Before selling your house you should review the selling process so you know what to expect and can resolve some issues before they arise.
Things You Should know
Here are some general things you should be aware of before you start working on selling your house.
Taxes -- If you have gains from the sale of a house that you have lived in for at least 2 of the last 5 years, you can exclude $250,000 of the gains if you are single and $500,000 if you are married and own it jointly. If you haven't lived in the house for at least 2 of the last 5 years or your gains exceed the limits you will have capital gains taxes unless you do a 1031 exchange. You should discuss how the sale of the property will affect your finances with a Certified Financial Planner (CFP), Certified Public Accountant (CPA), or tax preparer.
Fair Housing Laws -- Over the years various laws have been past establishing protected classes of people that can not be discriminated against when you are deciding who to sell or rent to. There are Federal, State and Local laws so there is some variety between jurisdictions. Ask your Realtor if you have any questions.
Housing Market -- It is important to understand the housing market both in the general area and in your neighborhood. One of the biggest reasons for a house not selling is misunderstanding the market. Your Realtor can provide you with a variety of market information. You should review this information and have your Realtor take you to some of the houses for sale in your immediate area so you can see how your house compares to them.
What a Real Estate Agent is and is not -- Real Estate Agents are a licensed professional knowledgeable about real estate in general and the sales process and regulations in particular. Unless they are additionally licensed in other professions they are NOT a CPA, CFP, attorney, home inspector, appraiser, mortgage broker, tax preparer, etc. If you have questions about law, taxes, financial issue, physical issues with the property that are outside the limits of what they are licensed to provide they will advice you to seek guidance from a professional licensed in that area. They often can provide you with referrals.
Selecting a Realtor
Here are some things you should consider when selecting an agent:
Do you feel you can effectively work with them. Sure all agent are nice people but you need to be able to work with them and trust them to sell your house in the shortest time at the best price with the least hassle.
Are they a Realtor. A Realtor is a member of the National Association of Realtors (NAR). Realtor subscribe to a code of ethics and can loose their membership if they violate the code. Being a Realtor also shows commitment to the profession.
Does the Realtor have any designations? Having one or more designations show commitment to being the best agent they can be. Getting designation take time and effort for example Graduate Realtor Institute (GRI) requires 90 class room hours of training and passing tests on the material. Studies show that agents with designation are more effective that those with out.
Marketing The Property
The key to getting your house sold in the shortest time and best price is to have an effective marketing plan. A great Realtor will have a written plan that they adapt to your house.
As your Realtor cranks up the marketing for your house buyers will begin showing up with their agents to view it. Before this happens and during the rest of the selling process you should keep your house as clean as possible and make sure valuables are out of site and secured.
You should also discuss with your Realtor what restriction if any should be placed on viewing times. Have your Realtor state clearly in the MLS listing and with any showing service they maybe using. Inevitably a buyer and their agent will show up without notice. Be polite so you do not loss a buyer but it is your house so feel free to ask them to come back some other time if needed.
Offers and Negotiating
When a buyer makes an offer it will come in the form of a purchase contact with addendums. The purchase contract will contains how much money and in what form the buyer is will to pay, when closing will be, a list of contingencies and responsibilities of both parties as well has other things.
While you are probably mainly interested in the price it is important for you and your agent to review the whole offer before you respond. While a lot of the items are typical such as a home inspection the offer may have contingencies and/or timelines that do not fit with your needs. Even when it comes to the price you need to understand the structure of the payment since the buyer may want seller subside.
Along with the offer you will mostly receive a pre-approval from the buyer bank and financial information sheet from the buyer. It is important for you and agent to review these to determine if the buyer is likely to be approved for the loan. Your agent may call the issuer pre-approval letter to validate it.
Once you fully understand the offer you and your agent can craft a response. This is when the negotiation begins. Many times buyer asks for more than they want, for example a lower purchase price or larger seller subsidy. You will counter through your agent. This may go on for several rounds as you and the buyer converge on price and terms.
Once the negotiating is complete it is time to sign. It is important to know that once you and the buyer have signed the purchase contract is binding and both parties are bound by the contract so you and your agent should review it one last time before signing. Do not sign if something isn.t clear and seek an attorney.s advice if needed
Most contacts have several contingences that must be cleared before settlement can occur. If a contingence can not be cleared the buyer has the right to not purchase the property. In some cases a contingence might be resolve with a renegotiation of the purchase contract, the most common of this is when an inspector finds something significantly wrong with the property. Here are some of the most common contingences:
Lead based Paint
Radon, Mold or Asbestos Inspection
Private Well Inspection
Preliminary Title Report
Homeowner Association Documents
Seller Statutory Disclosures
Contingent on Selling Existing Home
Pre Closing walk through
It is typical for buyers to do a pre-closing walk through the day of settlement. Typically you will have moved out by then but in some cases closing may occur a few days before your move. Most sells contract have a term like .broom swept clean. meaning that you should sweep, vacuum, do a quick wipe down of kitchen and bath, and put the trash out once you have removed your stuff. While it isn.t likely the buyer refuses to close because some dirt and trash has been left behind it might make for a tense settlement.
Closing also known as settlement involves signing a few documents. You will notice that there is a lot less papers to sign than when you bought the property. While the buyer has to sign a lot of mortgage related documents you simple sign HUD1, Deed and a few other transfer documents. The most important document from your prospective is the HUD1 which shows how much everyone pays or is getting paid. You should review this carefully before signing it. You should also have your Realtor check in against the contract you signed. You should also bring a third party preferable a CPA to review the HUD1. While the bank and settlement company has previously reviewed the HUD1 and other documents mistakes are not uncommon so it is important to verify the numbers on the HUD1 match what you expect. Also be prepared if the buyer finds something wrong with the HUD1. If you are the buyer finds something wrong on the HUD1 or other documents it might hold up the closing. In many cases the settlement company can fix it quickly and the closing can continue but, in some cases the settlement may be postponed for a day or two while the issue is worked out.
Lastly it is typical for the keys to be turned over at closing to make sure you bring the keys.