An Overview of Home Selling

It may be the first time, or you may be old hat. Either way, selling your home can be a daunting task. Where do you begin? How do you choose a Realtor (Seller’s Agent)? How do you sell in a highly competitive market? And how do you get top dollar for what is probably your single most important investment?

Below, we’ll give you the big picture of what’s in store, the details on your options, the lowdown on terminology you need to know, and the highlights on how to manage through lulls and special circumstances. We’ll help you figure out how to capitalize on the best methods for selling, where to exercise caution, and how to recognize when it’s time to try a different approach.

Step 1: Select a Seller’s Agent

The majority of home sellers take on the task with an ally: a Seller’s Agent. They feel that it is better to entrust the sale of their biggest investment to a professional, rather than attempting to learn about selling a house in a trial and error method. In addition, many people would rather use an Agent due to the complexities of modern Real Estate transactions since they usually incorporate legal and financial attributes, which takes them well beyond more simple transactions, such as the sale of an automobile.

Some of the other advantages of working with Agents that home sellers will list include: access to the Multiple Listing Service (MLS) so that large numbers of buyers will have access to the seller's property, the fact that the Agent absorbs all of the cost of advertising and marketing, and the screening that will be done of potential buyers by Agents. In addition, the Agent handles the lion's share of the details of negotiation.

Deciding whether to use an Agent or not has a great deal to do with what you feel the level of your capabilities are. If you feel fully confident that you can handle all of the details, then you may well want to attempt selling your house on your own. If not, you most likely will want to use an Agent and leave the details to them.

Step 2: Setting the Price

Along with location and condition, the pricing of a house is a major component of the reasons why a house will--or will not--sell quickly. Although the pricing should not be dealt with lightly, some sellers have a tendency to put too much emphasis on the price and not enough on the condition, ending up with a house that is overpriced for its current condition and the overall market. Even if you find an unaware buyer that appears willing to pay the high price, when the buyer applies for a mortgage, the chances are good that the lender's appraisal will force the price back down to market value.

Care and time should be taken when establishing the original listing price for several reasons:

1) If the house is overpriced, it won't sell. If it doesn't sell and sits on the market the listing quickly becomes stale.
2) If you overprice the house with the intention of reducing the price later just to "see what the market will bear", when the price of the house is lowered, it signals to buyers that it was (and still may be) overpriced.
3) If the house is under priced, it most likely will sell quickly--to the detriment of your net proceeds.

Some factors that affect the price of a home:

1) Location: You can't get away from this one. If your house is located in a desirable area that is in demand, you will be able to get a higher price than you can for the same house in a less desirable area.
2) Condition: A house that has been better maintained and shows better will always sell for more than one that has had deferred (neglected) maintenance and needs work.
3) Desirable amenities: If a house has amenities that are currently popular in the marketplace, it will bring a higher price.

Methods of setting the price:

1) CMA (Comparable Market Analysis): A comparison of similar properties in the same general area that compares actual sold prices. You Legacy Agent can generate a CMA for you.

2) Use the Internet (www.MLS.com, www.realtor.com, and many other sites). Look at comparable homes (bedrooms, bathrooms, hardwood floors, size of lot, building material, age, etc.). See what their listing prices are. Look at the pictures. How does your home compare?

3) Also, hire an appraiser. For a few hundred dollars, you’ll get an independent viewpoint of your home’s value. Factor that information in with what your own Internet research, neighborhood sales, or agents have told you. And set the price.

A note on the Psychology of Price:
Most buyers search for homes by looking on the Internet. They search by ranges. For example, $200,000 to $250,000. This is the reason you see prices set at $249,500 or $249,000.

Step 3: Preparing Your Home

There as many opinions/checklists on how to prepare your house for viewings as there are houses for sale.  However, the importance of this step cannot be understated.  Your Legacy Selling Agent will help you with specific suggestions for your home, but here's a checklist to get you started:

1. Stand across the street, and view your home as someone would, for the first time.

2. Hire an Inspector to check for termites, structural damage, hazardous materials etc.  The buyer will do this, so it is best to prepared.

3. Fix the small, noticeable impediments to a good first impression – bent gutters, broken screen door, missing shutter, and so on.

4. Get rid of clutter and kid toys in the front yard and driveway.

5. Brighten peeling paint on trim and front door.

6. Make sure the door bell works.

7. Make sure lawn and landscaping are tended.

8. Put out flowerpots or freshen flowerboxes.

9. Check light bulbs on the exterior as well as the interior.

10. Pay particular attention to any pet odors or smells from exotic cooking.

11. Store furnishings that are crowding rooms.

12. Organize, throw out, clear out, donate, box up – you need to create space.

13. Clean attics, basements, closets, under the sinks, kitchen drawers, bathroom medicine cabinets – buyers will be looking here.

14. Bring pleasant air into the home: open windows, try scented candles — but don’t overdo it. Baking cookies may create a good aroma.

15. Set out a bowl or two of candy or other bites. Agents and buyers both get weary; a jolt of sugar may keep them in your house a little longer.

Step 4: Marketing Your Home

Whether you are selling your home on your own or with a Legacy Selling Agent, you will want to be involved in the advertising and marketing of it. Self sellers need to be especially well versed on this subject, since they will be competing with hundreds (or thousands) of ads and the marketing efforts of local Agents. If you are selling with a Legacy Selling Agent, you will need to share with them what you feel to be the most important selling features of your house (who knows them better than you?) and you will want to monitor and give feedback about the Agent's marketing activity. The following are some examples of advertising and marketing.

Online listing, preferably MLS
Purpose: Provides all the key details on your home necessary for agents and buyers both.
Effectiveness: Another must have - the single most important place to market! Make your photos and description as compelling as possiblefor maximum effectiveness.

For Sale Signs
Purpose: Signal potential buyers they’re in the right place. Provide contact information.
Effectiveness: A must have. Be sure the sign is clearly visible.

Brochure Box with Flyers
Purpose: Provide appealing and essential information at a glance.
Effectiveness: Well-executed flyers position your home in appealing light to attract more qualified buyers. Helps minimize wasted time on phone; reduces showings to unqualified buyers. Keep the box stocked.

Public Open Houses
Purpose: Organized showing to the public, typically 2 – 3 hours, Sunday afternoon; Put up a sign & balloons, clean the house, and smile!
Effectiveness: Typically most effective early (when house is new to the market). Brings people in – both qualified and unqualified. If showing your house on your own, have enough help to keep eyes open. Get sign-ins, contact numbers.  

Word of mouth, Neighborhood Announcements
Purpose: Telling co-workers, friends; Delivering postcards or flyers in the local area.
Effectiveness: Good option whether using agent or selling on your own. Easy to do.

Agent Previews
Purpose: Allows agent to view house before his client does; May save time; eliminate showing to people who won’t be interested.
Effectiveness: If an agent wants to do this, go for it. It's standard practice for some buyer’s agents. Agents are closely tuned to needs not only of one client, but many. If your house isn’t appropriate for one agent's buyer, it might be for another.

Agent Open House
Purpose: Allows large group of agents to see your home quickly.
Effectiveness: Same as above.

“Caravan”
Purpose: Regularly scheduled tour for agents of multiple new listings on the market.
Effectiveness: Effectiveness may vary, based on how many homes agents are seeing in a short span of time; Regardless, it is important to be included if at all possible; Be the house with food! Agents will linger, and spend more time actually looking.

Agent Financial Incentives
Purpose: Special bonus amounts for buyer’s agent, typically tied to successful contract in specified time period.
Effectiveness: Money works. Special bonuses tied to target contract dates will further motivate buyers’ agents to show your home. Discuss this with your agent – might want to wait 3 or 4 months.

Agent-to-Agent Advertising
Purpose: Email, print, and other notifications from your agent to other agents.
Effectiveness: Keeps your house in other agents’ current “view".

Print ads
Purpose: Newspaper or specialty real estate publications.
Effectiveness: Often “the norm” for realtors, to keep the agent’s name in view; Considered necessary, though brings in fewer showings than online listings or other methods.

Step 5: Managing Offers

All the decisions have been made. The house has been prepared like a model. Advertising and marketing has begun. The listing is in the MLS and the showings are in full swing. Now it is time for the reason that all the work has been done: an offer.

An offer in Real Estate is a bit different than it is in many businesses. If a buyer asks a shopkeeper "could I buy this for $10?" and the shopkeeper accepts the offer, the buyer can still change their mind and walk away. Not so when you are dealing in Real Estate. When a buyer makes an offer, it is in the form of a legal contract. If you, as the seller, accept the offer, the house is sold. If you counter-offer, negotiations may continue. It is important to understand that all of the offer and counter-offer activity that you will engage in is framed legally.

This is why it is so important that a seller never gets involved in oral offers and negotiation. If you have a house listed at $175,000 and the buyer asks "would you sell the house for $165,000?" almost any response you make--short of "put it in writing"--can cause problems. If you verbally accept the offer, not only does the buyer have no obligation to actually buy the house, many will say to themselves, "gee, that was easy....I wonder if $150,000 would work?" This is why an Agent will never deal in verbal offers.

Some important points regarding purchase offers
1) If you intend to accept an offer (or make a counter-offer), do it as soon as possible. At any time prior to your acceptance or counter-offer, a buyer can withdraw their offer.

EXAMPLE: Seller Jones receives an offer from Buyer Brown. The acceptance date on the contract is the next day at 6:00 PM. Seller Jones knows that he is going to counter-offer at a price just a bit over Buyer Brown's offer. At noon the next day, Buyer Brown, in a cold sweat, withdraws the offer. Seller Jones is out of luck.

2) Any changes made on the contract require written approval of all parties for the contract to be enforceable. Even seemingly minor changes open the door for either the seller or buyer to change their mind.

EXAMPLE: Seller Smith receives an offer on his house. He accepts all of the conditions of the offer (selling price, financing agreements, etc.) except for one. He changes the occupancy date from July 31st at 12:00 noon to July 31st at 6:00 PM, wanting to give himself a bit more time for moving. If the buyers agree (in writing), there is no problem and the contract is valid. If the buyers change their mind about buying the house, however, the contract is not enforceable. There has been a change (the occupancy time) that has been approved by only one party to the contract.

What about low offers?
No matter how well you have prepared your house and how certain you are that it is priced at fair market value, there is always the possibility of receiving a low offer. It could be simply a shot in the dark, or it could be due to a limit in the buyer's mortgage qualification ability. No matter what the case is, though, the most important thing to remember is do not take it personally. Many home negotiations, if they had just been allowed to run their course, very well may have come together acceptably for all concerned if the negotiations hadn't fallen into a "grudge match". Yes, it is your home, and yes, you have put a great deal of love and effort into it, but taking a low offer as a personal affront solves no purpose. Reject the offer or counter-offer it and move on.

If you do get a low offer, it is far more important to try to get as much information as you can relative to the offer. Why was it at the price that it was? What was the motivation of the offer?  There still may be information that will be revealed to you, which will help you as you structure a counter-offer.

Step 6: Inspections and Repairs

Inspections
If you listened to your Agent, you had an inspection when you put your house on the market. You have to have another after before closing is complete, but there shouldn’t be any surprises.

Your buyer will hire an inspector to check your home for termites and other pests, for potential hazardous substances, and for proper and safe working of heating and air, water, and other systems. Structural components including foundations, walls, chimneys, patios, and decks will also be checked. Inspectors will know about local building code, and note things that are out of compliance.

As the homeowner, you will be asked to make repairs. Before final acceptance of the agreement, you can negotiate what you are willing to repair or change.

A Vital Note on Inspectors
All inspectors are not created equal. A bad or inexperienced inspector can cost you a sale.  Ask your Agent to get the name of the inspectors under consideration, and to verify membership in ASHI (the American Society of Home Inspectors) and reputation for impartiality before your home inspection takes place.  You don’t want your buyer inadvertently hiring a “deal killer.” This really does happen. And an Agent who hasn’t experienced it yet (and that may be your buyer’s agent) won’t watch out for it.

Don’t Want to Make Any Repairs - Selling "As Is"
Selling a property “as is” means you aren’t going to fix things regardless of inspection results.

The assumption will be that there is more wrong than meets the eye – and worries about foundations and other structural defects will plague the potential buyer. Only the most rundown homes are sold “as is,” or abandoned houses in less desirable areas. That may appeal to those who “flip” houses or other bargain hunters, but you certainly won’t get the best price you can.

If you simply don’t want to bother or can’t afford to spend the $500 to a few thousand dollars making repairs or giving your house some facelift elements, discuss this with your Legacy Selling Agent. If you can afford to make these repairs, focus first on anything that can be seen. Not only will buyers worry about what they see, but regardless of what they’re willing to risk, mortgage lenders may not give them the money to make the purchase if an inspection comes back showing significant defects.

And remember - that doesn’t mean you should fix what they see and then neglect on the disclosure statement any defects you are aware of. You’re asking for a boatload of legal trouble if you risk that one.

Repairs
Often you will have a list of repairs to make before closing. You have a week, or two weeks, or maybe a bit longer to get it all done. Here are a few things to remember:

1. Your Legacy Selling Agent will have a list of people who can help make repairs if you don’t.
2. Keep the receipts and paperwork that proves you made the repairs; bring these documents to the closing.
3. Make sure it all gets done.
4. If you’re buying another home simultaneously, you have a lot going on – timing the buying activities on that house, and coordinating your upcoming move.
5. If the timing of your move into a new home doesn’t coincide with vacating this house, coordinate storage and interim housing.
6. Ask for help. Make lists. You will have a lot going on.

Step 7: Closing and Settlement

Almost Done! Closing is the final official step in the transaction process. It consists of a meeting with you - the seller, the buyer(s) or a buyer’s representative, and usually a real estate attorney or other closing agent. The mortgage lender may also be present, along with others.

Real estate companies often facilitate filing the appropriate paperwork to the various agencies – all part of the fees you pay at closing. For many sellers, understanding the closing is the most confusing piece of the process. It involves:

1. Structuring and paying a variety of costs, called “closing costs”
2. Paperwork to comply with federal, state, and local laws, including disclosures, tax reporting, and other filings.  

A qualified real estate attorney can explain or facilitate the paperwork, and before the actual “closing,” your Agent will help you with an estimate of your closing costs. These are specified on what’s called a Settlement Statement, or HUD-1, at the actual closing meeting.

What are the Closing Costs?
You can expect some or all of the following types of fees:

Broker or agent’s commission: The commission you agreed to pay upon sale of your home. This amount is typically split between the seller’s agent and the buyer’s agent.

Attorney fee: typically a flat fee which may range from $300 to $600, depending upon the attorney, your location, the market you are in, and so on. Some attorneys will charge a higher flat fee to a seller who is without a broker.

Title Insurance: Sellers are often required by contract to pay for title insurance. This insurance is usually based upon the value of the sale. Title insurance guarantees the buyer that the property is owned, free and clear, by the seller, and protects the buyer in the case of any liens or other problems with clear title to the property. The few hundred dollars for title insurance is something that is typically recommended.

Survey: A seller is usually required to provide a property survey to the buyer. The survey shows the exact boundaries of the property.

Real estate taxes, and other tax credits: Since property taxes are paid in arrears, the new buyer of your home will receive the property tax bill for a period of time when they were not in possession of the property. As a result, sellers typically give a credit which is prorated towards the amount of real estate tax owed. Calculation of these credits is an estimate, and may also include other related municipal taxes that are typically held in escrow by the mortgage company – for sewage or other services.

Payoff of Loan: As the seller, you will need a payoff letter with the exact amount of the outstanding balance on your (mortgage) loan. This payoff amount will include principal plus interest that is outstanding as of the date of sale. Proceeds from sale of the house will be used to pay off the outstanding loan.

Other fees: Other amounts you may have agreed to pay at closing will also be included. These may include amounts for filing paperwork, messenger services, and so on.

Tax deductibility: Talk to your financial advisors about how you structure closing costs versus sale price, cost of repairs, and so on. Certain closing costs are tax deductible. Take advantage of the opportunity to deduct what you can.

Net proceeds from the sale: Here’s what’s left – these are the monies that remain for you to invest, to purchase your next home, or for some other purpose.

Answers to Frequently Asked Questions

What is title insurance?
Title insurance protects the named insured against loss because of defects, liens, encumbrances, adverse claims or other matters not shown or disclosed to the new owner that attach before date of policy.

What is a wood-destroying organism inspection report?
A wood-destroying organism inspection report is a written opinion by a qualified state licensed structural pest control inspector based upon what was visible and evident at the time of inspection. The inspection report does not in any way represent or guarantee the structure to be free from wood-destroying organisms or their damage, nor does it represent or guarantee that the total damage or infestation is limited to that disclosed in the report. Wood-destroying organisms include subterranean termites, dampwood termites, carpenter ants, wood boring beetles and wood decay fungus.

What are the hazards of lead-based paint?
All buyers and sellers are required by law to receive and read a pamphlet outlining the hazards of lead-based paint for homes built before 1978. Be sure to ask your real estate agent for a copy.

What are closing costs?
Closing costs are an accumulation of charges paid to different entities associated with the buying and selling of real estate. For sellers, they are usually about 9.5-10% of the total sales price of a property. Some of the closing costs you might encounter are: discount points, escrow fee, documentation fee, homeowners' association fees, pest/rot inspection, real estate commission and title insurance premium.

What is the difference between "pre-qualified" and "pre-approved"?
If a buyer is "pre-qualified" it has been determined, with a loan officer, what price the buyer can afford based on the down payment, debts and the amount the mortgage company will approve for the mortgage. Being "pre-qualified" is only a determination of probable credit. If "pre-approved", credit, employment and funds have been approved by the lender.

What should a home inspection include?
Every inspection should include, but not be limited to, an evaluation of the following:
1. Foundations
2. Roof
3. Heating and air conditioning systems
4. Ventilation
5. Common areas (for condominiums)
6. Septic tanks, wells or sewer lines*
7. Insulation
8. Plumbing and electrical systems
9. Ceiling, walls and floors
10. Doors
11. Hazardous materials concerns*
* There may be an additional fee for this.

What property details are usually included by Listing Services?
Usually, properties listed will include the following details:
•        Location
•        Photograph
•        Price
•        Utilities
•        Amenities
•        Annual property tax
•        Current financing (when assumable)
•        Listing company

What pages are generally included in the Purchase and Sales Agreement?
•        Agency Disclosure
•        Financing Addendum/Clause
•        Earnest Money Receipt
•        Inspection/Clause
•        Conditions/Disclosures Addendum
•        Contingency
•        Addendum Outlining Special Conditions
•        Lead-Base Paint Notification
•        Property Disclosure Form (completed by Sellers)

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.