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SELLERS: 10-Step Guide to Selling Your Home in Colorado Springs
- Step 1: Decide When to Sell
- Step 2: Hire a REALTOR®
- Step 3: Sign a Listing Agreement
- Step 4: Determine Your Home’s Asking Price
- Step 5: Add a Title Company to Your Team
- Step 6: Prepare Your Home for Sale
- Step 7: Let Your REALTOR® Market Your Home
- Step 8: Prepare Your Finances
- Step 9: Receive an Offer
- Step 10: Close the Deal
Step 1: Decide When to Sell
In real estate, timing is not everything but it does influence your home’s selling price. Let’s see if we can make timing work for you.
Status report. Is it a buyer’s or a seller’s market?
When there are lots of people looking for homes but there aren't many for sale, it is called a "seller’s market." This is because the seller has something buyers are looking for. When there are more homes for sale and not many people buying them, this is called a “buyer’s market.” This is because buyers have more power of choice. A REALTOR® is the best person to consult about what the current market conditions are.
How quickly do you need to sell your home?
In a seller’s market, top price and a fast sale can go hand-in-hand. In a buyer’s market, more sellers are competing for the potential buyer. If you have to sell during the buyer's market, you may wish to lower your asking price a bit to speed up the sale. REALTORS® are masters at figuring the price-to-listing ratio and know how to attract offers without going unnecessarily low.
Seasonality. Do home sales get frostbite?
It’s true. Winter sales tend to be slower, and Spring sales are more brisk. Regardless, there are always people looking to buy and seasonality is only one of many factors to consider.
Are you also planning to buy a home?
If you are, you don’t really have much leverage in terms of playing the market. If you sell your existing home for a "low" price, you are probably also buying at a low price. You have to consider whether you are downsizing or upsizing and price your home right from the beginning.
Buy first or sell first - The eternal question
Many people are able to time their sale and purchase so they happen on the same “closing date.” Buyers can make their offer “conditional” on the sale of their existing home, to make sure they’re not left paying for the upkeep of two homes. When selling, you can try to extend the “closing period” to give yourself more time to find your next home. REALTORS® are skilled at this sort of negotiation and can make your transitional life a lot easier.
If you find your new dream home before you’ve even started to sell your old one
Talk to your existing mortgage lender. You may be able to arrange the right financing. When your lender (the bank) is confident that your existing home will sell quickly, they might agree to lend you the down payment for your new home prior to selling your existing one.
Step 2: Hire a REALTOR®
There are many reasons why a REALTOR® is essential when selling your home.
Here are some reasons you should consider:
- 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 pre-approved by a lender, and know what they want in a home, will look at properties that might fit the bill. No "tire-kickers" and "window shoppers."
- 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 (and sometimes beyond).
- 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.
Step 3: Sign a Listing Agreement
The “Listing Agreement” authorizes your REALTOR® and their brokerage to market and sell your home. This agreement serves three purposes.
- It defines your relationship. Every detail of your work together, including the limits of your REALTOR’S® authority, will be clearly defined.
- It provides detailed information about the home. This information can then be placed on the board’s Multiple Listing Service to help potential buyers find you.
- It forms the basis for drafting offers on your home. Any formal offer on your home starts with the Listing Agreement.
Highlights of the Listing Agreement
The Listing Agreement describes the legal relationship between you and the real estate brokerage, and it sets a time limit for the REALTOR® to sell your home.
What is the Multiple Listing Service?
The Multiple Listing Service, which is one of the tools used by REALTORS® in providing you with MLS service, is paid for and operated by REALTORS®, so it can be used to spread the word to other REALTORS® to help you find a buyer. A “Multiple Listing” gives your home maximum exposure and your commission stays the same. It really is the better way to sell. Here are just a few items that are included in the MLS:
Price - The real key to attracting buyers. You have the final say over this magic number, but your REALTOR® will have very useful advice. You can learn more about choosing the right asking price in Step 4.
Real estate commission - This is usually a percentage of the final sale price, and you only pay once your REALTOR® has found you an acceptable offer. The commission is agreed upon between you and the individual brokerage. The agreed upon commission is then split between the Seller's Agent and the Buyer's Agent.
Legal information - such as the lot number, land surveys and the zoning code.
Financial information - like the minimum deposit you require with any offers. If you have a mortgage that can be assumed (taken over by a buyer) that information should be listed because it could make your home more desirable, especially if you’re locked into a lower interest rate than what is presently available.
How the home will be shown - Normally your REALTOR® will arrange appointments. Any specific instructions, such as “make sure the cat stays in” can also be noted.
What is included in the price-
Chattels are moveable items like washers and dryers, microwaves and window blinds. Chattels are not automatically included in the sale, but sellers will often include them to sweeten the deal. Any chattels you wish to include should be clearly noted.
Fixtures are permanent improvements to a property like central air conditioning, installed lighting and TV mound. Fixtures are assumed to be included in the sale of the home unless you note otherwise. Maybe the dining room chandelier is a family heirloom and you wish to take it with you. The line between chattel and fixture can get blurry, so leave nothing to chance! Go over every item with your REALTOR® and make sure it’s accounted for in the Listing Agreement.
The importance of a Seller Property Disclosure
Many real estate boards now request a Seller Property Disclosure. This can list any recent renovations or improvements, but more importantly, it lists all the known major defects and faults with the home, hidden or not.
Be honest about imperfections
Maybe the basement leaks during the spring thaw, maybe the kitchen sink backs up when both showers are running. It is best to come clean and report it. If you don’t, and a significant fault is discovered before the sale, it can cast a shadow of doubt over the rest of the home. If the fault is discovered after the sale, and it can be proven that you knew about the problem, you may be sued for the cost of the repairs.
Honesty is always the best policy
A major defect does not mean your home will not sell. List the defect and state how your home’s price has been lowered accordingly. This can actually be attractive to some buyers, especially if they have experience with the required repairs!
Step 4: Determine Your Home’s Asking Price
Lots of people out there want to buy your home. The right asking price will attract buyers’ attention and pay you a maximum return.
You don’t want to set your price too low or too high
Setting too low a price means you could miss out on thousands of dollars that some buyer would have happily paid.
Setting too high a price can scare away willing buyers and leave your home on the market for too long. When you lower the price, people may assume you are under pressure to sell or something is wrong with the house, and lower their offers even further.
Your goal is fair market value
“Market Value” is a term that simply means the maximum amount of money that interested buyers are willing to pay for your property. Remember, buyers comparison shop - especially for something as expensive as a home.
REALTORS® know the general factors affecting your market
Maybe larger families are moving into your neighborhood. This trend will make homes with three or more bedrooms and large yards more appealing than two bedroom bungalows. Perhaps a large employer is opening a plant nearby, which will increase demand for housing in general. How are interest rates affecting people’s willingness to take out big mortgages? Do people feel confident about their financial futures? Your REALTOR® knows the answer to these questions and, more importantly, how they affect the price of your home.
REALTORS® then calculate your home’s value within your market
After accounting for general market influences, your REALTOR® will get very specific about your home, and perform what is called a “Comparative Market Analysis” (CMA). Using the extensive background information available only to REALTORS® through the MLS listing service, they will compare your home to a collection of similar homes that have recently been sold in your area. No two homes are the same, but REALTORS® are very good at adjusting their calculations according to the differences. Your REALTOR’S® suggested asking price is thoroughly researched and designed to maximize attention and profit for your home. You can feel confident trusting their opinion.
Yes, first impressions matter
It’s nearly impossible to replace the initial flurry of interest and activity a new listing will generate. REALTORS® in your area will want to see your home right away and tell their buyers all about it. Be sure you’re priced and poised to capitalize on this first wave of excitement.
Step 5: Add a Title Company to Your Team
Similar to when you bought your home, it’s essential to have a Closer with a reputable Title Company handle all the various legal documents that change hands.
You’ve probably already worked with a Title Company
The most logical candidate is the Title Company that handled the transaction when you bought your home. They are already familiar with the property and may have even prepared the purchase documents. If you were satisfied with their work and fees, look no further.
Other ways to find a Title Company
Ask the people you trust like friends, family or business associates if they know a reputable Title Company with substantial real estate experience. REALTORS® can also give you the names of several Closers and Title Companies.
How your Closer will help with the sale
Your Closer will review important documents that require your signature. You will be legally committed to anything you sign, so it’s essential to make sure you’re protected.
Step 6: Prepare Your Home for Sale
Break out the mop and the paintbrush. It’s time to give your home a mini-makeover. Here are all the little things you can do to attract the big offers.
Time to see your home through a buyer’s eyes
Over the years, you’ve grown quite comfortable with your home’s little imperfections; the hole in the screen door, the chipped paint on the baseboards, the mess in the basement. Grab a clipboard, print out a copy of our “Home Preparations Checklist” and take a tour of your home.
Get rid of the clutter
Your house will feel a lot bigger and more inviting when you get rid of all the non-essential stuff lying around your house. Clear out those closets, remove bulky, unused furniture and rearrange the remaining pieces to make the best use of space. Fight your inner-pack rat at every turn. If you haven’t used something in the past year, toss it, donate it to charity or sell it in a yard sale.
Cleaning is the single most cost effective way to make your home more attractive to buyers. Floors, windows, walls, doors, baseboards...everything! Give extra care and attention to the two most important rooms in a buyer’s mind: bathrooms and kitchens. Once it’s clean, keep it clean! You never know what day your ideal buyer will visit.
Repair as much as you can within reason
During your “home tour” identify anything that’s broken, half-finished or simply doesn’t work. Fix all the little things like leaky faucets, doors that squeak or that don’t close properly and small cracks in the ceiling.
Some repairs are absolutely vital, like a leaky roof or basement. Nothing kills a sale faster than signs of water damage. If there’s an unsafe electrical problem you must fix that too, for the good of the sale and the buyer’s safety (not to mention your own).
Depersonalize your home
Remember, you want buyers to walk through your house and feel like it is their home, not yours! People just don’t have good visual imagination. They won’t see past your cluttered wall of family portraits, your collection of childhood trophies or your "eccentric" home decor. These things are guaranteed to prevent buyers from emotionally placing themselves in your home. Remove everything that’s too much about you. Ask your REALTOR® for help deciding.
Never underestimate the power of paint
Strong colors on the walls or wild wallpaper make it hard for buyers to imagine their furniture in your house. Consider repainting your home in neutral colors that will enhance a room’s size and look more inviting. Next to cleaning your home, paint is the most cost-effective way to increase your home’s appeal, and most importantly, attract offers.
Add some beautifying touches
Replacing tattered old curtains with some fresh draperies may make a world of difference. Mirrors on the wall will help rooms feel far bigger. A few new houseplants will add undeniable appeal. Pay special attention to the outside of your home. Trim the trees, weed the garden and consider planting a few new flowers. Your home needs to make a great first impression with some serious “curb appeal.” You don’t need to spend a fortune to make a big difference.
Weighing the cost of improvements vs. the potential return
Don’t get so carried away with prepping your home that you forget why you are doing this - to get more money! You need to consider two things before making any improvements.
1. Will this increase the value of my home more than it costs me to do it?
Painting, minor repairs and modest landscaping work are prime examples of improvements that really pay. There are many home improvement shows that focus on people improving their homes for sale, watching them is a good way to learn. Your REALTOR® is also an expert when it comes to prepping homes.
2. Your hidden problems
As discussed in Step 3, you must disclose any major problems that won’t be obvious to potential buyers. A basement that floods every spring, a shower that backs up when someone flushes the toilet, unsafe wiring...let your REALTOR® know everything and discuss your options. Denying problems now will lead to a much bigger problem later, often in the form of a lawsuit. People love honesty and many buyers are happy to fix a problem if your home’s price is adjusted fairly. Don’t forget the Home Preparation Checklist and good luck!
Step 7: Let Your REALTOR® Market Your Home
You have spruced up your home and it has never looked better. It’s time for your REALTOR® to do their thing.
Your REALTORS® marketing tools:
The “For Sale” Sign
Despite all our leaps in technology, the “For Sale” sign continues to be an extremely effective way to advertise. People responding to the “For Sale” are good leads because they have seen the home with their own eyes and are interested enough to phone in. If somebody is bold enough to knock on your door and ask for a “quick peak,” politely tell them that all showings are being handled by your REALTOR®.
MLS and the power of the Internet
According to the National Associations of REALTORS®, 98% of buyers start their search online. Your REALTOR® will place your home in the Multiple Listing Service, ensuring maximum exposure to all REALTORS® and their buyers. MLS is the most popular Internet research tool for residential real estate and a big reason why many people who search for a home start on the Internet.
REALTORS® really know how to network
Your REALTOR® is part of an extensive community of REALTORS® who collectively represent hundreds of eager buyers. REALTORS® will call their friends, who call their friends, who call their friends. The power of word-of-mouth will really be working for you.
Many buyers want to get a feel for your neighborhood before they start working with a REALTOR®. That’s why Open Houses to the public are so important. They usually last a few hours on a Saturday or Sunday. If you decide to have an Open House, there are a few simple but important rules to follow.
1. Make sure your home looks it’s finest
Your best buyer may just walk in off the street! Use the Home Preparations Checklist to make sure you’re ready.
2. Lock away valuables
Most people are decent, courteous and honest, but it is wise to stash valuables like jewellery, cameras and other small valuables. As added security, your REALTOR® will request a name and phone number from every visitor.
3. Attend to any hazards
Is there an electrical cord somebody could trip on? Is there a chair that will collapse if somebody actually sits in? It is best to attend to minor issues before they become major issues.
4. Avoid cooking foods with strong aroma
Almost nobody likes a home that smells like smoked herring!
5. The best way you can help
Don’t be there. You want people to feel relaxed and to allow themselves to daydream that your home is their home. This just isn’t possible with you there. Go see a movie, or if you have pets, take them to the park.
REALTORS® will want to show your home to individual buyers
Naturally, buyers want to see your place firsthand before making an offer. Welcome to the appointment-only phase of showing your home. Your REALTOR® will act as a go-between and will give you as much notice for these visits as possible. Keep your home in top shape and be somewhere else during these visits.
A “lock box” makes it easier to show your home
An electronic “lock box” is a small, sturdy metal box that is affixed to your front door knob. It is a mini safe with a key to your house inside. REALTORS® utilize the lock box, so they can show your home to interested buyers, and each entry is recorded with the name of the person who opened it, along with the date and time. Be patient with visits. Hopefully, they will lead to a great offer soon!
Step 8: Prepare Your Finances
Before the offers start rolling in, you should prepare for the massive amounts of money that will pass through your hands.
A lot of the money will probably be going to your mortgage
If you own your home free-and-clear, congratulations! For the rest of us, there are a lot of mortgage considerations.
“Discharging” your mortgage
Many people use the proceeds from the sale of their home to pay off their mortgage.
Maybe the buyer is “assuming” your mortgage
Your mortgage may have a feature that allows the new buyer to take over your mortgage. If the interest rate is lower than existing rates, this can be a very enticing selling feature for your home.
Become a mortgage lender yourself?
If your buyer is having trouble arranging all the money to buy your property, you may consider lending directly to them. This is often used by sellers to help move a property in a slower market. This is an incredibly complicated financial dealing and you must talk with your REALTOR® and lawyer before choosing this route.
If you find your new dream home before you sold your old one
Talk to your existing mortgage lender. You may be able to arrange a special financing so that your lender (bank) agrees to lend you the down payment for your new dream home.
Step 9: Receive an Offer
This is an exciting, often emotional time, so be prepared.
Your REALTOR® will walk you through the process. You'll see every offer!
It is required that your REALTOR® show you every offer that was submitted to them.
The Offer - When it comes to the type of offer you receive, it really depends on your buyers individual situation.
Conditional Offer to Purchase: Usually means there are one or more conditions on the purchase, such as “subject to home inspection”, “subject to financing,” etc. The home is not sold unless all the conditions have been met.
Acceptance of Offer: An Offer to Purchase is presented to you, the seller, who may choose to accept it, reject it, or submit a counter-offer. The counter-offer may be in regards to the price, closing date, or any number of other variables. Offers can go back and forth until both parties have arrived at an agreement or either side ends the negotiations.
Three Options when Responding to an Offer.
1. You can accept the offer
You got the price you were hoping for, maybe even more! The closing date looks good and there are no fussy conditions. Sold!
2. You can reject the offer
This offer isn’t even close to what you wanted.
3. You can counter the offer
This offer is close, but something’s not quite right. Now the delicate art of negotiation begins by submitting a counter proposal.
Reasons Why You May Want to Counter
1. You want more money
This is by far the most common reason people counter an offer. Everybody wants to get the most for their home and as the saying goes, “if you don’t ask, you don’t get.” Go for it...but don’t get too greedy and insult someone who has made a fair offer.
2. You want to change the closing date
Maybe your buyer has already sold their previous home and has no place to live. They want to move in soon - sooner than you’d like. Maybe you haven’t even started looking for a new home! In the same way that you can counter a higher dollar amount, you can also counter a closing date. Perhaps the buyer is willing to offer more money to compensate you for the inconvenience of living in a hotel for a few weeks. Welcome to the world of negotiation and compromise.
3. There may be some undesirable conditions on the offer
Conditions are points of contention that must be fulfilled in order for the sale to go through. Here are some common conditions that buyers place on their offers:
- Buyer to obtain financing. If the buyer doesn’t have a mortgage lined up, they will often put in this condition. The sale will only go through if the buyer can get the mortgage they want. For some sellers, this is too big an “if,” but the buyer’s agent will be candid about their odds of approval.
- Approval to assume mortgage. You have a great mortgage rate on the property and the buyer only wants your home if they can also take over your easy payments. Will this potential buyer qualify?
- Sale of purchaser’s home. The buyers haven’t sold their existing home yet and they want to be protected from the expense of owning two properties. Maybe their house will sell quickly. Maybe it won’t sell at all. Maybe you don’t want the sale of your home riding on so many maybes. Time to consult your REALTOR® about the other home and its odds of selling soon.
- Property Inspection. [Linked to Step 10 of Buying] This condition is becoming standard practice. Hopefully, you have followed the suggestion of your REALTOR® and disclosed every detail of your home’s faults so there wouldn't be any surprises. Refusing a home inspection before a sale is highly suspicious to a buyer - and may spoil the deal.
The Art of Counter-Offers and Negotiation
A successful negotiation is one that leaves both you and the buyer feeling satisfied with the outcome. This is a highly emotional time, so be sure to regularly ask yourself, “How important is this particular detail to me? Am I willing to jeopardize a sale over this?” Remember once you counter an offer, you are releasing the buyer from their offer and they are free to walk away. Thankfully, your REALTOR® is an expert and seasoned negotiator and will help you every step of the way.
Happy negotiating and best of luck!
Step 10: Close the Deal
Your negotiations were successful and you have a legally binding agreement. But is the house truly sold? Not quite yet. It’s time for the vital final steps known as “closing.”
Your REALTOR® and Title Company will do most of the work
Thank goodness. Closing a deal involves many, many complicated and time-consuming legal maneuvers. That’s why you have hired the pros.
YOUR CLOSING CHECKLIST
- Your agent will contact your Title Company and notify them that an Agreement has been signed.
- Immediately begin satisfying any conditions of the agreement that require action on your part. They have definitive dates for completion and failure to do so can result in losing the deal.
- Notify your lawyer, Title Company, and lending institution if the buyer is assuming your mortgage.
- Contact the utilities, telephone and cable companies about transfer or removal of service.
- Call your insurance agent and arrange cancellation or transfer of your homeowner’s insurance.
- Contact a moving company to arrange your move on or prior to the closing date.
- Send out your change of address notices and advise the post office.
- Notify your REALTOR® immediately if anything changes about your property or your situation.
Contact With the Title Company
If you plan to pay off your mortgage with proceeds of the sale, your Closer will obtain a statement from your lender showing your outstanding balance on the mortgage.
A few days before closing, your Closer will ask you to sign the paperwork that enables the title to be transferred to the buyer.
On closing day, the Closer will receive and distribute the proceeds from the sale, pay off your mortgage and other costs, and give you a check for the net proceeds.
You should be pleased that all your hard work paid off. I hope these ten steps helped make it easier. You have probably already used the proceeds from your sale to purchase your next property. A very wise move because as you know, home ownership is one of the best long-term investments you’ll ever make.