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Common Frequently Asked Questions by Sellers
Sadly, many sellers just don't do their homework. If you're like most people, your home is your most valuable investment. When you sell it, you'll want to pocket the biggest possible net gain or profit. But, when you sell your home, you need to understand the competition. There are other home sellers in your area, and just like in any other competition, mistakes can be costly. Here are some common home seller slip-ups we can help you avoid:
- Pricing it too high or too low - A listing price that is too high often gets the seller less than a price that is at market value. If your house is not priced competitively, people looking in your price range will reject your house in favor of other, larger homes for the same price. At the same time, the people who should be looking at your house will not see it because it is priced over their heads! Overpricing usually increases time on the market, and that adds to the carrying costs. Ultimately, many overpriced properties sell below market value.
- By setting the price too high, you turn away the best prospects for your home. By asking too little, you'll probably sell faster but net less from the sale.
- Selling it "AS IS" - In the competitive home sale marketplace, you need to show your house at its best. Your home should be in "move-in" condition from the first day it's listed. Buyers look for homes, not houses, and they buy the home in which they would like to live. Owners who fail to make necessary repairs, who don't spruce up the house inside and out, touch up the paint and landscaping, and keep it clean and neat chase buyers away as rapidly as Realtors can bring them.
- Selling it yourself - Although doing your own marketing looks tempting as a way to save money, surveys show self-sellers often net less from the sale than sellers who use a real estate agent. And self-sellers find that agents do a lot more than most people think - from bringing qualified buyers to keeping things on track to settlement. Realtors® will only bring qualified buyers, one who is ready, willing, and able to buy your house. Most people who go looking at For Sale By Owners are just starting to think about moving. An agent will ask a buyer how much he can really spend for a house, how much he has to put down, how good his credit is, how much he can pay each month, how much he will realize (realistically!) when he sells his present home - and about a dozen other questions like that. But unless your Realtor finds all the facts first, you must ask all these questions before the buyer crosses your threshold. Otherwise, you may have a parade of Sunday afternoon shoppers with a dream of owning a home some day.
- Not Knowing Your Rights & Obligations - Real estate law is extensive and complex; the contract for sale and purchase is a legally binding document. An improperly written contract can cause the sale to fall through, or cost you thousands for repairs, inspections, and remedies for title defects. You must be certain which repairs and closing costs you are responsible for. You must know whether the property can legally be sold "as is", and how deed restrictions and local zoning will affect the transaction. If there are defects in your title, or if your property is in conflict with local restrictions, you or your Realtor must remedy them, or you might have to pay plenty.
- Limiting the Marketing and Exposure of the Property - The two most common marketing tools (open houses and classified ads) are only moderately effective. Surprisingly, less than 1% of homes are sold at an open house. Agents use them to attract future prospects, not to sell the house!
- Advertising studies show that less than 3% of people purchased their home because they called on an ad. And if a machine answers, most callers just hang up without leaving a message. The right Realtor will employ a broad spectrum of marketing activities, emphasizing the ones he believes will work best for you. There are dozens of more effective ways to find buyers than just open houses and advertising.
- Believing that a Re-finance Appraisal is the Market Value of Your Home - An appraisal is an opinion of value for a certain purpose. If the lender wants to lend you the money, they are motivated to have the appraisal come in high. The appraiser may ignore foreclosure or distress sales in order to justify the high value. But a real buyer in the real world will not ignore these properties. They are your competitors when you try to sell. Don't make the mistake of thinking that the value you were told 6 months ago when you refinanced is what a real buyer would pay. Ask your Realtor for ALL the properties that have sold in your area, and then decide.
Question: What is the difference between a REALTOR® & Real Estate Agent?
REALTOR® identifies real estate professionals who are members of the National Association of REALTORS® and subscribe to its strict Code of Ethics. Not every real estate agent is a REALTOR®. A REALTOR® may be an appraiser, property manager or involved in some other aspect of the real estate business.
Question: Why Hire a REALTOR®?
Here are some reasons you should consider hiring a Realtor in the sale of your home:
- Money - Pricing your home so that it sells for the most money in your time frame. According to the National Association of Realtors, homes sold with Realtor Representation sold for an average 15% more than homes sold without seller representation. This means that sellers got more money even after paying a 6-7% commission. Paying a Professional can be a bargain.
- Exposure - Maximum exposure of your home to all the Buyer's Agents in the area, as well as internet sites.
- Qualified Buyers - Assurance that only Buyers that have been lender pre-approved and who know what they want in a home will only look at properties that might fit the bill.
- Feedback - Timely feedback with honest and clear advice throughout the marketing of your home.
- Legal Protection - Professional and objective seller representation throughout all the steps and negotiations of your home sale is a good idea unless you are a sales pro with a law degree and experience in real estate. The completion, interpretation and response to all the legal forms, contracts and paperwork are both crucial and ongoing throughout the sale of your home.
- Convenience - Life can be hard enough and you have plenty to do. You might be better off devoting your time to your profession and family and letting a Realtor handle the selling of your home professionally.
Question: Why do I pay a commission on the sale of my house?
The commission pays for the services we provide and the expenses we incur in selling your home. Some of our services include:
- Develop a tailored marketing plan
- Advise you on fix-ups
- List the house with a multiple listing service
- Put up a yard sign where permitted
- Attract buyers with advertising and open houses as appropriate
- Screen potential buyers and follow up with agents
- Negotiate the best contract on your behalf
- Supervise a million details all the way to closing for inspections, appraisal, walk through, repairs if needed
- Help you plan your next purchase and your move. If another agent brings the buyer, the commission is shared with that agent.
15 Reasons to List with a REALTOR®
- Buyers would rather use a REALTORS services in a home search
- REALTORS can provide an objective market analysis
- REALTORS can provide profitable marketing preparation
- REALTORS may have buyers waiting for areas
- REALTORS have constant exposure and recognition
- REALTORS use more effective ads and signs
- REALTORS find financially qualified buyers
- The seller will be less inconvenienced
- The seller will enjoy greater security
- REALTORS offer professional showmanship
- REALTORS can follow up effectively for each showing
- REALTORS can ask personal questions of the buyer that the seller can't
- REALTORS can negotiate without conflict or emotion
- REALTORS have financing programs knowledge
- REALTORS can help avoid potential legal pitfalls
Question: What is the difference between the "Buyer's Market" and the "Seller's Market"?
- Buyers' Market - A buyers' market refers to a marketplace that favors home buyers because more homes are listed than can be expected to sell in the near future. If, for example, 20 homes are listed in a neighborhood, and 5 were sold in the last month, the neighborhood has a 4-month supply of homes for sale.
- Sellers' Market - Of course, the market can - and does - change based on general economic conditions such as rising or falling interest rates, or the local business climate such as a new company opening nearby. If, for example, all 20 homes listed plus 5 new listings sell within a few months, then the market has become a sellers' market, where buyer demand meets or exceeds the house-for-sale supply.
Question: What does MLS stand for and how does it work?
The Seller hires a Real Estate Agent to help find her a Buyer for the home he or she is selling. On the Seller's behalf, the Real Estate Agent then "lists" the Sellers' home with a Multiple Listing Service (MLS). MLS is a service through which all Sellers' Real Estate Agents publicize and advertise their client's listings. The goal is that other Real Estate Agents who represent Buyers and who also subscribe to the MLS, will see a particular listing that their Buyer might like. If that Buyer Real Estate Agent's efforts contributed to the sale of Seller's home, then the commission that the Seller's Real Estate Agent receives from the Seller at closing will be split with the Buyer's Real Estate Agent.
Question: What is the difference between list price, sales price and appraised value?
The list price is a seller's advertised price, a figure that usually is only a rough estimate of what the seller wants to get. Sellers can price high, low or close to what they hope to get. To judge whether the list price is a fair one, be sure to consult comparable sales prices in the area.
The sales price is the amount of money you as a buyer would pay for a property.
The appraisal value is a certified appraiser's estimate of the worth of a property, and is based on comparable sales, the condition of the property and numerous other factors.
Question: What are the standard ways of finding out how much a home is worth?
A comparative market analysis (CMA) and an appraisal are the standard methods for determining a home's value.
Your real estate agent will be happy to provide a comparative market analysis, an informal estimate of value based on comparable sales in the neighborhood. Be sure you get listing prices of current homes on the market as well as those that have sold. You also can research this yourself by checking on recent sales in public records. Be sure that you are researching properties that are similar in size, construction and location. This information is not only available at your local recorder's or assessor's office but also through private companies and on the Internet.
An appraisal, which generally costs $350 to $750 to perform, is a certified appraiser's opinion of the value of a home at any given time. Appraisers review numerous factors including recent comparable sales, location, square footage and construction quality.
Question: What is the difference between market value and appraised value?
The appraised value of a house is a certified appraiser's opinion of the worth of a home at a given point in time. Lenders require appraisals as part of the loan application process.
Market value is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker. Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth.
Question: What's a house worth?
A home ultimately is worth what someone will pay for it. Everything else is an estimate of value. To determine a property's value, most people turn to either an appraisal or a comparative market analysis.
An appraisal is a certified appraiser's estimate of the value of a home at a given point in time. Appraisers consider square footage, construction quality, design, floor plan, neighborhood and availability of transportation, shopping and schools. Appraisers also take lot size, topography, view and landscaping into account. A comparative market analysis is a real estate broker's or agent's informal estimate of a home's market value, based on sales of comparable homes in a neighborhood. You can do your own cost comparison by looking up recent sales of comparable properties in public records. These records are available at local recorder or assessor offices, through private real estate information companies or on the Internet.
Question: What factors do not affect my price?
Ultimately, a house is worth what someone is willing to pay for it - the fair market value.
Some of the items we do not consider include:
- The original cost of the home
- Money spent for improvements
- How much cash you would like to net from the sale
While these factors are important to you, they have no bearing on the fair market value a buyer will be willing to pay.
Question: Why is it dangerous to overprice my house?
Sometimes sellers are tempted to test a higher price at first to see if they'll be lucky enough to find an uneducated buyer willing to pay. Unfortunately, experience shows this "Why not?" pricing strategy rarely pays off. Instead, asking the right price from the start avoids the many dangers of overpricing.
The right sales price is based on several factors: size of the house and its special features and amenities, recent home sales, demand for homes in your area and prices of similar homes currently on the market.
Although you may have decorated lovingly or renovated extensively, those improvements may have only a small effect on the market value of your home. In fact, personalized decorating can even slow a sale unless the style has wide appeal.
Here are 8 proven reasons why it's dangerous to overprice your home:
- You will miss out on pent-up demand.
Most activity on a listing comes within the first 30 days. An initial high price can discourage buyers - causing you to miss out on pent-up demand - or tempt them to wait for the price to come down.
- You will reduce the buyer pool.
Too high a price will eliminate a whole class of qualified buyers. Many buyers know just how high they can go and don't even look at homes priced above their ceiling.
- You might turn off buyers.
You may experience few or no showings because some prospective buyers who can afford the price won't waste time with an overpriced listing. They know they can get more house for their money elsewhere.
- You could sell the competition.
Overpricing helps sell other, more competitively priced homes first. Your home may be compared to underscore what a good deal another home is.
- You could frustrate prospects.
Prospective buyers who might stretch their best offer can become frustrated when they can't buy the home they want at a fair market value - only because an unreasonable seller insists on accepting only a premium price.
- You will frustrate your own timetable.
You could become frustrated, too, when your house fails to sell in a reasonable amount of time, leaving your plans in limbo. Only a price reduction is likely to help sell your house faster and meet your "move out" timetable.
- You will raise doubts about hidden problems.
If your overpriced house stays on the market for a long time, it may eventually be seen as "stale inventory" which can suggest structural or mechanical shortcomings, even after you lower your price.
- You will risk lender rejection.
If you do get a sales contract, the contract may fall through because of a too-low appraisal. The buyer may not be able to borrow enough to proceed with closing.
Question: Whose obligation is it to disclose pertinent information about a property?
In most states, it is the seller, but obligations to disclose information about a property vary.
Under the strictest laws, you and your agent, if you have one, are required to disclose all facts materially affecting the value or desirability of the property which are known or accessible only to you.
This might include: homeowners association dues; whether or not work done on the house meets local building codes and permits requirements; the presence of any neighborhood nuisances or noises which a prospective buyer might not notice, such as a dog that barks every night or poor TV reception; and any restrictions on the use of the property, such as zoning ordinances or association rules.
Question: What is a Contingency?
This is a sale, on Real Estate, that's condition upon a future, pre described event. This condition, or contingency, can be for anything you wish, the most common examples include:
1) The buyer will buy a home IF, or condition upon, the buyer selling their current home.
2) The buyer will buy a home IF, or condition upon, the home passing a building or pest inspection.
3) The sale will close if the buyer can obtain a loan from a bank.
Contingent sales usually have a date by which the condition must be met. If conditions are not met by that date, then the sale fails and the house is now available for sale to the next buyer.
Question: Do I have to consider contingencies?
If you are a seller in a seller's market, in which there is more demand than supply, you probably won't have to entertain too many contingencies. But if you are selling in a buyer's market, when buyers are few, prepare to be very flexible. Granting contingencies also depends upon what kind of price you want to get and on the condition of your property, most experts agree. Remember, contingencies are written into the contract and are negotiable during the negotiation phase only.
Question: Why is there a lien on my property?
There are many types of liens which can be filed that my affect your property. The most common is the deed of trust, which represents a mortgage holder's security instrument and is a voluntary lien, placed with the permission of the property owner himself.
Real estate tax liens are also levied against specific parcels of property. These are automatic, statutory liens. As long as you pay your real estate taxes when due, these liens will not cause you any transfer problems.
Mechanic's liens give security to people who perform labor or furnish material to improve real property. They are levied against specific parcels of land. A mechanic's lien may be filed up to three months after the mechanic's work is completed. Particular care should be taken when purchasing a property to insure against unfiled mechanic's liens.
Your homeowner's or condominium association can also place specific liens against your property if you fail to pay your assessments or fail to comply with the covenants or restrictions governing the property.
Other liens are identified by your name, and are not filed against a specific property. A judgment lien is placed when a creditor secures a judgment against you in court and files or "dockets" it in the land records. This lien attaches to any property you own (or acquire in the future) in the jurisdiction in which the lien is filed. Other non-specific liens include income tax liens and estate tax liens.
Different liens have different potential effects on you. If you discover that there is a lien affecting you or your property, you should get professional legal advice on how best to resolve the matter.
Question: What repairs should the seller make?
If you want to get top dollar for your property, you probably need to make all minor repairs and some selected major repairs before going on the market. Nearly all purchase contracts include an inspection clause, a buyer contingency that allows a buyer to back out if numerous defects are found or negotiate their repair.
The trick is not to overspend on pre-sale repairs, especially if there are few houses on the market but many buyers willing to buy at almost any price. On the other hand, making such repairs may be the only way to sell your house in a down market.
Question: Should I offer carpet allowance to buyers rather than replace my carpet?
Replacing the carpet to help the house sell faster is a favorite with real estate agents. And there's a good reason. Taking a shortcut by offering a carpeting allowance doesn't have the visual impression - or sales impact - of new carpet. Here are some guidelines to be sure the new carpet has the maximum effect:
- Select neutral colors.
- The color should be neutral or a dull color tone to help the room look bigger. When carpeting several adjoining rooms, the same carpet should be used, if possible - again to make the house seem larger and more unified.
- Select a high quality pad.
- The pad under the carpet is important, and not a place to cut corners. A good pad is dense and resilient, and gives an expensive feel to almost any carpet. Pads come in a variety of materials including rubber, foam, felt, and jute.
- Select fiber carefully.
- Choose a fiber that suits the area where the carpet will be installed. Carpets are made of a variety of man-made and natural fibers, and often are comprised of popular combinations of fibers. Nylon is durable and resilient, and suitable for high-traffic areas. Olefin is economical and stain-resistant, good for active families. Polyester is soft and elegant, and appropriate for a higher-style area. Wool is a warm natural fiber, luxurious and expensive.
- Select loop to match use.
- The type of loop should depend on the use. A sheared loop like plush works in more formal areas; a continuous loop, such as Berber, is suitable for children's play areas.
Question: What is the Lead-Based Paint Disclosure?
If you are selling a home that was built before 1978, you are now required to inform all buyers about the risks of lead-based paints. Buyers are required to sign a lead-based paint disclosure notice before signing a sales contract. The sale will not be processed without a signed lead-based paint disclosure form. Since 1995, federal law requires all sales contracts to have such a disclosure, and a pamphlet on the dangers of lead-based paint must be distributed prior to the signing of a contract.
Question: Will a neighbor problem reduce the value of my property?
While it may not reduce the actual value, a cluttered landscape next door can detract from the positive aspects of your home. Review your local laws, which should be on file at the public library, county law library or City Hall.
A typical "junk vehicle" ordinance, for example, requires any disabled car to either be enclosed or placed behind a fence. And most cities prohibit parking any vehicle on a city street too long.
It also may be worthwhile to check into local zoning ordinances. An operator of a home-based business usually is required to obtain a variance or permanent zoning change in residential areas.
In addition, if a neighbor's repair work produces loud noises, he may be breaking local noise-control ordinances, which are enforced by the police department.
Before bringing in the authorities, you may want to make a copy of the pertinent ordinance and give it to your neighbor to give them a chance to correct the problem.
Question: What are fixtures?
Fixtures are any kind of personal property that is permanently attached to a house (such as drapery rods, built-in bookcases, tacked-down carpeting or a furnace) and automatically stay with the house unless specified otherwise in the sales contract. But anything that is not nailed down is negotiable.
Question: How do you prepare a house to sell?
Doing whatever you can to put your house's best face forward is very important if you want to get close to your asking price or sell as quickly as possible. Short of spending a lot of money, here are several ideas for making your home show better:
- Sweep the sidewalk, mow the lawn, prune the bushes, weed the garden and clean debris from the yard.
- Clean the windows (both inside and out) and make sure the paint is not chipped or flaking. And speaking of paint, if your home was built before 1978, new federal law gives a buyer the right to request a lead inspection. If you think you might have some problems, do the inspection yourself beforehand and make any fixes you can.
- Be sure that the doorbell works.
- Clean and spruce up all rooms, furnishings, floors, walls and ceilings. It's especially important that the bathroom and kitchen are spotless.
- Organize closets.
- Make sure the basic appliances and fixtures work. Get rid of leaky faucets and frayed cords.
- Make sure the house smells good: from an apple pie, cookies baking or spaghetti sauce simmering on the stove. Hide the kitty litter.
- Put vases of fresh flowers throughout the house.
- Having pleasant background music playing in the background also will help set your stage.
Question: How does someone sell a slow mover?
Even in a down market, real estate experts say that price and condition are the two most important factors in selling a home.
If you are selling in a slow market, your first step would be to lower your price. Also, go through the house and see if there are cosmetic defects that you missed and can be repaired.
Secondly, you need to make sure that the home is getting the exposure it deserves through open houses, broker open houses, advertising, good signage, and listings on the local multiple listing service (MLS) and on the Internet.
Another option is to pull your house off the market and wait for the market to improve.
Finally, if you have no equity in the house, and are forced to sell because of a divorce or financial considerations, you could discuss a short sale or a deed-in-lieu-of- foreclosure with your lender.
A short sale is when the seller finds a buyer for a price that is below the mortgage amount and negotiates the difference with the lender.
In a deed-in-lieu-of-foreclosure situation, the lender agrees to take the house back without instituting foreclosure proceedings. The latter are radical options. Your simplest, and in many cases most effective, option is to lower the price.
Question: Why is it helpful to have a Home Warranty?
You need more than clever gimmicks to sell a home these days. To clinch a sale, many savvy home sellers offer home warranties. Buyers love them because warranties pay for certain home repairs for a year after the sale. Many sellers love them, too, because warranties help get the home sold - and may bring in offers closer to the asking price.
Typically, home warranties cover the repair or replacement of a home's heating, plumbing, and electrical systems and major built-in appliances. The cost often runs $350-$450, typically with a small deductible for each repair or replacement.
Shop For The Best Coverage
When shopping for home warranty coverage, compare the following:
- Required pre-warranty inspections.
- Coverage for appliances and systems.
- Deductibles and service fees.
- Dollar caps on total or individual replacement/repair costs.
- Limits on number of repair calls.
- Costs, including any initial or inspection charges.
Question: What are the two most important factors when selling a home?
Price and condition are the two most important factors in selling a home, even in a down market. The first step is to price your home correctly. Use comparative sales information from your agent, or pay for a professional appraiser (usually $200 to $300), to objectively evaluate your home's worth. Second, go through the house and repair any obvious cosmetic defects that could deter a buyer.
In a down market, you may have to consider lowering your price and/or making a major repair, such as replacing the roof, in order to lure a buyer. Also, make sure that your home is getting the exposure it deserves through open houses, broker open houses, advertising, good signage and a listing on the local multiple listing service or online listings provider.
Question: What is a "walk through" and what should I expect?
Whether you are selling a relatively new house or one that was built years ago, most buyers will want to make a final inspection before closing.
What Buyers Typically Look For
Check out contingencies.
The buyers will examine the house closely to see that any contingencies you agreed to have been resolved.
Buyers look for any flaws that might have escaped their notice earlier. For instance, how does the house look without your furniture? Have any changes been made since the buyer saw the house before?
Consider a negotiated solution.
In some cases, problems will have to be taken care of after settlement. Just make sure you have a written agreement to that effect (with a timetable specified), to avoid misunderstandings.
Buyers aren't shy.
Don't be surprised if buyers ask lots of questions during the final walk-through. After all, this may be their last chance to become familiar with their soon-to-be home. Some have been known to bring an experienced inspector or consult a home maintenance book during the walk-through.
Expect any requests in writing.
If the buyers do have concerns after the walk-through, expect them to put their requests in writing as soon after the inspection as possible.
Question: Do I need to reinvest my proceeds to avoid taxes?
When you sell your old home you do not need to reinvest all, or any, of the cash received into a new home in order to avoid taxes. Since 1997, Uncle Sam doesn't care how you reinvest the proceeds (savings, vacation, car purchase, bill consolidation, etc). Any gains up to $500,000 for married couples and up to $250,000 for singles are tax free, as long as:
- You're selling a principal residence.
- You've lived in the house 2 of the last 5 years.
- You haven't sold your previous house within 24 months.