The Selling Process
Setting A Price
When setting a price, the important thing is to be realistic. If the price is too high, you may not find a buyer. Too low, and you cheat yourself out of money.
Appraisal
Regardless of what you originally paid for your home and the cost of improvements you have made, the only price that matters is what the market will bear at the time you decide to sell. You may consider hiring an independent real estate appraiser with specialized training and experience. Don’t rely on assessed valuations made for tax purposes. Such valuations may not be reliable indicators of value, as they are usually made using mass appraisal techniques.
Comparative Market Analysis
Whether or not you get an appraisal, your Real Estate Agent can develop a comparative market analysis. This analysis will describe homes in your area that have recently withdrawn from the market and may compare specific features of your home to others–the value of a corner lot, a city view, or an extra bedroom, for example. The analysis may also point out market fluctuations caused by the opening of a new school or business, as well as long-term trends.
Net Proceeds
Once you’ve decided on a price range, your Real Estate Agent can help you calculate an estimated amount you might net from the sale. If you have owned your home for several years, you may have built up sizable equity. Equity is the difference between the value of your home and the balance on your mortgage. After subtracting what you owe on your mortgage, ask your Real Estate Agent what costs you will incur in closing. These may include title fees, taxes, a penalty for prepaying your mortgage, brokerage commission, attorney fees, and charges for preparing and recording documents. Finally, ask your tax adviser or attorney about the tax implications of your proposed sale.
Signing a Listing Agreement
After you choose a Real Estate Agent, you will most likely sign a listing agreement–a contract in which you agree to allow an Agent to sell your home during a given period and pay the Agent a fee when your home sells. Most Real Estate Agents are independent contractors who work for a company operated by a licensed real estate broker.
The amount of compensation you pay a broker is negotiable, but the Real Estate Agent will generally follow the company’s policy regarding compensation. The amount of the fee will be spelled out in the listing agreement. Make sure you understand how the fee will be paid before signing.
Exclusive Listings
Most Real Estate Agents will ask for an exclusive right-to-sell listing. This means that you will owe the broker a commission regardless of who finds a buyer during the listing period. In other words, if you decide to sell the house to your cousin, your broker still gets a commission. In an exclusive listing, the broker is usually motivated to work harder to sell your home.
It’s possible that an Agent from another company will find a buyer for your home. In that case, your broker is the listing broker, and the second agent is the cooperating broker. Many times the listing broker will agree to pay the cooperating broker a fee from the amount you pay the listing broker. Your listing broker cooperates with other brokers who procure buyers interested in your property and offers to compensate the other brokers for procuring a buyer. Cooperating and compensating other brokers is discussed in the listing agreement you sign with the listing broker.
Length Of Listing
The listing agreement will specify how long you agree to list your house with a company. You want a period that’s long enough to motivate your Real Estate Agent to advertise your home and respond to buyers yet short enough to allow you to change to a different company if you become unhappy with the Agent‘s service.
Remember that the listing agreement is a contract. You should get a copy for your records. Your Real Estate Agent is bound to the terms just as you are. You can expect the Agent to keep appropriate information confidential and effectively market your property.
The Offer
When a buyer makes an offer on your home, your Real Estate Agent will contact you promptly. The Agent will scrutinize the document, review it with you carefully, and answer your questions. The written offer lays out all the terms of the proposed transaction–the price the buyer is willing to pay and the financing terms–and becomes a binding contract if you sign it. The offer may be contingent on the buyer selling a home first or obtaining an inspection. Ask your Real Estate Agent how these terms affect you and whether the offer is in line with the market. The offer describes the property, states who pays for which closing costs, and specifies dates of closing and possession. Along with making the offer, the buyer may place some earnest money with the escrow agent as a sign of good faith. The earnest money will be kept in an escrow account and applied to the buyer’s down payment or closing costs when the sale closes.
Seller’s Disclosure
In most residential sales, the law requires that the seller deliver a seller’s disclosure notice to the buyer on or before the effective date of purchase. This document provides important information about the seller’s knowledge of the condition of the property. Complete the notice to the best of your knowledge and belief. Your Real Estate Agent will most likely ask that you complete the notice at the time the listing is first taken. Copies of the completed notice will be made available to those looking at your property.
Accepting The Offer
Once you and the buyer agree on terms and sign the contract, the buyer will generally have to find a lender and apply for a loan. Your Real Estate Agent may monitor the loan process, which could last several weeks. During this time, your Agent will also be busy coordinating other arrangements to prepare for the final sale.
Title Search
As part of the process, the title company may order a survey of your property and research the title to your home, making sure the chain of title is clear. Clearing the title may require paying off liens–that is, any monetary claims against your property. Examples are: mechanic’s liens, unpaid state and federal tax liens, court judgments, and probate considerations (if a co-owner has died). The product of the title search can be in the form of title insurance, abstract of title, or certificate of title, depending on what is commonly used in your area.
Inspection and Repairs
A buyer may hire an inspector to review many items in the property, such as the structural components, mechanical items, electrical systems, and plumbing systems. The inspector will report to the buyer the items that the inspector finds to be in need of repair. Most likely, the buyer will provide a copy of the inspection report to you and may ask you to complete certain repairs. Don’t be surprised if the inspection notes some items in need of repair. An inspector is trained to see items and defects that are not obvious to you or your Real Estate Agent. No matter how new or well-maintained a home is, an inspector may find some items in need of repair.
Closing the Deal
The sale formally ends at the closing table. In most transactions, the closing lasts less than an hour and often occurs at the title company office. Your Real Estate Agent and the buyer’s agent may be present. A title company officer or escrow agent will preside. Be sure to bring your driver’s license to the closing (DPS identification cards and passports are also acceptable).
Basic Documents
The sale actually consists of two transactions: 1) transferring the property to the buyer and 2) paying off the existing mortgage on your home (or allowing the buyer to assume your mortgage). To transfer the property, the title company will present documents proving that you have the title. Proceeds of the sale may be disbursed at closing or shortly thereafter once all the paperwork and verifications have been processed. When you give your house key to the new owners, the sale is complete.