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Step 2: Your House Is Your Business - The simple fact is that you need to think about selling your home as a business. You have to concentrate on getting as much as you can out of it so you’ll have the best chance to successfully move on with the rest of your life. Towards this end I won’t be referring to your ‘home’ anymore in this guide, from now on it’s your ‘house’ or ‘property.’ Try to forget about the kid’s growth marks on the walls and the sycamore tree you planted out front that’s now the tallest one on the block. You’ll need to take your personal feelings out of the equation and remember what it is that you’re selling… the buyer’s new ‘home.’
The are several different types of sales which you may be entering into for different reasons. Some types of sales may take longer to complete than others because of extra requirements and the approval of third parties.
Selling your home is is one of the most important things that you’ll ever do. Aside from being emotionally and economically invested in the process, your choices and decisions can have many significant and far-reaching effects... some unforeseen. You have to approach the sale of your home with a critical eye and be fully aware of all the legal, financial, and practical issues involved in the process.
Step 1: Should I Sell My Home? Do the Math - The decision to sell your home is more than just a practical issue or preference, its a serious commitment involving virtually every aspect of your well-being from your legal liabilities and bottom line to your dreams for the future. It’s crucial that you talk with your accountants, lawyers, and other professional advisors so you have a clear understanding of why selling your home is the right choice for you to make. Remember… the numbers never lie. You can save a lot of time and trouble by knowing the options that are best for you in advance.
Step 3: Go with a Pro & Use a Real Estate Agent - You can always try to sell your house on your own, but the reality is that there are multiple issues involved with selling a house that you probably aren’t ready to deal with. Most people also give into the temptation to price their properties too optimistically so they tend to sit on the market for a very long time. A lot of buyers have agents when they start getting serious and FSBO’s (for Sale by Owner) can be overlooked if they’re not properly listed on the MLS or even be bypassed altogether because agents are often reluctant to spend their client’s or their own time on high-priced seller’s who frequently aren’t prepared to make a deal or close.
Shop around for a real estate agent that you feel comfortable with who will:
When you’re selecting a real estate agent to work with some will tell you it’s okay to try listing your house at a high price because you can always change it later. This practice is very attractive to seller’s because it caters to what they want instead of what they know and it’s called ‘buying the listing.’, You should strongly consider the benefits of working with an agent who’s willing to tell you the facts even when it’s not what you want to hear. Being realistic about all aspects of your sale is the best way to ensure that you’ll avoid complications and get all that you can out of it as quickly as possible.
Step 4: Pricing Your House to Sell - The goal of pricing your house correctly is to get the greatest return it can give you in the shortest period of time. If you price your property at around market value or a little over to leave a pad for negotiating it will probably sell as quickly as the market will bear if there aren’t other issues.
Over-pricing is one of the worst things that you can do. Many buyers who may have taken a serious interest in your house don’t even look at it because they’re put off by the price. Others will take your time to look, but won’t make an offer on your property because they’ll figure (maybe correctly) that you’re not really willing to deal. When you first list your house for sale it’s ‘fresh’ for a while and everyone actively looking to buy in your area is aware of it. After this your listing becomes progressively more ‘stale’ and you end up ‘chasing the market.’ Many agents and buyers will stop paying attention to your house regardless of price changes that you make later on and new buyers coming on the market may be suspect of properties that haven’t been able to sell. If you price your property too high it can probably still be sold later for less, but it will cost you more than just time.
Finally, when you under-price your house it may end up attracting a lot of attention and start a bidding war between competing buyers which can end up with sellers getting more than they might have. A growing number of short sellers and lenders with REOs gamble on this kind of approach when they drastically down-price their listings. Unfortunately, this practice also gives buyers a false sense of values since they never find out what these properties actually end up selling for.
The simple truth is that no amount is fixed in stone until everybody signs on the dotted line and your house will probably sell for pretty close to it’s actual worth is no matter how you price it because the money never lies. Nobody’s giving it away… buyers or sellers.
Step 5: Preparing Your House for Sale: Once you’ve prepared yourself for sale… it’s time to prepare the house.
Sometimes the sale of your house can be complicated, stalled, or even made nearly impossible by existing legal issues or other disclosures that have to be made about your property. These can include boundary disputes with neighbors, liens, law suits, and judgements against the property, problems with title, actual defects of the house or lot, and other serious issues. Get legal and other professional help to address these problems first if you haven’t already so you don’t waste time, energy, and money fixing and marketing your house prematurely.
Step 6: Listing for Sale & Commissions - The listing agreement with your agent to sell your house will often be a standard form issued by California Association of Realtors. It will acknowledge that your agent represents you and set forth the agreed to terms and time frames for them to show and sell your property. Any point is negotiable including commissions which are most often split evenly between your agent (the listing agent) and the selling agent who brings in the buyer. A dual agency exists when your agent to represents both you and the buyer. This is allowed in California, but all parties must agree to this kind of agency in writing and sign an acknowledgement that they understand there’s a potential conflict of interest for the agent.
Step 7: Showing Your House - After you’ve listed your property for sale and gotten it ready to show you’ll need to keep it that way. You’d also be amazed at how much difference a fire in the fireplace, a bubbling hot tub, or the smell of cooking cider can make in the way your house shows. You’ll need to let your agent to put out a ‘for sale’ sign and make time for them to schedule showings and hold regular open houses. The easy availability of online listings has a lot more buyers out pounding the pavement looking for their new homes on the weekends and appointments to show specific buyers your property can come in at any time.
It’s best if you can make yourself scarce when potential buyers are around because you rarely if ever gain anything by personally engaging them. No matter how friendly you are, personalities are as likely to clash as not and you only risk derailing what might be an otherwise good offer.
Step 9: Contracts, Contingencies & Things Change - You need to be completely aware of all the of all the terms and conditions that have to be satisfied on the final purchase agreement you sign with the buyer. Like the listing agreement the purchase contracts used by most real estate agents are standardized forms issued by the California Association of Realtors, but any point can be negotiated and amended and any property purchase will have many other legal, tax, and financial implications and consequences. Always talk with your lawyers, accountants, and other professional advisors about any aspects of the transaction that you still don’t understand or want to clarify before you sign because your agent isn’t qualified to comment on many issues that may be involved.
If you’re doing a standard sale everyone’s responsibilities will usually start as soon as escrow opens and before you know it you’re closing the deal. If you’re doing a short-sale, probate, or other kind of trustee sale you and the buyers may have to wait a few months for bank or court approval before you have to do much of anything. The different kinds of sales and the effect that they have on the time it takes to close are discussed in our Quick Seller’s Guide to Standard, Short , & Trustee Sales.
Though all of the terms and conditions of the purchase agreement that you’ve signed have to be met in order for the deal to close… not all deals close.
Step 8: Negotiating the Deal… Don’t Take It Personally - Let the games begin…. an offer to buy your house is usually just the first round of a process that can take several days or more. You may accept the first offer if the buyers agree to pay twice the asking price and put your kid through college, but you’ll usually have modifications to make to the offer so you can get what you need out of the deal and you’ll send them a counter-offer. If you’ve received several offers you’ll typically send out multiple counter offers giving everyone another chance to respond. Counter offers can go back and forth several times. The point is that it’s only a negotiation until you sign on the dotted line and it’s an important part of the process so try not to take it personally. A lot of necessary details get worked out in advance that are of specific interest to you or the buyers or which may not have been properly addressed in the original offer. If you can’t come to terms then it may really for the best and you can feel good about walking away from the deal.
You’ll be sending the buyers a lot of materials and disclosures regarding known issues and defects affecting your property once things get going. The buyers will typically have the right to perform any reasonable physical or other inspections and investigations of the property that they choose as well. Any problems revealed during this discovery period will have to be resolved or renegotiated or the the buyers may be allowed to cancel the entire agreement without penalty. In short, ‘it ain’t over ‘till it’s over’ and any number of things can derail an agreement for better or worse.
The buyers will also usually have the option to ensure that their financing will receive final approval and that the property will appraise for at least its purchase price. Again, if there’s a problem in either regard they’ll probably have the right to renegotiate or cancel within the time frames stated on your contract.
Once all the buyer’s contingencies that have been released and signed off on they’re all the way in. Any failure to satisfy the remaining terms of the purchase agreement could result in a breech of contract, the loss of their deposit, and you may be in a position to pursue other legal remedies. Though problems do arise with escows, most sellers want to see the sale completed and they’ll work with buyers to resolve issues that come up. However, you may not be under any obligation to do so.
Step 10: Closing the Deal or Show Me the Money - This is the easiest part of the deal if everyone has done their jobs correctly (and maybe the hardest for you.) As soon as the buyers sign the closing papers and the balance their out of pocket closing costs and loan money are delivered to you, the sale is recorded with the county and your agent gives the keys to your house’s new owner’s. It’s done… time to move on.
Trusteeships (includes Probate, Conservatorships, etc.) - There are many different kinds of sales by trustees who are legally entitled to handle a sale for a wide variety of reasons. Two of the more common sales by trustees are probate sales when the owner has died or a sale by a conservatorship when they’re incapacitated, but in every case the actual owner is unable, unwilling, or just chooses not to deal directly with the sale.
The approval of third parties such as the courts, arbitrators, or other parties may be required in sales by trustees. You may be able to close quickly or there may be substantial waiting periods involved depending on the requirements of the purchase agreement. If there’s a delay then the obligation to perform some or all of your duties under the contract may once again be suspended until the approval of all the concerned parties has been received… usually in writing. Once received, the clock starts ticking again on the time frames stated in the agreement.
REOs (Lender Owned Properties) - The owner selling the property in this case is the foreclosing lender or other corporate entity.
Standard Sales - You’re selling the property directly to the buyer as the owner. The time frames to close the deal that are stated in the purchase agreement generally start the moment the papers are signed by all parties.
Short Sales - If you’re haven’t paid your mortgage for a while and are in pre-foreclosure you’ll hopefully be given the opportunity to sell your house at a loss by your lenders. You’ll have to contact the bank and undergo an application process requiring a lot of documentation (i.e. tax returns, bank records, pay stubs, and profit & loss statements,) but you usually can still list your house as a short sale and take offers while you’re waiting. You may even still be able to get a short sale approved and completed if you’ve already received notice and are in foreclosure.
In a short sale you’re still selling the property directly to the buyer as the owner, but there’s generally a waiting period of around 1 to 3 months between the time that the contract is signed and ‘accepted’ by you and the buyer and the time that it’s ‘approved’ by all of the lenders who are agreeing to take less money than they’re owed (usually releasing you from further liability for the debt.) All the time frames for you to perform your duties under the purchase agreement with the buyer are typically put on hold during this period. Once all of the bank approvals have been received the way is clear to satisfy all the remaining terms of the purchase agreement and close escrow. If the sale is not approved then the contract is usually renegotiated with the buyers and sent back to the lenders for approval or cancelled without penalty.