Selling Step 5: Offers, Counteroffers and Negotiation
Selling your home involves both business and personal issues: you will have people looking at your house, and buyers presenting offers and counteroffers; and you’ll have to deal with bargaining, negotiating and signing documents.
REALTORS® assist owners in the offer, counteroffer and negotiation process, offering advice and counsel as offers are received and by working closely with legal counsel, tax specialists and inspectors as required.
What is an Offer?
When you put your home on the market, you are essentially making an offer to buyers: for a given number of dollars and other terms they can acquire the home. Buyers, in turn, can respond with several options:
• accept the offer
• decline the offer
• make a counteroffer
The process of making offers varies around the country. Typically, the buyer’s agent will present a written offer to the seller through the seller’s agent. The seller, in turn, may accept the offer, decline it or make a counteroffer.
What is a Counteroffer?
A counteroffer is nothing more than a new offer with different terms. Offers and counteroffers reflect the back-and-forth activity of the marketplace. It's a common, efficient and practical process - but also one that may contain tricky clauses and hidden costs. Because of this, and because counteroffers are common, it's important for buyers to remain in close contact with a REALTOR® during the negotiation process so that any proposed changes can be quickly reviewed.
What is an Acceptable Offer?
The goal of every seller is to have a line of buyers outside the front door, each bringing higher and higher offers. And while this has been known to happen, in most markets there is some balance between the number of buyers and sellers. To determine whether a buyer's offer is acceptable, the seller should consider the following questions:
• Has the buyer accepted the asking price or something close?
• Has the buyer buried thousands of dollars in discounts and seller costs within tiny clauses and contract additions?
• Is there a possible better deal than the buyer's offer? If a home has not attracted an offer in months, then the seller needs to recognize that each month costs are being incurred for mortgage payments, taxes and insurance.
• Do you have enough time to wait for other offers?
• What if no other offers are received?
• What if several offers are received? Do you choose the higher offer from the purchaser with questionable finances who may not be able to close, or a lesser offer from a buyer with preapproved financing?
• What are the contingencies and what time period do they last for if other offers are received?
In each case, the owner - with assistance from a REALTOR® - will need to carefully review offers, consider marketplace options and then determine whether an offer is acceptable.
Contingencies and “Subject to” Clauses
Buyer offers often contain contingencies or “subject to” clauses that must be met before the contract is considered binding. Contingencies can include the following:
• approved financing
• buyer selling an existing home
• satisfactory home inspection report
• test results for environmental factors including radon, mold and water quality
• termite inspections
• easements
• liens
Work with your real estate agent to make sure that any buyer contingencies have a time clause, also called a kick-out clause, which limits the contingency to a short time period (say 12, 24 or 48 hours) should you receive another acceptable offer. This makes sure you are able to pursue other offers without undue restraint.
How Do You Negotiate?
No aspect of the home buying process is more complex, personal or variable than bargaining between buyers and sellers. This is the point where the value of an experienced REALTOR® is clearly evident because he or she knows the community, has seen numerous homes for sale, knows local values and has experience negotiating realty transactions. Also, your agent, from experience, can help you avoid getting locked into a deal that’s likely to fall through because of the prospective buyer’s finances.
Real estate bargaining typically involves compromises by both sides. It's not war; it's not winner-take-all. Instead, negotiating should be seen as a natural business process: buyers should be treated with respect, and owners should never lose sight of either their best interests or their baseline transaction requirements.
There are a lot of considerations, not just price, in making and negotiating offers. This is where the working with an experienced REALTOR® can guide you to a win-win negotiation.
Tuesday, August 24, 2010
Monday, August 23, 2010
Selling Step 4: Market Your Home
Selling Step 4: Market Your Home
Marketing a home requires a specialized approach because each home is unique, the marketplace is always in flux, interest rates frequently change and new buyers search for homes each day.
In such a dynamic marketplace, you can get best sales results by working with a REALTOR® who can craft marketing plans tailored for individual homes, market conditions and buyers. Experienced REALTORS® base their marketing efforts on extensive training, what has proven successful in previous transactions and ongoing research into industry best practices.
How REALTORS® Can Help You Market Your Home
Selling can entail a variety of marketing strategies. REALTORS® can assist in marketing your home to potential buyers in several ways:
Preparation: Before being placed on the market, homes must be in "show" condition. REALTORS® can explain what repairs and upgrades are required and that are most likely to produce the best results and give the best return on investment.
Pricing: REALTORS® do more than price homes for sale, they also construct sale terms designed to hasten the selling process. It may be, for example, that a home priced at $150,000 with a 2 percent seller credit to the buyer at closing will be far more attractive to purchasers than a home priced at $147,000. Why? That 2 percent credit is worth $3,000 to the purchaser at closing - the time when buyers are most likely strapped for cash.
Marketing: REALTORS® will execute strategies and programs to get the home sold. Typically this includes placement on the local MLS and real estate Web sites, as well as related marketing, advertising and networking. Open houses, office tours, agent access to the home via the use of a lock box and networking with both local and out-of-town agents are also common.
Much of an agent’s work will be quiet and unseen - yet important. The telephone calls, the work with contacts, the follow-ups with open-house visitors, conversations with ad respondents, the Web postings and other outreach efforts are all part of the process required to sell homes.
Open Houses
There are no universal marketing standards for real estate because marketplaces are localized. For instance, open houses may be common in some communities but rarely used in others.
A REALTOR® holding an open house typically advertises that the home will be open for a given period (e.g., 2-5 p.m. on Sunday). During the open period, the REALTOR® hosts the home while the owners leave for a few hours so that buyers will feel comfortable having a good look around the property and asking questions.
The REALTOR® will provide literature, maintain a visitor log and answer questions. By interacting with visitors, the REALTOR® will seek feedback regarding the home and opportunities to follow up with prospective purchasers.
Marketing Your Home on the Internet
Your REALTOR® should advertise your home online. The Internet is a vital marketing tool for home sellers and has two important roles in the real estate selling process.
First, it is a "place" to view real estate 24 hours a day, 7 days a week and all from the comfort of home or office. There are many real estate sites, including individual agent sites, real estate franchise and brokerage sites, and also industry sites.
Second, and equally as important, the Internet offers immediate communication via e-mail and instant messaging and gives REALTORS® and consumers more opportunities to keep in touch.
Marketing your home works best using a combination of marketing strategies, knowing the local market conditions and having contact with buyers and other agents. Working with an experienced REALTOR® gives you valuable expertise in all areas related to marketing your home to buyers.
Marketing a home requires a specialized approach because each home is unique, the marketplace is always in flux, interest rates frequently change and new buyers search for homes each day.
In such a dynamic marketplace, you can get best sales results by working with a REALTOR® who can craft marketing plans tailored for individual homes, market conditions and buyers. Experienced REALTORS® base their marketing efforts on extensive training, what has proven successful in previous transactions and ongoing research into industry best practices.
How REALTORS® Can Help You Market Your Home
Selling can entail a variety of marketing strategies. REALTORS® can assist in marketing your home to potential buyers in several ways:
Preparation: Before being placed on the market, homes must be in "show" condition. REALTORS® can explain what repairs and upgrades are required and that are most likely to produce the best results and give the best return on investment.
Pricing: REALTORS® do more than price homes for sale, they also construct sale terms designed to hasten the selling process. It may be, for example, that a home priced at $150,000 with a 2 percent seller credit to the buyer at closing will be far more attractive to purchasers than a home priced at $147,000. Why? That 2 percent credit is worth $3,000 to the purchaser at closing - the time when buyers are most likely strapped for cash.
Marketing: REALTORS® will execute strategies and programs to get the home sold. Typically this includes placement on the local MLS and real estate Web sites, as well as related marketing, advertising and networking. Open houses, office tours, agent access to the home via the use of a lock box and networking with both local and out-of-town agents are also common.
Much of an agent’s work will be quiet and unseen - yet important. The telephone calls, the work with contacts, the follow-ups with open-house visitors, conversations with ad respondents, the Web postings and other outreach efforts are all part of the process required to sell homes.
Open Houses
There are no universal marketing standards for real estate because marketplaces are localized. For instance, open houses may be common in some communities but rarely used in others.
A REALTOR® holding an open house typically advertises that the home will be open for a given period (e.g., 2-5 p.m. on Sunday). During the open period, the REALTOR® hosts the home while the owners leave for a few hours so that buyers will feel comfortable having a good look around the property and asking questions.
The REALTOR® will provide literature, maintain a visitor log and answer questions. By interacting with visitors, the REALTOR® will seek feedback regarding the home and opportunities to follow up with prospective purchasers.
Marketing Your Home on the Internet
Your REALTOR® should advertise your home online. The Internet is a vital marketing tool for home sellers and has two important roles in the real estate selling process.
First, it is a "place" to view real estate 24 hours a day, 7 days a week and all from the comfort of home or office. There are many real estate sites, including individual agent sites, real estate franchise and brokerage sites, and also industry sites.
Second, and equally as important, the Internet offers immediate communication via e-mail and instant messaging and gives REALTORS® and consumers more opportunities to keep in touch.
Marketing your home works best using a combination of marketing strategies, knowing the local market conditions and having contact with buyers and other agents. Working with an experienced REALTOR® gives you valuable expertise in all areas related to marketing your home to buyers.
Tuesday, August 17, 2010
Selling Step 3: Set the Listing Price
All owners want the best possible price and terms when selling their home. Several factors, including market conditions and interest rates, will determine how much you can get for your home. The idea is to get the maximum price and the best terms during the window of time when your home is on the market.
In other words, home selling is part science, part marketing, part negotiation and part art. Unlike math where 2 + 2 always equals 4, in real estate there is no certain conclusion. All transactions are different, and because of this, you should do as much as possible to prepare your home for sale and engage the REALTOR® you feel is best able to sell your home.
What is Your Home Worth?
What homes are worth boils down to “what the market says it’s worth.” A home “value” also depends on who you ask: there's the price owners would like to get, the price buyers would like to offer and the point of agreement between buyer and seller that actually results in a sale.
In considering home values, several factors are important:
• The value of your home relates to local sale prices. The same home located elsewhere could have a different value.
• Sale prices are a product of supply and demand. If you live in a community with an expanding job base, a growing population and a limited housing supply, you have a seller’s market, and home prices will likely rise. Alternatively, if the local community is losing jobs and people are moving out, then you'll likely have a buyer's market.
• Listing prices should not be inflated. You should be strategic in setting your listing price and be sure not to overprice your home, because you may not be able to sell it. The longer a home is on the market, the more “stale” it gets, and the more likely that buyer agents will tend not to show it and that buyers will think there is something wrong with the home because it is not selling. If you overpriced your home, you many eventually have to bring the price down to even less than what you could’ve got if it was priced properly in the first place. And you will have lost the initial flurry of interest that new listings generate.
• How quickly the owner needs to sell can affect sale values. Owners who " must" sell quickly will have less leverage in the marketplace. Buyers may think that the owner is willing to trade a quick closing for a lower price - and they may be right. Conversely, owners who do not need to sell quickly may have more marketplace strength.
• Sale prices are not based on what owners " need." When an owner says, " I must sell for $300,000 because I need $100,000 in cash to buy my next home," buyers will quickly ask if $300,000 is a reasonable price for the property. If similar homes in the same community are selling for $250,000, the seller will not be able to sell for $300,000.
• Sale prices are NOT the whole deal; look also at terms and conditions. Which would you rather have: a sale price of $200,000, or a sale price of $205,000 but where you agree to make a " seller contribution" of $5,000 to offset the buyer's closing costs, pay a $2,000 allowance for roof repairs, fund two mortgage points, repaint the entire house and leave the washer and dryer?
How Do You Set a Listing Price?
Because all transactions are unique there is price flexibility in the marketplace. The amount of flexibility depends on local conditions.
For example: you're selling a townhouse and there have been five recent sales of the same model townhouse and prices ranged from $200,000 to $210,000. You now have an idea of how your home might be priced. In a strong market perhaps you can ask for $210,000 or a little more. If the market has slowed, $210,000
All owners want the best possible price and terms when selling their home. Several factors, including market conditions and interest rates, will determine how much you can get for your home. The idea is to get the maximum price and the best terms during the window of time when your home is on the market.
In other words, home selling is part science, part marketing, part negotiation and part art. Unlike math where 2 + 2 always equals 4, in real estate there is no certain conclusion. All transactions are different, and because of this, you should do as much as possible to prepare your home for sale and engage the REALTOR® you feel is best able to sell your home.
What is Your Home Worth?
What homes are worth boils down to “what the market says it’s worth.” A home “value” also depends on who you ask: there's the price owners would like to get, the price buyers would like to offer and the point of agreement between buyer and seller that actually results in a sale.
In considering home values, several factors are important:
• The value of your home relates to local sale prices. The same home located elsewhere could have a different value.
• Sale prices are a product of supply and demand. If you live in a community with an expanding job base, a growing population and a limited housing supply, you have a seller’s market, and home prices will likely rise. Alternatively, if the local community is losing jobs and people are moving out, then you'll likely have a buyer's market.
• Listing prices should not be inflated. You should be strategic in setting your listing price and be sure not to overprice your home, because you may not be able to sell it. The longer a home is on the market, the more “stale” it gets, and the more likely that buyer agents will tend not to show it and that buyers will think there is something wrong with the home because it is not selling. If you overpriced your home, you many eventually have to bring the price down to even less than what you could’ve got if it was priced properly in the first place. And you will have lost the initial flurry of interest that new listings generate.
• How quickly the owner needs to sell can affect sale values. Owners who " must" sell quickly will have less leverage in the marketplace. Buyers may think that the owner is willing to trade a quick closing for a lower price - and they may be right. Conversely, owners who do not need to sell quickly may have more marketplace strength.
• Sale prices are not based on what owners " need." When an owner says, " I must sell for $300,000 because I need $100,000 in cash to buy my next home," buyers will quickly ask if $300,000 is a reasonable price for the property. If similar homes in the same community are selling for $250,000, the seller will not be able to sell for $300,000.
• Sale prices are NOT the whole deal; look also at terms and conditions. Which would you rather have: a sale price of $200,000, or a sale price of $205,000 but where you agree to make a " seller contribution" of $5,000 to offset the buyer's closing costs, pay a $2,000 allowance for roof repairs, fund two mortgage points, repaint the entire house and leave the washer and dryer?
How Do You Set a Listing Price?
Because all transactions are unique there is price flexibility in the marketplace. The amount of flexibility depends on local conditions.
For example: you're selling a townhouse and there have been five recent sales of the same model townhouse and prices ranged from $200,000 to $210,000. You now have an idea of how your home might be priced. In a strong market perhaps you can ask for $210,000 or a little more. If the market has slowed, $210,000
Monday, August 16, 2010
Selling a house: Step 2
Selling Step 2: Get a REALTOR® When You Sell a Home
Before placing a home on the market you should identify REALTORS® in your community who can assist with the sale.
Why Use a REALTOR® to Sell Your Home?
REALTORS® are members of the NATIONAL ASSOCIATION OF REALTORS® (NAR) and must adhere to a strict Code of Ethics, and have access to a wide range of classes, seminars and certification opportunities. Local REALTOR® groups are active in community matters, and individual members are routinely involved in neighborhood organizations.
Essentially, local REALTORS® are community experts. They track real estate trends, share neighborhood concerns and participate in local matters. They're good neighbors who are in the business of helping others buy and sell homes.
How Do You Choose a REALTOR®?
Many communities have independent real estate agents and realty brokerages. You can find a local REALTOR® in local advertising; by referrals from other agents, neighbors, lenders, attorneys, financial planners and certified professional accountants; and on the Internet. Recommendations of an agent’s past clients can be valuable.
Most people choose an agent who is a relative or friend, who was referred by a relative or friend, or who was their agent for a previous sale. After that, an agent might be chosen because of a referral by one of the professionals noted above, or from a marketing piece, ad or For Sale sign.
It can be a good idea to interview more than one agent – even three or four – before selecting one to work with. These interviews are a good opportunity to consider such issues as experience, track record, market knowledge, marketing approach, professional network, representation, certification and fees.
What Should You Ask a REALTOR®?
In some cases, sellers elect to meet with only one REALTOR® while other meet with several. Whatever your preference, there are a number of questions you will want to ask, including:
• What services do you offer?
• Do you work alone or with a team or partner? What will your role in the sales process be and what will their roles be?
• What type of representation do you provide? Different states have different forms of representation: some real estate agents represent buyers, some represent sellers, some facilitate transactions as a neutral party, and in some cases different agents in a single firm may represent different parties within a transaction.
• What is your track record?
• What is your market knowledge?
• What kind of professional network do you have?
• What are your certifications/designations?
• What experience do you have in my immediate area?
• In the current market, how long should my home remain listed to get the highest possible price? Because all homes are unique, some will sell faster than others. Several factors can impact the amount of time a home remains on the market, including changing interest rates and local economic trends.
• How would you price my home? Ask about recent home sales and comparable properties currently on the market. If you speak with several real estate agents and their price estimates differ, that's OK, but be sure to ask how their price opinions were determined and why they think your home would sell for a given value.
• How will you market my home? At listing presentations, real estate agents provide a detailed summary of how they market homes, what marketing strategies have worked in the past and which marketing efforts may be effective for your home. Ask your agent which media they use, e.g., Web, flyers, real estate papers, TV, open houses, etc.
• What is your fee? Fees are established in the marketplace and not set by law or regulation. Typically, real estate agents who list homes are compensated on a performance basis, and are not paid unless the home sells under the terms and conditions that are acceptable to the seller.
• What disclosures should I receive? State rules require that real estate agents provide extensive agency disclosure information, usually at the first sit-down meeting.
• Will I be able to get an unconditional release from the listing agreement if for some reason I decide not to sell? A listing agreement is a contract that shows the real estate agent’s obligations and outlines the terms under which your home is being made available for sale. Although the length of the listing agreement negotiable, a 90 day term is common.
What Should You Expect When Working with a REALTOR® to Sell Your Home?
Once your home is listed with a REALTOR®, she or he will immediately begin to market your home according to the most appropriate conventions for your community.
Your REALTOR® should keep you informed as the marketing process unfolds and as expressions of interest are received. In time, the marketing plan may be modified to reflect buyer reactions and changes in the marketplace.
REALTORS® will also help you find any lawyers, inspectors or other professionals needed for your real estate transaction. Your agent will help you understand, evaluate, write and deliver offers and counteroffers.
Your REALTOR®’s expertise and experience is a valuable resource in the complex undertaking of selling a home. Your REALTOR® will help you every step of the way.
Before placing a home on the market you should identify REALTORS® in your community who can assist with the sale.
Why Use a REALTOR® to Sell Your Home?
REALTORS® are members of the NATIONAL ASSOCIATION OF REALTORS® (NAR) and must adhere to a strict Code of Ethics, and have access to a wide range of classes, seminars and certification opportunities. Local REALTOR® groups are active in community matters, and individual members are routinely involved in neighborhood organizations.
Essentially, local REALTORS® are community experts. They track real estate trends, share neighborhood concerns and participate in local matters. They're good neighbors who are in the business of helping others buy and sell homes.
How Do You Choose a REALTOR®?
Many communities have independent real estate agents and realty brokerages. You can find a local REALTOR® in local advertising; by referrals from other agents, neighbors, lenders, attorneys, financial planners and certified professional accountants; and on the Internet. Recommendations of an agent’s past clients can be valuable.
Most people choose an agent who is a relative or friend, who was referred by a relative or friend, or who was their agent for a previous sale. After that, an agent might be chosen because of a referral by one of the professionals noted above, or from a marketing piece, ad or For Sale sign.
It can be a good idea to interview more than one agent – even three or four – before selecting one to work with. These interviews are a good opportunity to consider such issues as experience, track record, market knowledge, marketing approach, professional network, representation, certification and fees.
What Should You Ask a REALTOR®?
In some cases, sellers elect to meet with only one REALTOR® while other meet with several. Whatever your preference, there are a number of questions you will want to ask, including:
• What services do you offer?
• Do you work alone or with a team or partner? What will your role in the sales process be and what will their roles be?
• What type of representation do you provide? Different states have different forms of representation: some real estate agents represent buyers, some represent sellers, some facilitate transactions as a neutral party, and in some cases different agents in a single firm may represent different parties within a transaction.
• What is your track record?
• What is your market knowledge?
• What kind of professional network do you have?
• What are your certifications/designations?
• What experience do you have in my immediate area?
• In the current market, how long should my home remain listed to get the highest possible price? Because all homes are unique, some will sell faster than others. Several factors can impact the amount of time a home remains on the market, including changing interest rates and local economic trends.
• How would you price my home? Ask about recent home sales and comparable properties currently on the market. If you speak with several real estate agents and their price estimates differ, that's OK, but be sure to ask how their price opinions were determined and why they think your home would sell for a given value.
• How will you market my home? At listing presentations, real estate agents provide a detailed summary of how they market homes, what marketing strategies have worked in the past and which marketing efforts may be effective for your home. Ask your agent which media they use, e.g., Web, flyers, real estate papers, TV, open houses, etc.
• What is your fee? Fees are established in the marketplace and not set by law or regulation. Typically, real estate agents who list homes are compensated on a performance basis, and are not paid unless the home sells under the terms and conditions that are acceptable to the seller.
• What disclosures should I receive? State rules require that real estate agents provide extensive agency disclosure information, usually at the first sit-down meeting.
• Will I be able to get an unconditional release from the listing agreement if for some reason I decide not to sell? A listing agreement is a contract that shows the real estate agent’s obligations and outlines the terms under which your home is being made available for sale. Although the length of the listing agreement negotiable, a 90 day term is common.
What Should You Expect When Working with a REALTOR® to Sell Your Home?
Once your home is listed with a REALTOR®, she or he will immediately begin to market your home according to the most appropriate conventions for your community.
Your REALTOR® should keep you informed as the marketing process unfolds and as expressions of interest are received. In time, the marketing plan may be modified to reflect buyer reactions and changes in the marketplace.
REALTORS® will also help you find any lawyers, inspectors or other professionals needed for your real estate transaction. Your agent will help you understand, evaluate, write and deliver offers and counteroffers.
Your REALTOR®’s expertise and experience is a valuable resource in the complex undertaking of selling a home. Your REALTOR® will help you every step of the way.
Thursday, August 12, 2010
Selling Step 1
Selling Step 1: Evaluation: Get Ready to Sell Your Home
Millions of homes are sold each year, and while each transaction is different every seller wants the same thing - the highest price with the least amount of hassle and aggravation.
Home selling is more complex than it used to be. As a seller you need to be aware of a range of issues and deal with many complex forms. You also need to know that buyer agents represent buyers and are working to get the best deal for their buyer clients.
Successfully selling your home requires experience and training in areas such as real estate, marketing, financing, negotiation and closing – this is the very expertise REALTORS® offer.
Know Why You Want to Sell Your Home
First, you should have a clear idea why you want to sell your home.
Selling a home is an important matter and there should be a good reason to sell, such as moving to a new community, needing more space, retiring to a smaller home or moving closer to family. Your reason for selling can impact the negotiating process so it's important to discuss your needs and wants in private with the REALTOR® who lists your home.
To get an idea of whether it’s a seller’s market or a buyer’s market, many people start by looking at online or printed real estate guides to research the current market and the price of comparable properties.
Is Your Home Ready to Be Sold?
The home-selling process typically starts several months before a property is made available for sale. For best results when selling your home, you need to look at your home through the eyes of a prospective buyer and determine what needs to be cleaned, painted, repaired and tossed out.
Ask yourself: “If I were buying this house, what would I want to see?” The goal is to show a home which looks good, maximizes space and attracts as many buyers - and as much demand - as possible.
When Should You Sell?
The marketplace tends to be more active in the spring because parents want their children to be settled and enrolled before the beginning of the school year. Spring is also when most homes are likely to be available.
Generally, the selling market is more active from Labor Day to early December, and then January to about May. Summer and Christmas are usually the slowest times of the year for house sales.
Owners are encouraged to sell when there is a need or desire to sell, the property is ready for sale and the seller has chosen a REALTOR® to work with.
How Do You Improve Your Home's Value?
Ideally, you want to be sure that your property is competitive with other homes available in the community. REALTORS® see many homes and can provide home-improvement suggestions that are consistent with your local marketplace and cost-effective in terms of what you will be able to recoup through the sale.
The general rule in real estate is that buyers seek the least expensive home in the best neighborhood they can afford. In terms of improvements, this means you want a home that fits in with the neighborhood but that is not over improved. For example, if most homes in your neighborhood have three bedrooms, two baths and 2,500 square feet of finished space, a property with five bedrooms, more baths and far more space would likely be priced much higher and would likely be more difficult to sell.
Improvements should be made so that the property shows well, is consistent with the neighborhood and does not involve capital investments that cannot be recovered from the sale. Furthermore, improvements should reflect community preferences.
Cosmetic improvements, such as carpeting, paint, wallpaper and landscaping, help a home " show" better and often are good investments. Mechanical repairs, which ensure that all systems and appliances are in good working condition, are required to get a top price.
Prepare yourself to sell your home by evaluating why you want to sell, and when to sell and by improving your home and property to enhance its value to buyers.
Working with an experienced REALTOR® will give you valuable expertise and advice to guide you through the complex process of selling your home.
Millions of homes are sold each year, and while each transaction is different every seller wants the same thing - the highest price with the least amount of hassle and aggravation.
Home selling is more complex than it used to be. As a seller you need to be aware of a range of issues and deal with many complex forms. You also need to know that buyer agents represent buyers and are working to get the best deal for their buyer clients.
Successfully selling your home requires experience and training in areas such as real estate, marketing, financing, negotiation and closing – this is the very expertise REALTORS® offer.
Know Why You Want to Sell Your Home
First, you should have a clear idea why you want to sell your home.
Selling a home is an important matter and there should be a good reason to sell, such as moving to a new community, needing more space, retiring to a smaller home or moving closer to family. Your reason for selling can impact the negotiating process so it's important to discuss your needs and wants in private with the REALTOR® who lists your home.
To get an idea of whether it’s a seller’s market or a buyer’s market, many people start by looking at online or printed real estate guides to research the current market and the price of comparable properties.
Is Your Home Ready to Be Sold?
The home-selling process typically starts several months before a property is made available for sale. For best results when selling your home, you need to look at your home through the eyes of a prospective buyer and determine what needs to be cleaned, painted, repaired and tossed out.
Ask yourself: “If I were buying this house, what would I want to see?” The goal is to show a home which looks good, maximizes space and attracts as many buyers - and as much demand - as possible.
When Should You Sell?
The marketplace tends to be more active in the spring because parents want their children to be settled and enrolled before the beginning of the school year. Spring is also when most homes are likely to be available.
Generally, the selling market is more active from Labor Day to early December, and then January to about May. Summer and Christmas are usually the slowest times of the year for house sales.
Owners are encouraged to sell when there is a need or desire to sell, the property is ready for sale and the seller has chosen a REALTOR® to work with.
How Do You Improve Your Home's Value?
Ideally, you want to be sure that your property is competitive with other homes available in the community. REALTORS® see many homes and can provide home-improvement suggestions that are consistent with your local marketplace and cost-effective in terms of what you will be able to recoup through the sale.
The general rule in real estate is that buyers seek the least expensive home in the best neighborhood they can afford. In terms of improvements, this means you want a home that fits in with the neighborhood but that is not over improved. For example, if most homes in your neighborhood have three bedrooms, two baths and 2,500 square feet of finished space, a property with five bedrooms, more baths and far more space would likely be priced much higher and would likely be more difficult to sell.
Improvements should be made so that the property shows well, is consistent with the neighborhood and does not involve capital investments that cannot be recovered from the sale. Furthermore, improvements should reflect community preferences.
Cosmetic improvements, such as carpeting, paint, wallpaper and landscaping, help a home " show" better and often are good investments. Mechanical repairs, which ensure that all systems and appliances are in good working condition, are required to get a top price.
Prepare yourself to sell your home by evaluating why you want to sell, and when to sell and by improving your home and property to enhance its value to buyers.
Working with an experienced REALTOR® will give you valuable expertise and advice to guide you through the complex process of selling your home.
How to Set a List Price for Your Home
How to Set a List Price for Your Home
Setting the list price for your home involves evaluating various market conditions and financial factors. During this phase of the home selling process, your REALTOR® will help you set your list price based on:
• pricing considerations
• comparable sales
• market conditions
• offering incentives
• estimated net proceeds
Pricing Considerations – Find a Balance Between Too High and Too Low
When setting a list price for your home, you should be aware of a buyer’s frame of mind. Consider the following pricing factors:
If you set the price too high, your house won’t be picked for viewing, even though it may be much nicer than other homes on the street. You may have told your REALTOR® to "Bring me any offer. Frankly, I’d take less." But compared to other houses for sale, your home simply looks too expensive to be considered.
If you price too low, you'll short-change yourself. Your house will sell promptly, yes, but you may make less on the sale than if you had set a higher price and waited for a buyer who was willing to pay it.
TIP: Never say "asking" price, which implies you don't expect to get it.
Price Against Comparable Sales in Your Neighborhood
No matter how attractive and polished your house, buyers will be comparing its price with everything else on the market.
Your best guide is a record of what the buying public has been willing to pay in the past few months for property in your neighborhood. Your REALTOR® can furnish data on sales figures for those comparable sales and analyze them to help you come up with a suggested listing price. The decision about how much to ask, though, is always yours.
Competitive Market Analysis (CMA): The list of comparable sales a REALTOR® brings to you, along with data about other houses in your neighborhood that are presently on the market, is used for a "Comparative Market Analysis" (CMA). To help in estimating a possible sales price for your house, the analysis will also include data on nearby houses that failed to sell in the past few months, along with their list prices.
A CMA differs from a formal appraisal in several ways. One major difference is that an appraisal will be based only on past sales. Also, an appraisal is done for a fee while the CMA is provided by your REALTOR® and may include properties currently listed for sale and those currently pending sale. For the average home sale, a CMA probably gives enough information to help you set a proper price.
Formal Written Appraisal: A formal written appraisal (which may cost a few hundred dollars) can be useful if you have unique property, if there hasn't been much activity in your area recently, if co-owners disagree about price or if there is any other circumstance that makes it difficult to put a value on your home.
TIP: If you do order a market value appraisal, make it clear you don't need an elaborate, or full narrative report, i.e., the kind that's complete with photos of the house and neighborhood. Floor plans and a site map is sufficient in most cases.
Market Conditions – Is it a Buyer’s Market or a Seller’s Market?
A CMA often includes a Days on the Market (DOM) value for each comparable house sold. When real estate is booming and prices are rising, houses may sell in a few days. Conversely, when the market slows down, average DOM can run into many months.
Your REALTOR® can tell you whether your area is currently in a buyer's market or a seller's market. In a seller's market, you can price a bit beyond what you really expect, just to see what the reaction will be. In a buyer's market, if you really need to sell promptly, offer an attractive bargain price.
If You Price High, Set a Schedule for Lowering the Price
Some sellers list at the rock-bottom price they'd really take, because they hate bargaining. Others add on thousands to the estimated market value "just to see what happens." If you want to try that, and if you have the luxury of enough time to feel out the market, sit down with your REALTOR® and work out an advance schedule for lowering the price if need be.
If there haven't been many prospects viewing your home after three weeks, you may need to lower your list price. If that doesn't bring any prospective buyers, you may need to lower your list price again. Plan on doing that regularly until you find a level that attracts buyers. Make a written schedule in advance, before emotion takes over and you're tempted to dig your heels in.
Offering Incentives to Hasten a Sale
Sometimes cash incentives are as effective as lowering the price, especially in the lower price range where buyers may be "cash poor." You may offer to pay some or all of a buyer's closing costs and discount points required by the buyer's lending institution.
If you haven't had much traffic through your house and you’re in a hurry to sell, you may want to add the offer of a bonus to the selling broker, in addition to their commission. An example of the wording for such an offer may be "to the broker who brings a successful offer before Christmas."
Estimating Net Proceeds
Once you’ve been given an estimate of market value by your REALTOR®, you can get a rough idea of how much cash you might walk away with when the sale is completed. This can be particularly useful when you start looking for another home to buy.
To estimate your net proceeds, from the estimated sales amount, subtract the applicable costs in the three sections outlined below: seller’s costs, buyer’s/seller’s costs and closing costs.
Seller’s Costs: Subtract the following costs as applicable.
• payoff figure on your present loan(s)
• broker's commission
• prepayment penalty on your mortgage
• attorney's fees
• unpaid property taxes
Buyer’s/Seller’s Costs: Additionally, your REALTOR® can tell you whether local customs or rules dictate whether the buyer or seller pays for the items listed below. Subtract the following costs, as applicable.
• title insurance premium
• transfer taxes
• survey fees
• inspections and repairs for termites, etc.
• recording fees
• Homeowner Association transfer fees and document preparation
• home protection plan
• natural hazard disclosure report
Closing Costs: As far as closing costs are concerned, you and your eventual buyer may agree on any arrangement that suits you, no matter what local practice dictates. Your REALTOR® will assist you in estimating what your final closing costs will be.
Setting the list price for your home involves evaluating various market conditions and financial factors. During this phase of the home selling process, your REALTOR® will help you set your list price based on:
• pricing considerations
• comparable sales
• market conditions
• offering incentives
• estimated net proceeds
Pricing Considerations – Find a Balance Between Too High and Too Low
When setting a list price for your home, you should be aware of a buyer’s frame of mind. Consider the following pricing factors:
If you set the price too high, your house won’t be picked for viewing, even though it may be much nicer than other homes on the street. You may have told your REALTOR® to "Bring me any offer. Frankly, I’d take less." But compared to other houses for sale, your home simply looks too expensive to be considered.
If you price too low, you'll short-change yourself. Your house will sell promptly, yes, but you may make less on the sale than if you had set a higher price and waited for a buyer who was willing to pay it.
TIP: Never say "asking" price, which implies you don't expect to get it.
Price Against Comparable Sales in Your Neighborhood
No matter how attractive and polished your house, buyers will be comparing its price with everything else on the market.
Your best guide is a record of what the buying public has been willing to pay in the past few months for property in your neighborhood. Your REALTOR® can furnish data on sales figures for those comparable sales and analyze them to help you come up with a suggested listing price. The decision about how much to ask, though, is always yours.
Competitive Market Analysis (CMA): The list of comparable sales a REALTOR® brings to you, along with data about other houses in your neighborhood that are presently on the market, is used for a "Comparative Market Analysis" (CMA). To help in estimating a possible sales price for your house, the analysis will also include data on nearby houses that failed to sell in the past few months, along with their list prices.
A CMA differs from a formal appraisal in several ways. One major difference is that an appraisal will be based only on past sales. Also, an appraisal is done for a fee while the CMA is provided by your REALTOR® and may include properties currently listed for sale and those currently pending sale. For the average home sale, a CMA probably gives enough information to help you set a proper price.
Formal Written Appraisal: A formal written appraisal (which may cost a few hundred dollars) can be useful if you have unique property, if there hasn't been much activity in your area recently, if co-owners disagree about price or if there is any other circumstance that makes it difficult to put a value on your home.
TIP: If you do order a market value appraisal, make it clear you don't need an elaborate, or full narrative report, i.e., the kind that's complete with photos of the house and neighborhood. Floor plans and a site map is sufficient in most cases.
Market Conditions – Is it a Buyer’s Market or a Seller’s Market?
A CMA often includes a Days on the Market (DOM) value for each comparable house sold. When real estate is booming and prices are rising, houses may sell in a few days. Conversely, when the market slows down, average DOM can run into many months.
Your REALTOR® can tell you whether your area is currently in a buyer's market or a seller's market. In a seller's market, you can price a bit beyond what you really expect, just to see what the reaction will be. In a buyer's market, if you really need to sell promptly, offer an attractive bargain price.
If You Price High, Set a Schedule for Lowering the Price
Some sellers list at the rock-bottom price they'd really take, because they hate bargaining. Others add on thousands to the estimated market value "just to see what happens." If you want to try that, and if you have the luxury of enough time to feel out the market, sit down with your REALTOR® and work out an advance schedule for lowering the price if need be.
If there haven't been many prospects viewing your home after three weeks, you may need to lower your list price. If that doesn't bring any prospective buyers, you may need to lower your list price again. Plan on doing that regularly until you find a level that attracts buyers. Make a written schedule in advance, before emotion takes over and you're tempted to dig your heels in.
Offering Incentives to Hasten a Sale
Sometimes cash incentives are as effective as lowering the price, especially in the lower price range where buyers may be "cash poor." You may offer to pay some or all of a buyer's closing costs and discount points required by the buyer's lending institution.
If you haven't had much traffic through your house and you’re in a hurry to sell, you may want to add the offer of a bonus to the selling broker, in addition to their commission. An example of the wording for such an offer may be "to the broker who brings a successful offer before Christmas."
Estimating Net Proceeds
Once you’ve been given an estimate of market value by your REALTOR®, you can get a rough idea of how much cash you might walk away with when the sale is completed. This can be particularly useful when you start looking for another home to buy.
To estimate your net proceeds, from the estimated sales amount, subtract the applicable costs in the three sections outlined below: seller’s costs, buyer’s/seller’s costs and closing costs.
Seller’s Costs: Subtract the following costs as applicable.
• payoff figure on your present loan(s)
• broker's commission
• prepayment penalty on your mortgage
• attorney's fees
• unpaid property taxes
Buyer’s/Seller’s Costs: Additionally, your REALTOR® can tell you whether local customs or rules dictate whether the buyer or seller pays for the items listed below. Subtract the following costs, as applicable.
• title insurance premium
• transfer taxes
• survey fees
• inspections and repairs for termites, etc.
• recording fees
• Homeowner Association transfer fees and document preparation
• home protection plan
• natural hazard disclosure report
Closing Costs: As far as closing costs are concerned, you and your eventual buyer may agree on any arrangement that suits you, no matter what local practice dictates. Your REALTOR® will assist you in estimating what your final closing costs will be.
Wednesday, August 11, 2010
Understanding Capital Gains in Real Estate
Understanding Capital Gains in Real Estate
When you sell a stock, you owe taxes on your gain — the difference between what you paid for the stock and what you sold it for. The same holds true when selling a home (or a second home), but there are some special considerations.
How to Calculate Gain
In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate, follow these steps:
1. Purchase price: _______________________
The purchase price of the home is the sale price, not the amount of money you actually contributed at closing.
2. Total adjustments: _______________________
To calculate this, add the following:
• Cost of the purchase — including transfer fees, attorney fees, and inspections, but not points you paid on your mortgage.
• Cost of sale — including inspections, attorney fees, real estate commission, and money you spent to fix up your home just prior to sale.
• Cost of improvements — including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.
3. Your home’s adjusted cost basis: _______________________
The total of your purchase price and adjustments is the adjusted cost basis of your home.
4. Your capital gain: _______________________
Subtract the adjusted cost basis from the amount your home sells for to get your capital gain.
A Special Real Estate Exemption for Capital Gains
Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if you meet the following criteria:
• You have lived in the home as your principal residence for two out of the last five years.
• You have not sold or exchanged another home during the two years preceding the sale.
• You meet what the IRS calls “unforeseen circumstances,” such as job loss, divorce, or family medical emergency.
When you sell a stock, you owe taxes on your gain — the difference between what you paid for the stock and what you sold it for. The same holds true when selling a home (or a second home), but there are some special considerations.
How to Calculate Gain
In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate, follow these steps:
1. Purchase price: _______________________
The purchase price of the home is the sale price, not the amount of money you actually contributed at closing.
2. Total adjustments: _______________________
To calculate this, add the following:
• Cost of the purchase — including transfer fees, attorney fees, and inspections, but not points you paid on your mortgage.
• Cost of sale — including inspections, attorney fees, real estate commission, and money you spent to fix up your home just prior to sale.
• Cost of improvements — including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.
3. Your home’s adjusted cost basis: _______________________
The total of your purchase price and adjustments is the adjusted cost basis of your home.
4. Your capital gain: _______________________
Subtract the adjusted cost basis from the amount your home sells for to get your capital gain.
A Special Real Estate Exemption for Capital Gains
Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if you meet the following criteria:
• You have lived in the home as your principal residence for two out of the last five years.
• You have not sold or exchanged another home during the two years preceding the sale.
• You meet what the IRS calls “unforeseen circumstances,” such as job loss, divorce, or family medical emergency.
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