How to Sell Your Home

To sell your home, you'll need more than ads and signs. You need a strategy for attracting the best buyer to your home.

By Owner or Broker

Once you've made the decision to sell your home, you'll need to decide if you want to try to sell it yourself with some legal help, or list it with a real estate broker. If you choose a broker, you'll be asked to sign a listing agreement, which is one of several types of contracts in which you hire a real estate firm to find a ready, willing, and able buyer for your home in exchange for a set fee.

Three types of listing agreements

• With an exclusive right-to-sell agreement, the seller pays a fee regardless of who produces the buyer. This fee covers many important services that the real estate agent performs beyond finding a qualified buyer.
• If the seller finds a buyer, he or she is not obligated to pay the fee in an exclusive-agency listing. If the real estate agent finds a buyer, then a fee is paid to the real estate company.
• An open listing is one in which you sign with several real estate firms and give each authority to sell your home. It is typically less effective than an exclusive listing because the real estate agent lacks the incentive to make an all-out effort to sell your home.

Note: Your home could also be included in a multiple listing service (MLS) as part of an exclusive listing. MLS gives your home greater exposure in the marketplace.

Starting with the Facts

Before the yard sign goes up, you and your real estate agent, if you are using one, will need to gather some facts to attract the best buyer. Buyers want to know details; having the answers is a powerful sales tool. Here is the information you need to collect:

• The legal description of the property.
• The number of rooms and their sizes.
• A list of things not attached to the house that you're offering for sale, such as window treatments, carpet, fixtures, swing sets, etc.
• Past utility bills, property taxes, and insurance.
• Information about your mortgage, including the type, terms, and assumability.
• Financing assistance, potentially through your own lender.
• Any liens against the property.
• If you live in a condominium or townhouse, you'll need copies of the association's declaration, bylaws, financial statement, monthly fees, and special assessments.
• Special items or improvements about the house. (Point out things that may not be apparent on a walk-through.)
• The positive points about your neighborhood, such as demographic information and proximity to services, shopping, schools, and other areas.
• Any defects that aren't apparent. (You should inform your real estate agent about defects so a buyer can be informed.)

Pricing and Merchandising

• Don't base your asking price simply on what you paid for the home. You may be asking too little or too much.
• Determine how much time you have in which to sell your home. If you must sell quickly, will you take a lower price? If you have some flexibility, you may choose a slightly higher price.
• If you are working with one, ask your real estate agent for information on recent sales of comparable homes in your area.
• Hire an appraiser to give you his or her opinion of the market value.
• Don't price your home too high as a means of making more profit. You will lose a large pool of eligible buyers who won't even look at your home because they can't afford the price. Likewise, you'll disappoint those buyers who can find more house for their money elsewhere.
• The value of your home is based on the buyer's perception of that value, rather than the amount you originally paid for the house.

Merchandising Your Home

• As you prepare your home to be shown to prospective buyers, you must look at your home through a buyer's eyes.
• Unclutter all areas of your home to create an impression of spaciousness.
• Clean everything thoroughly. Ask a friend to help you assess your efforts -- especially in sensitive areas such as odor removal.
• Neutralize your home by making improvements in neutral colors.

In the Yard

• Keep the lawn well-trimmed and edged. Keep shrubs and trees trimmed.
• Put away lawn equipment, toys, and other outdoor items. Stack firewood neatly.
• Repair and paint or stain fences.
• Check exterior surfaces. Make repairs, clean, or paint as needed.
• Clean, paint, and repair or realign gutters.
• Fix broken windows and screens, then wash.
• Wash down the exterior of the house, driveway, and sidewalks. Fix holes in pavement.
• Check the roof and repair loose shingles, or flashing.
• Make sure the entry light and doorbell work. Replace house numbers and welcome mat as needed. Paint, stain, or clean the door if needed.
• Brighten your landscaping with moveable, potted flowers.

In the Home

• Discard all unused items to reduce clutter.
• Arrange clothes neatly in closets. Store a limited amount of items on the floor and overhead shelves.
• Leave kitchen countertops as clear as possible. Clean and organize cupboard interiors.
• Check walls for smudges, chipped paint, and torn or loose wallpaper. Make repairs and paint surfaces in neutral colors.
• Clean and organize the basement, attic, and garage.
• Launder window treatments and carpets. Replace worn, stained, or smelly carpeting.
• Tighten loose doorknobs, switch plates, cabinets, drawer pulls, and the like.
• Fix sticking doors and windows, and squeaking floors and steps.
• Fix leaky faucets, and remove water stains.
• Repair or clean caulking on tubs and sinks.
• Replace all lights with higher-wattage bulbs and open all drapes.
• Arrange furniture to give an impression of spaciousness in each room.

When Your Home Is Shown

• Turn on all your lights, including the outside entrance, even during the daytime.
• Turn off the TV.
• Ask a friend to keep pets, especially during your open house.
• Put out fresh flowers, your best towels, a nice tablecloth, and other accessories.

The Offer

Carefully review the offer to purchase submitted by the buyer. It tells you the price the buyer is willing to pay and under what conditions. This offer is the most important document of the sale. Once you and the buyer sign it, it becomes the contract of sale. Once an offer has been extended, your options are to:

• Accept the terms with no changes and sign the offer.
• Make a counteroffer to the buyer by making some changes. Many counteroffers may take place before the final agreement is signed.
• Reject the offer entirely.
• Sign a binder, if applicable in your state. The binder is a more detailed contract that sets forth the major terms and is signed by both parties.
• Once you've signed an offer, you may accept a backup offer if the buyer clearly understands the house is under contract.

The Price

• Decide on a price. Be sure to estimate your proceeds -- the sale price minus fees, taxes, and insurance.
• Don't be concerned if the offer is your asking price. It doesn't mean you underpriced your home, but rather that you priced it right.
• If the price is less than you wanted, look at the contract as a whole. Perhaps the buyer is assuming some of the closing expenses you expected to pay.
• Be ready to split the difference if you and the buyer come within about $1,000 of each other.

Earnest Money

An earnest money deposit will be held by a third party until an agreement is reached between you and the buyer. At that time, the money is usually credited to the buyer and applied to the down payment. Until you accept his or her offer, the buyer may get the earnest money back. On the other hand, you may keep the earnest money if the buyer fails to follow through with the contract once it's accepted.

Title and Deed

As part of the contract process, you must prove to the buyer that you have a clear title on the house -- that you own the property, and there are no legal claims against it. Through a title search, proof is provided in the following ways:

• The insurance company may search the title through the owner's policy of title insurance. Either the buyer's insurance company or your own may conduct this search, depending on the buyer's preference of company.
• The abstract of title is a condensed history of a title to a property and a certification by the abstractor that the history is complete and accurate.
• The certificate of title is reviewed by your attorney who searches the title and issues an opinion that the title is clear.
• In some parts of the country, the Torrens system is used as a means of registering property. At closing, the duplicate Torrens certificate of title is turned over to the buyer.

Property Deed

Be prepared to convey the property with a deed -- a legal document that transfers the title (or ownership rights) of the property to the new owner. Most buyers will require a general warranty deed, in which you guarantee that no one will bring a claim against the title.

Conditions

Review the contract for the special conditions under which the buyer is offering to buy your home. A common condition is one in which the purchase of your home is contingent on the buyer selling his or her old home. The conditions may also be more specific, such as asking you to provide a survey of the property.

Provisions

Read the fine print in your contract to understand the provisions (or ground rules) of who pays for what in the context of the sale. For instance, the contract should explain who is responsible if there's damage to the house after the contract is signed. You or the buyer may add special provisions to the standard ones.

Sale Specifics

Double-check the list of everything you intend to sell that is included in the contract and make sure it is accurate. This list may include items such as fixtures, window treatments, or appliances.

Closing

The buyer and your real estate agent, if you are using one, can arrange the settlement and select the settlement agent, per your approval. The person who handles the closing may be a broker, lender, title insurance company, escrow company, or attorney. Frequently, closing is dictated by the necessity of the buyer in arranging financing, usually a period of 30 to 60 days.

Look over any terms in the contract that state when the buyer wants to take possession. If you aren't moved out by that date, you are often obligated to pay rent to the buyer.

Finishing the Details

Your attorney, if you are selling your home yourself, or your real estate agent, can help you line up any of the paperwork that the contract has called for you to supply, such as the title insurance or a survey.

• Expect the buyer's lender to send an appraiser and a surveyor to check your home.
• Notify your lender that you will be paying off the mortgage and ask for a statement of what you owe. Your outstanding balance will be subtracted from the amount you'd receive from the seller. (Any penalty for paying off the mortgage early will also be subtracted.)
• Have fix-up work done according to the contract so that final inspections may take place.
• Gather all warranties and instruction books for your home's appliances or major systems to give to the buyer.
• Once you have a closing date, notify the utility, telephone, water, trash, and other services to advise them of your final billing date. Utility companies should make final meter readings on the day of closing.

Settling Up

• Prior to closing, your buyer may wish to make a final inspection (or walk-through) to see that the home is still in good condition.
• Ask your settlement agent for a copy of the closing costs before closing. This document is known as the closing statement or settlement sheet and will contain most of the charges you'd be asked to pay.
• You may pay a loan discount fee or service fee. This fee, known as points, is one percent of the buyer's mortgage amount and charged by the lender to adjust its yield to reflect current market interest rates. For VA-guaranteed loans, the seller pays the points; otherwise, points are a negotiable item.
• Depending on your area, you might pay for charges related to the title such as title insurance or attorney's fees.
• The buyer will likely pay the fee for recording the mortgage, while you may be asked to pay the transfer fee and the deed-recording fee. Other fees, such as settlement agent fees, document preparation, notary services, or warranty coverage, are charged for preparation of closing. Discuss which fees you will be responsible for with your real estate agent.
• Typically, you as the seller will pay the real estate agent's fee. If two brokers are involved, the fee is divided between them.
• After the balance you owe on your mortgage is subtracted from your proceeds, as well as any early payment penalties, you also may pay a small charge to have the title cleared.
• You will be responsible for paying your prorated share of property taxes and hazard insurance until the date of settlement. If these charges have been paid from an escrow account, you may still have money in your account. Or, if the charges have already been paid in advance, you may receive money back from your lender.

Closing Activities

• Closing may involve more than one settlement activity: closing the property transaction, the buyer's loan, and possibly the book on your mortgage.
• Depending on your part of the country, you may attend a closing meeting. An escrow agent may complete the entire transaction. Or, you may be part of group meetings in which you, the buyer, your real estate agents, attorneys, the lender's representatives, and the settlement agent meet together or separately.
• Any issues or questions should be resolved by this time so that both parties can simply review and sign each document.
• You will sign over the deed to the buyer to convey the title to the property. You should also review the final version of the settlement statement to be sure it is in order.

Finally -- it's the moment you've waited for! At the settlement meeting or shortly thereafter, you'll turn over the keys to your house -- and be given a check you can take right to the bank.

 

Source: Better Homes and Gardens, retrieved January 25, 2005 from http://www.bhg.com/bhg/story.jhtml?storyid=/templatedata/bhg/story/data/
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