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http://public.findlaw.com
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| Friday, Jul. 25, 2008 |
The home selling process will be much less daunting if you take it step by step.
When you bought your home, you probably felt like the seller held all the cards -- and you'd be lucky if the house ever became yours. Now you're sitting on the other side of the table, and likely experiencing a different set of anxieties: How much is your house really worth -- what if you set the price too high, or too low? Are you willing to pay a 5% commission for an agent 's help? Should you repaint or remodel before putting the house on the market? This article will look at the home-selling process step by step, and link you to other important information sources.
If you bought your house a long time ago, it's probably worth much more now. But even during the months that you plan your sale, the real estate market may be moving up and down. Try to take the market's temperature. A "hot" market is one in which there are more buyers than sellers, so the buyers are competing with each other and driving up prices. A "cold" market is one with more sellers than buyers, so the buyers can be choosy and bid low. The hotter the market, the more aggressive you can be in pricing your house.
Simply chatting with your neighbors can teach you a fair amount about the heat of the local market. Also, read your local newspaper's real estate section, and talk to realtors you meet at open houses.
The best source of pricing information comes from houses directly comparable to your own. In the real estate industry, a "comparable," or "comp," is a house with similar features, preferably located near yours -- ideally within six blocks. When identifying comps, look for houses with the same number of bedrooms and bathrooms and other amenities. Eventually you'll be able to predict the prices of other houses, and get a sense of what yours should be listed for.
If you're looking for your next house near where you currently live, you may have already begun your "homework," by visiting open houses, reading classified ads (in print and online), and visiting websites containing listings. If not, this is a great way to start. Websites that publish the Multiple Listing Service (MLS) are particularly helpful, such as http://www.realtor.com, by the National Association of Realtors (NAR).
Of course, list prices don't tell you how much houses ultimately sell for. In a hot market, they might go for well over list price, and vice versa. An easy way to find this out is to go to websites that collect this data, such as http://realestate.yahoo.com/Homevalues or http://www.domania.com. This information will also help you decide which of the incoming purchase offers are realistic.
Don't just wait for your real estate selling agent, if you use one, to put a dollar figure on how much your house is worth. For one thing, less scrupulous agents may inflate their estimates in order to capture your business. More importantly, you want to be educated about your house's real value in order to work intelligently with your agent and make rational decisions when negotiating with buyers.
Most sellers prefer to work with a real estate agent or a lawyer at some point in the process. (In fact, in a handful of U.S. states, a lawyer must be hired to help finalize the sale.) Real estate agents usually charge a commission -- currently totaling about 5% -- to be split between your agent and the buyer's agent, if any. Lawyers normally charge by the hour, around $200 per.
Despite the costs, experienced, responsible professionals can ultimately save you time, money, and aggravation. Unfortunately, there are plenty of incompetent or unethical ones out there, too. Take the time to get referrals from friends, and meet with a few prospects before you hire anyone. Or, if you're organized, good with finance and legal issues, and have some time to spare, you can sell the house on your own, and save the commission.
Before putting your house on the market, you'll want to make it look as attractive as possible -- buyers will pay many thousand dollars more for a house they like the look of. Usually you don't need to do a major remodel, although a fresh coat of paint can brighten your home's prospects considerably.
At a minimum, sweep the sidewalk, mow the lawn, clean the windows, fix chipped or flaking paint, clean up all the rooms, and hide the kitty litter box. Also address any safety issues such as loose steps, slick areas, or unsafe fixtures.
How much farther you go towards making your house look good depends on your budget and the local market. Your realtor may suggest that you hire a professional to do a temporary job of interior decorating. This usually involves moving out most of your own possessions and renting furniture and art or antiques. Such work is likely to cost you several thousand dollars, but if done well, can be more than recouped in the increased sale price. If you're a do-it-yourselfer with an eye for decorating, this can be a worthwhile and satisfying project.
Although the buyer will shoulder the main paperwork burden in this transaction -- preparing the purchase contract -- you won't be able to escape doing some paperwork yourself. In many states, a seller's main responsibility is to fill out a disclosure form, telling buyers what they know about the property's physical condition.
If you're working with a real estate agent, the agent should help place ads in the local classifieds and the online Multiple Listing Service. If you don't have an agent, you can take the same steps yourself (though you'll have to pay a broker for the latter service). Then interested buyers can make an appointment to see the house in person.
Many home sellers find open houses a useful tool. They're certainly good for bringing in the crowds. Some of the visitors will merely be curious neighbors. Welcome them, too -- they may mention your house to their househunting friends. Others will be genuinely interested buyers, including some who were reticent about making an individual appointment.
With any luck, one or more prospective buyers will present a written offer to buy your house. (If you're in a hot market, you may want to set a deadline for receiving such offers.) Here's where your realtor can play an important role, meeting with the agents who present offers and helping you decide which offer is the strongest. It won't necessarily be the one for the most money! A high bid with shaky looking financing, or one made contingent on the buyer selling his or her house first, may actually drop to the bottom of your pile.
You are under no obligation to accept the first, the highest, or in fact any offer. (Just don't discriminate against any buyer personally when making your choice.) You can also counteroffer, suggesting changes in terms or even a higher price.
After counteroffers have gone back and forth between you and the buyer, and you've both signed off to indicate your acceptance, you're technically "in contract" to sell your house. At that point, you're legally bound to sell your house, and can't change your mind without potentially facing a lawsuit. (The exception is if you included conditions or "contingencies" in the contract, such as the buyer furnishing you with proof of his or her financing, and these conditions aren't met.)
The signed purchase contract will state a closing date within it, usually several weeks in the future. The buyer will be scrambling like mad during these weeks, lining up financing, inspections, insurance, and more. But you'll have a role to play as well, making your house available for inspections, negotiating with the buyer over repair issues that come up, and of course moving out your possessions.
You probably won't meet with the buyer on the closing date. Usually the two of you sign various documents separately, in the office of your escrow agent or attorney.
Once the closing occurs, the buyer has the right to full possession of the house. If things go wrong and you can't be out by that date, you may be able to negotiate a short-term rental agreement with the buyer.
Assuming you make a profit on your sale, you might have to pay capital gains tax. The IRS website at http://www.irs.gov can tell you more.