreign countries. Ask about customs protocols, duties and taxes.
Planning is essential: stock up on boxes, packing materials, tape and markers. Always mark boxes so that movers will know where goods should be placed and so you know what’s inside the boxes.
Hiring a Mover
If you need to hire a mover, ask for recommendations from your REALTOR® and friends and associates. There are a number of factors to consider. Money is one issue: you'll want to spend as little as possible, but choosing only on the basis of cost can be a mistake. Movers must have the right equipment, training and experience to do a good job. A mover, no matter how large or small, should be able to provide recent references from past clients who had a similar volume of goods to transport.
Get mover estimates in writing. Be aware that it's possible to get discounts through membership organizations and, sometimes, on the basis of your profession.
Always confirm mover credentials. Movers should be licensed and bonded as required in your state, and employees should have workman's compensation insurance. It’s a good idea to check whether a given mover is approved by the Better Business Bureau - many aren’t.
There is also the question of how many movers to use – usually either 2 or 3. Naturally, 3 movers will cost more, but the time saved might mean that using 3 is more cost effective than using 2, who would take longer. Additionally, it’s good to find out what the minimum number of hours you’ll be charged for, given that this could determine how many movers you use.
Moving Preparation Checklist
Moving is a big job and checklists can make it more organized and easier. Here are some of the major items to consider:
- Yard sale: Get rid of excess furniture and other goods by having a sale before you move.
- Postal: Get mail forwarded to you, and inform important people and companies (bank, insurance, etc.) of your new address.
- Utilities: Prearrange to have utilities cut off at your old home and hooked up at your new home. Check whether there are any deposits that should be returned to you. Also find out what your hook-up fees will be.
- Boxes: Number boxes so that all items can be counted on arrival. Make a list of boxes by number and note their contents.
- Medicine: Keep medicines and related prescriptions in a place where they will be available during the move.
- Children: If you’re moving with children, make sure that children have some of their favorite things - toys, blankets, games, music, etc., - that will keep them happy.
- Pets: If you have pets, bring along food, water dish, carrier and other items your pets will need.
- Money: If you're moving more than a few miles you should have enough cash or credit to cover travel, food, transportation and lodging.
- Valuables: Make sure historical, antique, breakable or valued items get special handling and packaging.
- Important papers: Keep important papers with you so they do not get lost in the move.
- Contact Numbers: Have address books readily available in case you need help.
- E-mail: If you have a laptop computer with a modem, make it accessible during your trip to pick up business and personal e-mail.