Chapter 14
Selling the House You Already Have
In This Chapter
- Selling your home on your own
- Finding and working with a realtor
- Timing your settlement date
- Selling a house is expensive business
- Making the most of packing and moving
- Coping with the actual move
There are many issues involved with moving, not the least of which is how to sell your current home.
If you’re thinking of buying or have already put a deposit on a new home, you’re no doubt very excited and probably a little nervous. Will you really be able to afford the new house? Will you like the neighborhood? Will the neighbors like you? Where will everybody sleep? What colors should you use in the living room?
It’s easy to get so involved with the new house that you overlook the very important fact that you’ve got to sell your old house.
In this chapter we’ll look at some aspects of selling the house you already have. This is important information because selling your home can be tricky if you don’t know what you’re doing. Even if you’ve sold a house or two or three in the past, it’s a good idea to review the finer points of working with a realtor, settlement costs, and so forth.
Hire a Realtor or Sell It Yourself?
Many people are tempted to try to sell their own home, bypassing the services—and fees—of a realtor. Realtors usually charge between 6 and 7 percent commission on the sale of your home, which can add up to a lot of money, depending on the value of your property.
The National Association of Realtors reports that about 13 percent of homes are sold by owners, without benefit of a professional realtor. A theory behind owner selling is that, because you’re saving the realtor’s fees, you can sell the house for a few thousand dollars less, and that will cause it to sell more quickly.
Some people have had great success selling their own home and swear they’d never do it any other way. And maybe you will, too. Before you decide to go the FSBO route (realtor lingo meaning “for sale by owner”), carefully read the information that follows, and think long and hard about what you may be getting yourself into.
If you’re going to sell your own home, you’ll need to invest significant time to do so. You’ll have to be around to show the house when it’s convenient for potential buyers. You’ll probably need to do some work on the home to make it as attractive and sellable as possible. You’ll need to arrange for advertising, open houses, and research your selling price.
Money Morsel
If houses in your neighborhood are so much in demand that potential buyers line up outside every time a for sale sign goes up, you may have little trouble selling your home yourself. Just be sure you adhere to all the legal and financial guidelines.
The first question to ask yourself is if the time and energy required to sell your own home is worth the money you’ll save.
If you have many obligations at work or otherwise, you might simply not have the time required to market and sell your own home. Or you may not have the personality to do it. Remember that you have a lot of yourself invested in your home. How will you feel when a potential buyer criticizes your decorating scheme or sniffs at the size of the kitchen? You’ve got to be able to remain calm and impassive, as though you’re a third party instead of the owner of the house.
The biggest mistake that FSBOs make, according to professional realtors, occurs with pricing the home. Almost everybody thinks their home is worth more than it is, and why wouldn’t you? You’re emotionally connected with your home, which greatly increases its value in your mind.
Somebody walking through your home for the first time, however, probably isn’t going to feel the emotional connection that you do.
Determining a Price for Your Home
You’ve got to know the value of your home if you’re going to put it on the market. The following are some ideas for determining what your house is worth:
- Check out the real estate transactions. Look in the real estate section of your local paper and see what houses in your neighborhood are selling for or have sold for. Remember not to price your house too much higher than those around you, even if you’ve made improvements the others don’t have. You want to get your money back from the work you’ve done, but you don’t want to price your home out of competition.
- Talk to your neighbors. In every neighborhood, there are some folks who know exactly what’s going on. And they’re usually willing to share the news. Find out what the Smiths got for their house last fall, or what the Joneses are asking for theirs. Just be sure that your information is reliable.
- Hire a professional appraiser. This is the best way to determine the value of your home, because he’s trained to know exactly what it’s worth. Many people assume the value reported on their tax assessments is correct, but you shouldn’t rely on it, even if it’s been done recently.
Once you know what your house is worth, consider special circumstances that might affect what you ask for it. If the market is particularly strong, you might add 5 or 10 percent of your home’s value to its appraised price. Don’t get too greedy, though. Overpriced homes don’t sell. Likewise, if the housing market is at a crawl in your area, you may have to shave a percentage of its appraised value off your asking price.
Don’t Go There
Trying to get an extra couple of thousands of dollars out of your home by setting your asking price higher than the appraised value can backfire on you, especially if you’re selling the home yourself. Savvy buyers know you’re avoiding a realtor’s fee by selling yourself and may resent that you’re still asking a higher price than other sellers.
Advertising Considerations
If you’re putting your home on the market, you’ve got to let prospective buyers know that it’s there. There are some effective methods for doing this, but you’ve got to be ready to spend a little money.
The first thing you should do is figure out a marketing budget. This will include the cost of everything you’re going to do to attract potential buyers, get them into your home, and follow up with them once they’ve been there.
Think about which newspapers will best advertise your property. Don’t limit yourself to just your local paper if you think your home may be attractive to folks outside of your immediate area. For instance, if you live close to a major highway that makes your area an easy commute to a city 40 miles away, you might consider placing some ads in their nearby city papers.
Homes located further away than the immediate suburbs of a major city normally are less expensive than those that are closer. People looking to live within commuting distance without paying the high prices of homes in the immediate suburbs may well be attracted to your area.
Don’t skimp on the ad for your home to try to save money. Remember that realty companies use photos in many of the advertisements for homes they’re selling, so consider using a photo of your home, as well. Your ad is likely to be the first contact with your home for prospective buyers, so make it as impressive as possible.
Regardless of where you advertise, make sure your ad is professional-looking and attractive. The advertising departments of most newspapers have staff to help you get an ad ready. Or you could hire an ad agency or graphic design firm to make an ad for you.
If you prepare your own ad, use others that have appeared in the paper as guidelines. Be sure that you list the best features of your home, but don’t exaggerate by using words like “prestigious” or “spectacular” if they don’t apply.
If you’re well versed with the Internet, you might consider setting up a Web site on which to advertise your home. More and more people are house hunting online, and the Internet is full of realty company sites that contain their listings.
Be sure to buy at least one attractive, weatherproof “for sale by owner” sign for your yard and several “open house” signs that you can place at appropriate locations to alert potential buyers.
And, don’t forget to prepare a fact sheet to give prospective buyers when they come to see the house. Many realtors now place these sheets, which list pertinent information such as price, square footage, and features of the house, in a waterproof box next to the sale sign on the lawn. Pick up a sheet prepared by a realtor to see what yours should include.
Legal Considerations
If you don’t have a realtor, be sure to work with a lawyer (preferably a real estate lawyer) who can review contracts and advise you on other legal matters. Some forms you’ll need to have include the following:
- Deposit receipt
- Offer to purchase
- Seller’s disclosure form
If you’ve already assumed the responsibilities of a realtor, don’t—under any circumstances—try to be your own lawyer, as well. In our litigious society, it’s imperative that you get competent legal advice.
Some people selling their own homes have gotten into big trouble by not disclosing certain information about their homes or through other mistakes.
If you live in an old home that may contain lead paint or asbestos, for instance, don’t even think of selling it without first disclosing that information. Have the home tested for radon and termites, and any other possible problems.
Be especially careful to avoid even the appearance of discrimination when you’re selling your house. If a physically disabled person wants to see the house, for instance, you can’t legally say something like, “I won’t show you the house because you wouldn’t be able to get around in it. It’s got a lot of steps.”
It is unfair under the law to discriminate in a real estate transaction on the basis of race, color, religion, national origin, gender, handicap, and presence of children in a family.
And if you’re involved with financing, be sure to consult with your lawyer about terms and agreements. Work carefully with your attorney to assure you come through selling your house legally unscathed.
Practical Considerations
If you’re going to try to sell your home, you’ll want prospective buyers to see it at its very best. Perhaps a fresh coat of paint wouldn’t hurt. How about cleaning all the windows and washing the curtains?
A few other tips for getting your home in tip-top condition are as follows:
- Check the roof and gutters to see if they need to be cleaned or repaired.
- Make sure the shrubbery is trimmed and the lawn neatly cut. If it’s autumn, keep the leaves raked.
- Check to be sure all the plumbing is in good working condition.
- See that all the appliances are working properly.
- Make sure the caulking around tubs, windows, showers, and sinks is in good condition.
- See that the house is clean; consider having the carpets cleaned if they’re dirty.
Once your house is in shape and you’ve determined a fair price, got your advertising in place, and considered all the legal aspects, you’re ready to launch it onto the market. Good luck!
If you decide, on the other hand, that you don’t have the time, energy, or personality to sell your own house, don’t feel bad. There are plenty of realtors out there who will be glad to do it for you. The trick is, how do you find a good realtor with whom you’ll want to work?
Finding the Right Realtor
Having an experienced, competent realtor can be a huge comfort to those unfamiliar with the ins and outs of selling a home.
Ask your agent to go through the listing agreement with you, asking any questions you have on points you don’t understand. Understand what happens if a sale falls through, if the buyers can’t obtain a mortgage, and so forth. Keep a list of questions and concerns you think of in between visits with your realtor.
Your realtor will pre-qualify prospective buyers, saving you the hassle of having to clean up and clear out for somebody who can’t begin to afford your home. She’ll take care of all the paperwork involved with selling your house, present to you all offers received on your property, and advise you whether or not to accept those offers.
There are lots of realtors around—just check out the yellow pages of your local phone book. If you’re relocating and looking for a realtor, you could call the chamber of commerce or the local board of real estate agents in the city to which you’re moving and ask for a recommendation. Or you could trust an established firm in that city to hook you up with a good realtor.
Other tips to keep in mind when you’re looking for a realtor include the following:
- Ask around. If you know somebody who just sold her home, ask about her experience with her realtor. Personal recommendations are a great source of information. Remember, though, that just because your friend liked—or didn’t like—her realtor, doesn’t mean that you’ll feel the same way.
- Conduct an interview. If you get a lead on an agent, give him a call and ask to meet. Get a feeling for his personality and work background. Ask a lot of questions about the market, your property, and how his agency operates. And ask him for recommendations of folks with whom he’s worked recently.
- Ask other professions for recommendations. Call your attorney and ask for a reference. Area bankers, mortgage agents, your financial planner can provide information about real estate agents that can be helpful.
- Make sure that he’s a member of a multi-list service that provides a listing of all residential property in your area. This makes your property accessible to many more people. Also, be sure your realtor will list your home on the Internet.
- Look at the realtor’s experience level. Has she been in the business for a period of time? Is she a full-time agent or is this a part-time job? Someone who works full-time in the business is generally up to date with the latest regulations and market trends.
- Be sure that he’s familiar with the various mortgage companies, home inspectors, and other services within your community that you might need.
- Consider your comfort level. Chances are that you’re going to be spending a significant amount of time with the realtor you hire. Be sure that it’s somebody with whom you’re comfortable and will want to work with.
Other traits to look for in a realtor include diplomacy and communication skills, honesty, understanding, and familiarity with your area.
Whether you hire a realtor or sell your home yourself, you need to pay close attention to details. There are a lot of legal and financial implications involved, and you can’t afford to neglect or overlook anything.
For more information on buying a new home and selling your current home, refer to The Complete Idiot’s Guide to Buying and Selling a Home, Third Edition. It is full of helpful hints and educates you on the entire process.
Timing Is Everything
If all is right with the world, you’ll sell your house (quickly, of course) to a perfect family who promises to love and take care of the property just like you did. Meanwhile, a house that you’ve had your eye on for three years will just happen to go up for sale on the very day the great family makes an offer on yours.
Your offer on the new home will be immediately accepted, you’ll set up an appointment with the movers, and start packing your belongings. Everything will go as planned, and one day soon you’ll have settlement on your old home at 9 A.M., your new home at 10 A.M., and be moved into your new house by dinner time.
That’s a great scenario, but real life rarely works out that perfectly. Timing is extremely important in buying and selling homes. Improper timing can make the process a lot more difficult. Let’s look at some timing possibilities, and see how you might be able to time events to your best advantage.
The Ideal Situation
Most financial advisors and mortgage counselors recommend that you sell your old home before buying a new one. And selling the old house first has some real advantages.
If you know that your house sold for $175,000, you can better gauge your house search. You know how much proceeds you realized from the sale of your home, and how much down payment you’ll be able to make on your new home.
And if you sell your old home before you buy your new one, you’re likely to reap the benefit of pre-qualifying for your new property. Pre-qualifying is when you provide the bank with your financial information before applying for a mortgage, and the mortgage counselor tells you just how much mortgage you qualify for.
This allows you to narrow your search of homes, and shortens the amount of time it takes to get a mortgage once you find a place to buy. It also displays to the seller that you’re a serious buyer with means to pay for the house.
Adding It Up
Settlement is the final closing of the sale of your home. It is the settling of property and title on an individual or individuals, at which time your lender hands over money to the seller and you assume the mortgage.
Selling your house before you have another one, however, also carries some risk. If, for some reason, the buyer wants to move in immediately, you could be left without a place to live for a while.
The ideal situation is to be able to sell your property (for the price you wanted, of course) and set a settlement date that gives you time to find another house before you need to be out of yours. Once you find your new home, you schedule the settlement date for a day or two before, or the same day, as settlement on your old house. This gives you time to move your belongings from one home to the next while still having a roof over your head.
As you know, however, ideal situations often elude us.
Congratulations, You Own Two Homes
Just imagine that you’re out driving around one Sunday afternoon and suddenly, you see it. It’s the house you always wanted, but have never seen before. And it’s got a sale sign in the front yard. The minute you saw it, before you even noticed the sign, you knew you were destined to live there.
You go right home and grab your spouse, babbling all the while about this perfect house. Your excitement is contagious, and by six o’clock that evening you’ve made an offer. You lie awake all night, planning where you’ll put the piano and what color curtains you’ll get for the guest room.
The next day, you learn that the seller has accepted your offer, and you set a settlement date for 30 days out. You’re absolutely thrilled, until you suddenly realize that unless you sell your current home within a month’s time, you’ll own two homes.
How in the world could you afford two homes, even if it’s just for a little while? Well, know that while this situation sounds frightening, it occurs all the time. Most buyers who already own a home will agree to make an offer on a new home with the contingency that they must sell their current property before buying the new one. This delays settlement for the sellers until they’ve sold their house. If a cash buyer comes along, however, the seller does not have to hold the house for the contingent buyer.
If you missed the section on swing loans in Chapter 13, “Paying for a New Home or Second Home,” flip the pages right on back there and read up on this nifty innovation that allows you to buy a home before you sell the one you’re in.
Swing loans are mortgage loans that use your first property as collateral for the second home. You’ll be required to sign a mortgage note, but you’ll only pay interest until your first property is sold. When you sell the property, you repay the loan and satisfy the mortgage.
Don’t be overly optimistic about selling your home quickly if real estate sales in your neighborhood have been at a standstill for the past six months. If sales are down, it’s not a good idea to buy a new home before you sell your old one unless you’ve got enough money to hold two mortgages for a period of time.
Owning two homes is sometimes necessary. If you’re going to be in that position, just be sure that you think through how you’ll manage financially until your current house is sold.
Where Is the Nearest Hotel, Please?
On the other end of the owning-two-homes spectrum is the dilemma of being temporarily without a home. Sometimes, a house sells much faster than anticipated, or its sale is contingent on the buyers being able to move in very quickly, forcing the sellers to make settlement on their home before they’ve bought or settled on a new one.
Being between houses isn’t completely bad, although most people avoid it if they can.
Go Figure
Most contractors try to stay pretty well on schedule with new construction, but sometimes delays occur. If the buyers of the new construction timed their settlement in anticipation of the pre-delay construction schedule, they could be in for a period of homelessness.
On the plus side, you will have sold your house, clearing the way for you to go ahead and look for a new one. On the minus side, you’ll need to find a place to store your furniture—not to mention yourselves—until you find a new home, wait for your settlement date, or wait on new construction.
Many people bunk in with family rather than stay in a motel, but you probably know how living with relatives can get a bit, shall we say, stressful? Hopefully, your timing will work out right, and you can avoid this situation. If your timing problem is due to a construction delay, ask the builder to reimburse you for hotel costs.
Deciding on a Settlement Date
Normally, the buyer stipulates the date of settlement. If that date or time isn’t convenient for the seller, the realtors should try to find a time that is mutually acceptable.
Something to think about is this. The longer the time period between when you sign the sales agreement and the date of settlement, the greater chance there is that something may go wrong to prevent settlement. One of the parties could lose his or her job, illness could occur, or the buyers might find another house that they like better.
So if you’re anxious to sell your house, don’t drag your feet when setting a date for settlement.
Costs Associated with Selling
You expect that buying a house will be an expensive undertaking. Somehow, though, you just don’t anticipate how expensive it will be to sell a home.
Let’s take a quick look at some of the expenses involved with selling your house. If you’re working with a realtor, he or she should be able to give you an idea of what all these costs will total. Or a mortgage counselor can help you. Some costs to keep in mind include . . .
- Mortgage points. Each point is 1 percent of the amount of your mortgage.
- The mortgage appraisal and mortgage application fees.
- The credit report the mortgage counselor will request before approving your loan.
- A pesky 1 percent transfer tax.
- Notarization fees.
- Tax certification.
- Flood plain certification.
- A deed (also called documentation) preparation fee.
- The real estate commission.
- Any expenses paid by the seller on behalf of buyer. Sometimes a buyer doesn’t have the cash required for settlement, so he pays a higher price for the property and the seller assumes some of his settlement costs, such as points.
Try to get a pretty good idea of what all those costs will add up to before you commit to selling your home.
Preparing for a Move
Moving is a tiring and stressful time. Any advance planning you can do may make the event a little easier. As soon as you find out when you’ll be moving, make a list of everything you need to do.
Prioritize the jobs on your list, and try to estimate about how much time you’ll need for each task. Then start enlisting help.
Older kids can pack up their own stuff. Be sure to encourage them to use the occasion as a chance to get rid of all the items they no longer use. Ask other family members to help you. This isn’t a time to be shy, or to think you can do everything yourself.
Packing and moving is a great chance to get rid of all the unnecessary stuff you’ve accumulated. If you haven’t looked at your college textbooks in 22 years, for instance, chances are that you don’t need them.
Take the items you won’t use to Goodwill, the Salvation Army, a women’s shelter, or your church or synagogue’s bazaar. Thoughtfully decide where the items can best be put to good use. Any items you give to charity can be listed as charitable contributions and deducted from your income tax. Just be sure to get a receipt from the charity and itemize what you’ve donated.
The following table is a listing of suggested price ranges for gifts of donated property to charity, in good condition. The IRS requires proof of the donation and documentation supporting its appraised value.
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Consider having a big yard sale or garage sale. Or you could take clothing and household items to a consignment shop. Preparing for a move also is a good time to update your records.
Be sure to call a moving company as soon as you know the date on which you’ll be ready to go. A company representative should either come to your home or give you an estimate over the phone of how much it will cost to move your belongings. Look for a reputable firm that’s had some experience. Do as much packing yourself as you can to cut the movers’ time and save money. Don’t forget to mark the boxes as to where they go in the new house.
After your mortgage has been approved, make a list of everyone you’ll need to notify. These will include the following:
- Cable company
- Telephone company
- Newspaper carrier
- Trash hauler
- Utility companies
- Postal service
Advise all of them of when you’ll be moving and make arrangements to have services transferred to your new home, if applicable. Keep a list of what you’ve done and who you’ve spoken with.
Go Figure
June, July, and August are the busiest months for most moving companies, due to families wanting to move while the kids are on summer vacation. If your move falls in one of those months, be sure to call early.
When the Big Day Arrives
Hopefully, all your advance preparations will pay off, and you’ll be calm, cool, and collected on your moving day.
Try not to think of all the work you’ll have after your belongings are moved but to focus on what’s happening at your current house.
The movers will have questions concerning what goes to the new house and what stays, so at least one person needs to be available. Another person can go on ahead to the new house to direct the movers there.
Moving is stressful, there’s no question about it. Try to stay as calm as possible, and know that your life will soon begin to get back to normal.
The Least You Need to Know
- There are advantages to selling a home on your own, but you’ve got to know what you’re doing.
- A good realtor can help keep you out of legal and financial trouble, as well as provide reassurance and guidance.
- Ideally, you’ll move out of one home and into the next without overlaps or gaps in the timing.
- There are a lot of hidden costs to selling a house, and you’ll need to figure out in advance how much they add up to.
- Packing and moving can be stressful, but provide great opportunity for cleaning out and starting over.
- Moving day will be easier and proceed more smoothly if you’ve coordinated everything ahead of time.