Your Home-Selling Success Story!
Aka, Homeseller’s Step by Step Overview
Sellers have been particularly challenged over the last six years. Market uncertainty, the sub-prime mortgage meltdown, the global financial crisis and low consumer confidence have all contributed to poor sales in many areas of the country, including ours. It’s simply not as easy to sell your home as it was ten years ago. For many months over the last six years, new sellers outnumbered buyers by almost 2:1, leaving many sellers stressed and apprehensive. While closer-in suburbs have begun to rebound and are seeing prices on the rise, homes in outerlying areas such as Loudoun or Prince William counties, and even some parts of Fairfax, have been slower to feel the recovery.
However, there is good news for homesellers. The market seems to have bottomed out and market activity and median sales prices have been on the rise over the last few years. A fantastic resource for understanding local economic indicators and statistics is the Center For Regional Analysis (“CRA”). I am neither an economist nor a statistician and while I can see trends in the marketplace, a far more scientific analysis is presented by the CRA. Click here for their latest update on the Washington Metro Housing market update.
For those of you who may be considering selling your home and would like an overview of the process, I hope this article helps. Please keep in mind that each home is different and each seller has a unique set of circumstances, both financial and practical. I understand that and will work with you to sell your home as quickly as possible, for the best price and with the least interruption to your busy lifestyle.
Step One: Our Initial Meeting.
At our first meeting, I will help you determine whether you are ready to sell your home and what we might do to best prepare for listing. Often this meeting takes place months before you actually plan to list the home. It’s certainly possible to list a home within days of your decision to do so, but as with most things, the more time you have to prepare, the easier the process usually is on you. I will take notes, listen to your goals, discuss your timing and begin to strategize about the best course for you. Typically, after introducing myself and telling you a bit about how I practice, I walk through the home with you and take copious notes on each room, noting what may need to be repaired, cleaned, removed, packed away, etc.
I walk through the home with a critical eye at this point – not to stress you out, but to put myself in the place of a prospective buyer. What objections might buyers raise? What would YOU want to see if you were walking through the home? When preparing to show a home, I believe that the idea is to “neutralize” the home. This means removing items of a personal nature, possibly painting rooms in warm beige tones and removing furniture and clutter to really maximize your space. In my opinion, this allows prospective buyers to more easily imagine their belongings in the home.
Once I’ve walked through the home, I’ll create a list of showing suggestions for you and email it to you within a few days. During this initial meeting, I also leave plenty of time for you to ask me questions and have your concerns about this process addressed.
Step Two: Prepare Your Home/Home Improvements. Most of the time, a fresh coat of paint, minor repairs and clean carpet can dramatically improve the look of a home. After our meeting, you will be in the “getting ready” phase. You’ll have to take a hard look at what repairs you feel are worth doing and which you deem too burdensome. It’s also not a bad time to think about why you really want to sell, how motivated you are and whether it is realistic based on what you owe on the home and current market conditions.
Most of what you’ll be doing during this phase is de-cluttering. I tell people that countertops and horizontal surfaces (desktops, bureau tops, night stands) should be as clear of personal articles as possible. And simple fixes, like repairing foggy windows, addressing any minor electrical issues and DEEP CLEANING, can really give you some mileage during showing and remove potential objections during the home inspection phase. If you dislike cleaning or don’t have particularly stringent home cleaning standards, considering hiring a professional service. Nothing says “neglect” like a layer of dust and dirt.
Most importantly, don’t neglect the exterior of your home. What is the first thing the buyer sees when they visit your home? The front lawn, the yard, your front door. Get the picture? Take time to mow the lawn, weed, edge and remove any toys, bikes or trash from the exterior. It never hurts to put potted plants and or decorative lanterns near the front door. And speaking of which, a fresh coat of paint on the front door usually looks wonderful. And don’t forget a pretty welcome mat. You can find attractive and upscale-looking coir mats at places such as Target.
And last, consider professional staging services if you feel that you need a “wow” factor or if you will be showing your home vacant. Numerous studies note that staging services reduce time on market and make the home seem much more inviting than an empty home.
Step Three: Determine a Smart Price. One of the biggest pricing pitfalls that sellers encounter is being emotionally attached to the price of their home. The price is determined by the current market conditions, not what you need to net from the sale of the home and not what your neighbor’s house sold for at the height of the market. This sounds harsh, I realize, but I find that people don’t hire me to stroke their ego, they hire me to present them with the market research necessary to achieve their goal – selling their home. I will help you determine a smart price by preparing a thorough comparative market analysis and discussing the current market environment. So that you don’t waste time on the market, it is imperative to be as objective as possible when comparing your home to others. Overpricing a home wastes valuable time on the market and often costs you more in the long run, both in money and certainly in aggravation.
Step Four: Pre-Listing Review and Professional Photos. When you are close to listing your home and almost all repairs or cleaning has been done, we’ll meet to go over showing instructions and run through the house with a critical eye to make sure we are showing the house off to it’s best advantage. I’ll take professional photos of the home with a wide-angle lens and also create an online virtual tour. Great photos are key to attracting buyers to your home. Photos must be clear, in focus, light, bright and show off each room’s features. Unlike ten years ago, most buyers have “seen” the inside of your home before they visit. I would venture to say that nearly 100% of my buyer clients have looked at photos of a home online before we visit. The biggest turnoff to potential buyers? No photos or photos that are done poorly. So, when we do our photo shoot, the home should be as clean as possible with as much clutter removed. I usually schedule this shoot one or two days before we list.
Step Five: We’re Live on the MLS. Congratulations, you’ve finished your cosmetic and mechanical repairs and the home is ready for it’s close-up! I will enter the property on the Multiple Listing Service, upload all the great pictures I’ve taken and create a virtual tour. I’ll have a sign out front, a call-in information line will be created for anyone driving by who would like more information on the house, brochures will be prepared and your new listing will be promoted with print advertising as well. I will be promoting your home on an immediate basis – including conducting a Broker’s Open House and a public Open House (if you desire them) shortly after listing, networking with colleagues and other brokers, and following up with anyone who has visited the home.
Realtors who visit the home will need to contact you or me to gain access. We will discuss the most convenient way to allow access before we go “live” online. Some clients prefer realtors to contact them directly to make appointments, others prefer that I be a conduit and coordinate convenient showing times between all parties.
Much of what I do at this point is behind the scenes, but I will report to you directly on a regular basis. For example, once all the advertising is in place and we are officially listed, I will spend the bulk of my time following up with realtors for feedback (this is very important), working with contacts, maintaining and refreshing web postings and also doing other sorts of outreach and coordination (i.e., with contractors, inspectors, whatever you need) that are necessary to properly manage your transaction.
Step Six: A Note about Open Houses. If you are new to the home selling process, here is a quick note on open houses and how they typically work. Generally, we schedule the first open house on the first or second Sunday after the home has listed. Most of the time, the home is open from 1pm to 4pm. During football season, those open houses can be pretty slow, but I also figure that the people out looking at that time are (hopefully) more serious buyers.
During the open house, either I, or my assistant, will host your home while you vacate the premises for a few hours. I greet those who enter, give them a short introduction to the home and its wonderful features, provide them with a flyer or brochure and then give potential buyers the leeway to explore the home at their own speed, on their own. Occasionally, someone requests a tour, but by and large, people like to be left alone and I respect that.
Because I cannot follow everyone that walks through a home, I ask that you secure all your valuables or items that are precious to you. While it has never happened to any of my clients, I have certainly heard of instances where items have been stolen from open houses. I realize it is so unpleasant to even think about this, but the reality is that it happens and you should do your best not to leave anything tempting in sight.
Step 7: We’ve Received an Offer. Our efforts have paid off. You’ve cleaned, we’ve priced correctly and voile, we have an offer. During this phase of the process, you can expect to spend a lot of time on the phone with me discussing options and negotiations, as well as signing papers. The sale of a home is complex and we need to carefully evaluate all features of an offer, so that we can be satisfied that we are addressing all of the personal and business aspects of selling your home.
While it may be your goal to have multiple contracts and people lining up outside with contracts filled with escalation clauses, the reality of the current market is that such a scenario is unlikely. So, with one offer on the table, how do we determine whether it is acceptable, workable, even viable? Many factors make up an offer and while price may be a huge consideration for you, I encourage you to take a moment to ponder the following other factors:
– Even if the offer is at or near your asking price, has the buyer cost you thousands of dollars in subsidies (closing cost credits, lender costs to be paid), thereby reducing your net?
– What type of financing is the buyer using? Conventional mortgage? FHA or VA loans? Many sellers prefer buyers using a conventional mortgage. With FHA or VA loans, not only are downpayments generally lower, but appraisals can be stricter and the underwriting process more complicated. That is not to say that anyone with FHA or VA funding should not be seriously considered, but the type of financing is simply one factor to evaluate.
– Who is the buyer’s lender? A good local lender with a strong reputation? That is the ideal, of course. Less than ideal would be credit unions and “internet” or out of state lenders. In my opinion, they are simply not as invested in you, in the process or committed to providing exemplary customer service. This hurts the buyer, but it also hurts you if the buyer cannot settle on your property because his lender was incompetent. Beware, bad lenders are plentiful.
– When can the buyer close? Do you need a rent-back after closing? How flexible is the buyer with your desired move-out date? Or, if your home is vacant, can the buyer settle more quickly, thereby relieving you of the carrying costs?
– What is the alternative to this offer? Can you afford to wait for another one? There is an adage in real estate that your first offer is usually the best one. I can tell you that 99% of the time, that is true. If you refuse a reasonable offer because you and the buyer are only a few thousand dollars apart, consider that if you keep the home on the market just two months longer, the cost of maintaining the home, paying the utilities, taxes, HOA or condo fees, and mortgage will probably be more than the few thousand that separates you from the buyer. You’ll have lost money in the long run, exposed yourself to the risk of having to repair the home if something is damaged and, most importantly, after more time on the market, you’re likely to get offers even lower than the first one. Ask yourself if that is that a risk you are willing to take.
Step 8: Responding to The Offer. After you’ve considered the offer, there are three ways you may respond.
First, you may accept all terms (“Yes.” We like your offer and we’ll move forward with it and sign off on all the details – the proverbial, “Where do I sign”?).
Second, you may reject the offer outright. (“No.” Nothing is acceptable and we are unwilling to work with you). A rejection will generally stop all negotations dead in their tracks.
Third, you may counter-offer. (“Maybe-so.” We are interested, but here are some terms about the contract that we would like to change.)
The first two options are relatively self-explanatory. Counter-offering is simply responding to the buyer with a new set of terms. If you make even ONE change to the offer and send it back to the buyer for consideration, that is considered a counter-offer. The process of offering and countering is very typical and reflects the back and forth nature of the negotiation. It’s normal and you should expect it.
Everyone negotiates a bit differently, with some people preferring to go one or two rounds and quickly wrap up details, and others who don’t feel satisfied unless they have gone several rounds with you, tweaking minor details or inching up or down on price several times before finally coming to agreement. My advice about this part of the process is to truly step back and not get emotional about someone else’s negotiating style. A buyer’s negotiating style has nothing to do with you and much more to do with the buyer’s personality, experience and even culture. Don’t take it personally, look at the overall picture – we have an offer and we are all trying to come to an agreement. If the buyer has taken the time to present an offer, consider that she has likely spent many days with her realtor considering other homes and hours drawing up the contract. She has chosen us. That’s usually a good thing.
If we counter back, the buyer then has the same three options with regard to our counter offer. She may accept, reject outright and walk away or propose another change to the contract.
Here are my personal opinions about negotiating. As I mentioned before, everyone comes to the table with a different set of priorities, a different background and a different personal style. Don’t get bogged down in those differences and don’t commit the cardinal sin of negotiating a business transaction – losing your cool and getting emotional about an offer. Doing so does nothing to move you forward and it will cause you undue stress. Do keep in mind your needs, your requirements (financial and otherwise) and your best interests (hint: this is why I’m here). While many people have an underlying feeling that a negotiation should produce a winner and loser, I disagree. If a buyer has taken the time to present an offer, consider coming at the negotiation with this thought in mind instead, “We all want the same thing here. How can we make that happen?” Life is full of compromises and real estate is no different. If we approach the negotiation with this in mind, I believe the end result will be closer to a “win-win” than a “winner take all” slugfest.
Once all parties have agreed to all terms on the contract, it is considered “ratified” and I must change the status online “under contract.”
Step 9: Inspections and Appraisals. As part of the contract, the buyer and the buyer’s lender will require certain inspections of your home. You do not need to be present at any of these. Typical inspections are:
– Home Inspection: Generally, within a week of ratifying the contract, the buyers will conduct a home inspection. Depending on the size of your home, you should expect it to take between 3 and 6 hours. You are expected to vacate your home. Negotiating repairs based on the home inspection can occasionally become stressful, often much more so than negotiating the actual contract terms. We’ll cross that bridge when we come to it and put into play the same tactics and mindset we used when we negotiated the actual sales contract. A radon test may also be performed at this time. If your home has radon, the buyers will likely ask that you install a mitigation system or provide them with a credit to do so. Such systems generally cost between $875 and $1200 to install.
– Appraisal: The buyer’s lender will send an appraiser to visit the property. He or she will walk through the home, take photos of the interior and exterior and determine whether the contract sales price is supported by the market comparables and the home’s condition. Utilities MUST be on for the appraiser’s visit. If there is visible water damage or wood rot among other things, the appraiser will note such issues and the lender may require that these items be repaired before they will agree to fund the loan. It doesn’t happen often, but you should be aware that the lender may require repairs.
– Termite Inspection: A termite inspector will visit the home and conduct an interior and exterior examination. The lender requires this and if there is an infestation of any wood destroying insects, you will be required to professionally treat the problem and provide evidence of such treatment to the lender.
Step 10: Transaction Management. Please keep in mind that all of these steps will be managed by myself or a member of my team. Coordinating with inspectors, the other agent, any contractors and the appraiser will all be done through me. I will also be in touch with the title company on a regular basis to make sure that they are gathering all the necessary paperwork and keeping us on target. Any repairs that are necessary as a condition of the home inspection contingency or appraisal will be managed by me, if you wish. The idea here is to head off any issues that could delay or even prevent settlement, so I will work very closely with you to manage every detail of the transaction. My goal is to get to the settlement table with absolutely no outstanding issues. The best settlements, in my opinion, are the ones that are utterly boring.
Step 11: Seller Moves Out. Unless otherwise agreed upon, you will vacate your home some time in the week before settlement, if not before. According to the contract, you must leave the home in broom clean condition, with all debris removed. Please don’t leave items in the home simply because you think the new owners might find them helpful. You know that old saying about one man’s treasure being another man’s trash? It’s doubly true in this situation. No matter how useful or attractive you find something, there is no guarantee that your buyer will feel the same way. Take your things and leave the home empty for the new owners. Doing so will also simplify their final walk-through and put you in compliance with the sales contract requirements. If they find the home empty and ready for them, they will not have anything to complain about at the settlement table.
Step 12: Repairs are Completed and Buyer Conducts Walk-Through Inspection. When you have completed all the repairs required by the contract and/or home inspection contingency, we will provide receipts for those repairs to the buyer. A day or two before settlement, the buyer will visit the home again to do a final “walk-through” of the home. The buyer is not looking for new items for you to fix. He or she is visiting the home to make sure that it is in substantially the same condition as of the date of the home inspection and that nothing about the home has been substantially altered.
I once had a buyer who visited a home on settlement day only to find that the seller had removed the nice shower fixture in the master bathroom and replaced it with a cheap one. The seller assumed we would not notice, but we did. It was unpleasant to fight over this at the settlement table, but this is the kind of thing that happens all the time when sellers are not careful or upfront about what they plan on taking with them. If you intend to take a fixture or any other item with you, please let me know at the time of listing so that we may exclude that item from the list of conveyances. Better yet, remove the item and replace it with something else at the time of listing so that removing it later will not become an issue or negotiating point with the buyers.
The buyer will verify that all requested repairs have been completed and will also make sure that all the utilities are working and that nothing is broken. He or she will likely test the appliances again, make sure the heat or A/C is working and flush all the toilets, etc. It’s not unheard of for something to break unexpectedly during the time from contract ratification to settlement (think: heating, cooling, leaking plumbing). If the buyer discovers something that is broken at the walk-through that was operational at the home inspection, we must repair it before settlement or arrange to have a contractor address it at your expense so that we remain in compliance with our contract obligations. Luckily, this does not happen too often, so keeping your fingers crossed is always a good practice during this time.
Step 13: Closing and Recordation. Closing, or “settlement,” occurs on the date specified in the contract. You will have a few documents to sign – nothing compared to the large stack of papers you likely had to sign when you purchased the home! You will sign a deed conveying the property to the buyer as well as a number of affidavits, a “HUD-1” settlement statement (a standardized form that itemizes the fees and charges associated with the transaction), and perhaps some tax-related forms. Click HERE for a sample HUD-1 Settlement Statement and links to further explanation. (http://www.mbh.com/Library/Settlement_Terms.aspx)
Once the papers have been fully executed by both parties, you will hand the keys over to the buyers and you are free to go! Congratulations, we’ve sold your home! The title company will record the deed in the land records (often the next day) and once that is accomplished, the proceeds of your sale will be available. You may choose to have those funds wired directly into a bank account or you may pick up a check from the title company. Either way, you’ve successfully sold your home and can now move on to the next phase of your life.