Selling a Home
For most people, selling a home is an emotional process. While you may be anxious to move, you have loved your home. It may be hard to think of the legalities involved in selling. It is a good idea to think these things through before you take the first step.
Handling the Sale Yourself
Sellers may be reluctant to hire a real estate agent because they do not want to pay or cannot afford a commission of about six percent of the sale price. Before you make that decision, consider all that needs to be done and whether it is realistic to think you can do it yourself.
If you decide to work with an agent, consider the agent’s experience with your neighborhood, get references, and ask lots of questions. Are you currently working with any potential buyers? How will the property be advertised? Will the agent host an open house to show the house to other agents or to show the house to the general public? Where will the key be kept? What if I decide not to sell? Why should I list for more than six months? Keep in mind that it is fairly rare for the agent who lists a house to also be the agent who finds a buyer. You want your listing to be attractive to other agents when it appears in the multiple listing service (MLS). Will your agent offer incentives to other agents? How is the commission going to be split? A seller may negotiate a lower commission without realizing that buyers’ agents are less likely to show a house that promises a two percent commission split than one that promises three percent.
Start with a realistic look at your home. Curb appeal and staging are important, but other issues must be addressed first. Does it have any defects or need repairs? Complete repairs before you put it on the market. Many states and some municipalities require written disclosures and tests relating to everything from roof leaks to radon. An Internet search will help you find the details. Your buyer or the buyer’s lender is also likely to require an inspection.
To determine the value of your home, get an appraisal or use comparable sales. A real estate agent will usually find records of recent sales for several similar homes in the area. Pricing your home above its real value is counter-productive. Most prospective buyers will not visit homes above a particular price point. A buyer’s mortgage lender will obtain an appraisal and will not fund a loan above the appraised value.
Consider the other costs of selling. In addition to the costs of moving and commission, you will be required to pay off your mortgage and any other liens against the property, such as contractors’ liens for any work done on the house or judgment liens for any other debts you may have. You will likely have to pay for a title report or title insurance, an attorney, and your unpaid share of property taxes, HOA fees, or special assessments. Your real estate agent or attorney can give you a realistic estimate of your bottom line.
If you work with an agent, you need only worry about keeping your house clean for showing. The agent will handle scheduling the showings and will only show the house to qualified buyers. If you are showing the house yourself, consider how you will work around your other obligations, how you will avoid being in the house alone with strangers, how you will determine whether callers are able to buy your house or are just nosy, and how you will react to negative comments about your house or your asking price. You may want to limit showings to pre-qualified buyers. Make sure that your insurance is adequate in case a buyer is injured on your property or damages your belongings.
Evaluating an Offer
After several weeks of keeping your house in perfect order and adjusting your schedule for showings, you may be tempted to sign the first offer you receive. Before you sign, consider the price in light of the closing costs you have calculated, the dates, the personal property listed, and any contingencies. Buyers often include contingencies for inspections, mortgage approval, and attorney approval, while sellers can also include such a contingency, and they are generally acceptable if the contract limits the contingency to a reasonable time. Other contingencies, such as the sale of the buyers’ house, could effectively remove your house from the market for several weeks without any guarantee that you actually have a sale. After you have a contract, you will have to cooperate in allowing inspections and appraisals as provided by the contract.
The sale typically “closes” a few weeks after the contract is signed. Before closing, the buyer will want to inspect the property again. In some areas, the buyers and sellers attend an actual closing meeting at the office of an attorney, a title company, or the lender. In other locations, it is more common that the parties deposit the required documents and checks in advance with an escrow agent, who will then complete the transfer. The seller must provide several documents, which are prepared by the seller’s attorney, the real estate agent, or a title company, depending on where you live. Some of these documents must be notarized, so remember to have identification on hand. Do not forget the keys and garage door opener! A seller’s documents usually include:
- A deed, signed by all owners who appear on title. If you had a co-owner who has died or left, resolve your right to convey the property before closing. Some people think they must hand over the deed they received in purchasing the house. That is not true. Deeds are now recorded, typically by counties, and information about who is on title is readily available through the recorder.
- A title opinion or insurance, HOA documents (if applicable) and a survey.
- A bill of sale to convey personal property, such as appliances and window treatments.
- Affidavits (sworn statements) concerning whether there are any “hidden” construction liens or easements that do not appear on the survey.
- Letters verifying the amount of the mortgage and other liens to be paid off and a settlement sheet (HUD-1 or RESPA) detailing every payment associated with the closing.
- Depending on your location, you may need a transfer tax declaration, disclosures concerning the condition of the property, or other forms. Your agent, attorney, or the title company can provide them.