Article 5 - Selling Your Existing Home

Whatever, your personal reasons are for selling your home, you’ll need to make wise decisions about the preparation process, realtor choice, listing agreement and buyer demands. 

There are various reasons why owners decide to sell their home:

• They may have out-grown their existing home
• They may want a smaller home
• They may want a newer, more up-dated home
• They may have a job transfer, or wish to take a job out of the area
• They may have originally purchased their home with the intention of remodeling and selling it to move-up; with the remodeling done, they are now ready to move up. 

Timing:

While there are a host of great reasons for selling, the timing is rarely perfect.  Regardless of timing, ask yourself these questions:

Should the housing market have any bearing on your decisions?  It is always nice to sell in and “up market” when you stand a better chance of getting your price, fewer conditions as part of the purchase and a fairly quick closing.  However, if your home is well positioned in the market, looks sharp and well priced – you should do well.

What if you decide to list and sell during a slower time of the year?  You may need to allocate more money for incentives and more time for your home to sell.  There are certain times of the year for every region that are traditionally slower than others.  One of the very best times to put your home on the market is during December and January when there are fewer homes available.  Starting late January and on into the spring, you will notice a flood of homes coming into the market.  Traditionally, December and January can be strong markets simply due to a lack of supply.

Planning:

It’s important to determine the milestone dates that include completion of any improvements, selection of a realtor, date your home goes on the market and estimated date for closing.  Once you have these dates figured out, you can develop your plan. 

Figure out how long any home improvements will take to complete.  Allow adequate time to secure your realtor and for the realtor to get the listing, disclosures and marketing prepared.  Determine the timing for putting the home on the market.  Check to see how long it is taking on average for homes in your neighborhood to sell.  Plan a minimum of 60 to 90 days for your home to sell and another 30 to 45-days for it to close escrow.  

Home Improvements:

Getting your home ready to sell is the first step in the process.  What you expect to ask for the sales price, can determined how many improvements are necessary.  You need to have a clean, sharp looking home, including the landscaping, to get your asking price.  Prior to hiring a realtor, visit all of the open houses in your neighborhood as they come on the market and note what improvements your neighbors have done to their homes.  Some improvements are considered “cosmetic improvements” (i.e. new paint, fresh flowers, new carpet, etc.).  Some improvements are considered “major improvements”, such as a new roof, new fence, new landscaping, new driveway, remodeled kitchen and baths.

Ask yourself, how does your home compare to other homes in your neighborhood?  Keep an eye on how long it takes to sell a home with cosmetic improvements versus a  home with major improvements and did the seller get their asking price? 

Keep a list of your observations.  If a home with a new paint job and new carpet sells as quickly as the house with major improvements, you may not need to install that new roof or new driveway like you thought.  Don’t be talked into making major improvements if you aren’t going to get your money back out of them.  Do your home work and figure out which improvements are necessary to get your asking price. 

Finding the Right Realtor:

Finding the right realtor is equally as important to preparing your house for market.  Interview the top realtors in your area (the realtors who sold the most homes in a year).  A reputable and knowledgeable realtor will be able to give you professional advice that you can rely upon.  Make certain the realtor knows your neighborhood!  If they don’t know your neighborhood, they will not be able to give you good advice about what it will take to sell your home, such as necessary home improvements, marketing, incentives and general negotiation guidelines. 

• Expect a marketing plan, comparables and a listing proposal from the realtors that bid for your listing. This service is free and part of landing the listing agreement.  The marketing plan will show how often the realtor plans to conduct open houses, the advertising plan, staging plan and budget, etc.
• Make sure your house is listed on the Multiple Listing Service (MLS) for maximum exposure to the market.
• Make sure the commission paid to the Selling Broker is at least 3%.  This is not an area to skimp.  Agents will show your house last if the commission is lower than other listings.
• Ask for comparables in the neighborhood so you can compare the asking price the realtor is recommending. The comparables will show the number of days homes were listed before closed and the percentage of the asking price the home sold for.
• Find out how often the realtor will hold open houses and make sure the realtor or an experienced associate realtor will be present at all open houses.
• Discuss the realtor’s philosophy in selling your home.  Are they going to sell the value or the incentives?  By visiting other open houses held by the realtor and acting as a buyer, you will be able to see first hand the sales approach the realtors use when selling.  A good realtor will tour potential buyers through the home in a planned and professional manner and are able to be personable with prospects.
• Make sure the realtor has all of the property disclosures available in a neat binder at all open houses. 
• It is highly recommended that you pack away and store all valuables during the open house stage.  In addition, all important medicines should be secured. 

Pricing Your Home:

Pricing is the most important part of your marketing plan.  Pricing your home too far over the current market for comparable properties is a mistake.  It may get a lot of attention in the beginning, but most potential buyers will be advised by their realtor that the home is too high and will advise clients to wait for the price to come down.  This attaches a stigma to your home that it is “over priced”.  If your home is unique and deserves a higher price, it is understandable and buyers will be able to see the difference. 

By contrast, listing the home at or below the direct comparables can cause a frenzy of activity, encourage competing offers and ultimately could get you close to your desired sales price – or more!  Nothing is guaranteed, but watching how your neighbors price their homes will help you figure out the best approach.  Don’t simply rely upon the realtor’s opinion – ask your neighbors what worked for them and ask their advice. 

Contracting and Negotiating:

Try to create a sales approach that encourages multiple offers. For example:  Show the property for a week before allowing offers to be submitted.  Let buyers know the best offer will be considered and possibly accepted.  You don’t have to accept any of the offers if they don’t meet with your approval.  Having multiple offers gives you choices, and you can select the most favorable terms and/or price.

There are trade-offs while negotiating the price, incentives and the closing time frame.  The more a buyer is asking for in the way of concessions, the shorter the time frame should be for closing.  If the buyer wants a lower price or incentives, they need to be loan approved and willing to close within 30-days.   

Your realtor will help with negotiations on your behalf, but ultimately the decision is up to you.  Ask to see all offers – including verbal offers!  Remember you are the seller and the boss.  If you don’t like how the negotiations are going, or if you believe the realtor is not representing your interests as intended, be direct and let them know.  If necessary, you can speak directly to the realtor’s managing broker.

Contract Technicalities:

• Finance Contingency: All purchase and sales agreements come with a finance contingency period, typically 20-days.  The buyer must remove their finance contingency by the date in the contract. If the buyer cannot get the loan by the date in the contract, they can cancel and will get their deposits returned.  If they cancel after the finance contingency is removed, you may retain their deposits.
• Contingent sale:  When a buyer has a house to sell or a house in escrow, they will make an offer subject to the sale and closing of their existing home.  Be sure to have a firm date when the contingency must be removed. Also, provide a provision in the contingency addendum that in the event you receive a non-contingent offer, you will give them 72-hours to remove their contingency and close escrow; if they cannot remove the contingency, make sure you have the right to cancel the contract.  Take back up offers!
• Accepting conditions:  Make sure you are comfortable with all conditions the buyer is requesting, including time to complete additional improvements and/or inspections. It is advised to always take back-up offers in the event your buyer or the buyer’s lender does not accept certain conditions of the sale. 
• Try to make sure all improvements are complete before the close of escrow; if not, you have additional liability of damage on the new owner’s property.
• Homebuyer Warranty:  For a few hundred dollars, it is a good idea to purchase a homebuyer warranty for the home.  This gives you and the buyer peace of mind and will help prevent calls from the new home owner when the air conditioning goes out one week after moving in.

Schedule a walk-though with the new homeowners.  Show them where everything is including breaker boxes, gas and water shut valves, sprinkler systems, how the HVAC system operates, etc.  Handing the home off in this way insures a better start for the new homeowner.  Fewer frustrations for them - and you - will provide less of an opportunity for complaints that could escalate later.