Selling a home can seem like a daunting process – we’re here to help. What follows is a basic guide on what to expect along the way, broken down into the following steps:
- Market Research
- Listing Prep
- List for Sale
- Negotiate Offer(s)
You’ll probably want to start preparing to list your home for sale a few weeks or more before it actually hits the market, in order to guarantee the best possible offer in the shortest time frame. The first step in that preparation is to do market research – what have homes similar to yours sold for recently? What does the current competition look like? What would make those homes cost more or less than yours?
We start with what’s called a Comparative Market Analysis, frequently referred to as a CMA or “comps.” We look for general market trends within your neighborhood, and then try to narrow down a handful of properties most similar to yours in terms of age, size, location, and improvements that are currently for sale, in escrow, or have sold in the last few months. From there, we’ll have a pretty good idea as to your home’s value.
From there, you’ll want to prep your home for marketing – we’ll be glad to help with this by walking through and pointing out any quick fixes that can help improve the marketability of a home. Most of the things that increase appeal among buyers are common-sense – keep rooms clean and tidy (clothes picked up, dirty dishes out of the sink), pack up any items you’ll be able to do without until you move (less clutter makes a home feel more spacious and allows a buyer to imagine their own belongings moved in), etc. Minor repairs of items that are broken, such as dead outlets or switches, or patching holes in walls, may make sense, though major upgrades rarely do – the success of most projects like kitchen or bathroom remodels are measured by the percentage of the cost that’s recovered at sale, rather than the percentage of extra profit they generate.
One last thing to consider is how easily your home will be available to potential buyers. Traditionally, sellers allow an electronic lock box to be placed on their home with a key inside – licensed agents call on behalf of their clients with a minimum one to two hours’ notice of a showing, then proceed to let themselves in using the lock box if you’re not home to accommodate the showing. In order to prevent crime a digital record is created each time a box is opened, and all agents receiving a key card to the boxes must submit fingerprints and pass a background check. With the high volume of interest in properties lately (that seems to be waning a bit as of early 2014), some sellers choose to hold off on allowing showings the first few days on the market, and start off with a weekend open house before beginning with standard showings. Others may have unruly pets or other issues that complicate the showing process – if this is the case your agent will work with you to design a showing plan that works for you while making the house as marketable to buyers as possible.
Once the house has been prepared for market, it’s time to list. Your agent will present a marketing plan that will typically include online advertising across a broad spectrum of real estate websites, a sign on the property (and possibly others nearby as warranted), and marketing flyers with photos to be posted with the sign for passers-by or prospective buyers doing “drive-bys” on properties that interest them. If the home is in an area likely to draw traffic (more likely in urban and suburban than rural areas), an open house may be held as well.
The simple reality of real estate is that most houses are not sold by the listing agent, or through any form of advertising. The vast majority of sales involve a cooperating broker, either within the listing agent’s office or from a competing brokerage. Most competent agents representing buyers have arranged for their clients to receive automatic updates as soon as a property meeting their specifications for neighborhood, size, and amenities hits the market (we’re a big fan of these custom searches ourselves). This means that everyone who’s serious enough about buying to have consulted an agent and who’s interested in a house like yours will know about it within 24 hours of it hitting the market. Conventional wisdom in the past has been that the majority of attention a listing gets will be within the first 21 days – as technology advances we’re being led to believe that the time frame for attracting attention is even tighter – sellers today most likely reach 90% of their target audience in the first 10-14 days on market.
This constricted time frame makes it more important than ever that a property be in its best condition and priced right from day one – once the existing buyer pool sees your home and decides it’s either too expensive compared to others nearby or not appealing enough, the only two options are to reduce the price (which will send out an e-mail to all existing buyers enticing them to take another look) or wait for new buyers to come into the market. The first strategy is undesirable because it represents wasted time – if the price is too high, why wasn’t it listed lower in the first place? The second also poses problems – due to there being such a broad spectrum of housing styles and prices, this could take some time, especially if your house is unique in style or location.
Suppose, however, that there’s no issue finding a buyer and that we have a few good offers a day or two after the first-weekend open house. The next step is negotiating the best offer, which is a bit more difficult than picking the one with the highest price. As the market recovered from the crash of the late 2000s, buyers began making drastic overbids on properties, knowing that they’d be in competition with several other buyers. The problem: when an appraisal comes in, the home isn’t worth nearly as much as the buyer agreed to pay. Having knocked other prospective buyers out of the bidding, and assuming those buyers have moved on to other properties, the one you’re stuck with has leverage in forcing you to re-negotiate, possibly accepting a price in the end that’s less than another buyer would have been willing to pay.
For this reason your agent will help you review not only price, but the loan qualifications, background, and financial stability of the buyer. Are they asking for credits or repairs that would end up eating into your bottom line? Are they ready to close on time, or do they need to sell another property before they can begin the process of buying yours? These are just a few things to take into consideration when negotiating with one or more buyers.
After negotiations are complete, you’ll enter a “contingency period” which usually lasts 17 days. As the seller, you’ll be responsible for providing the buyer with a host of disclosures regarding the property and neighborhood – your agent will help you prepare these when the home is listed. You’ll also have to make your home available for any inspections the buyer requests that you perform or elects to perform themselves. The buyer may request that you perform a termite inspection and make any needed repairs to the property – if there’s extensive evidence of wood damage or infestation, your agent will likely advise that you have this inspection done prior to listing the property, so the cost of repairs can be factored in during initial negotiations. The buyer may also conduct a general inspection of their own, which may lead to additional inspections or requests for repair bids if problems are found. They’ll also have an appraisal performed in order to satisfy themselves and their lender as to the value of the property.
Once the buyer has reviewed all of the disclosure paperwork and had a chance to conduct inspections, they have three choices: continue with the purchase, attempt to re-negotiate the deal due to unforeseen problems, or back out of the transaction entirely. This is another instance when your agent steps in on your behalf, working to keep costs down while holding the deal together in the event problems are found.
Now that the terms of the sale are finalized, the only thing left is for the buyer to complete the loan process and close. If you select an agent with lending experience (cough…we have a finance background dating back over 15 years…cough), he or she will likely have been following this process since day one. If you’ve agreed to perform any repairs, you’ll wait until the buyers have removed all of their contingencies (thus making their deposit non-refundable in case they back out) and then get to work. Especially if third party contractors are involved, this is usually timed to coincide with the buyers signing their final loan docs, which happens a few days before closing.
If you’ve made it this far, there’s nothing left to do but load your moving truck, cash a check, and move along to wherever life may take you. Now it’s time to click the button below and get this process started…