Selling Your Home: Overview
Learn about the home selling process, step by step.
Selling a home brings on a whole host of questions, and sometimes, anxieties: How much is your house really worth — what if you set the price too high or too low? Are you willing to pay a 4-6% commission for an agent 's help? Should you repaint or remodel before putting the house on the market?
This article will look at the home-selling process step by step.
Step One: Decide How the Local Market Will Affect Your Sale
Hot or cold?
A "hot" market is one in which there are more buyers than sellers, so the buyers are competing with each other and driving up prices. A "cold" market is one with more sellers than buyers, so the buyers can be choosy and bid low. In a hotter market, you can price your house aggressively. In a cooler market, setting the price at or a little below market value is best, so that the house doesn't stagnate on the market.
Do some research.
Don't rely solely on the national headlines — even in the coldest of national markets, for example, houses in some neighborhoods or cities continue to hold their value and even attract multiple bids. Chatting with your neighbors can teach you a fair amount about the heat of the local market. Also, read your local newspaper's real estate section and talk to real estate agents you meet at open houses.
Step Two: Use Comparable Houses to Set Your List Price
What is a "comp"?
The best source of pricing information comes from houses directly comparable to your own. In the real estate industry, a "comparable," or "comp," is a house with similar features, preferably located near yours. When identifying comps, look for houses with the same number of bedrooms, bathrooms, and other amenities.
Check current listings.
To get comps, visit open houses, read classified ads (in print and online), and check out websites containing real estate listings. Websites that publish the Multiple Listing Service (MLS) are particularly helpful, such as www.realtor.com, by the National Association of Realtors (NAR).
Review actual selling prices.
Of course, list prices don't tell you how much houses ultimately sell for — that's the comparable data you really need. In a hot market, houses might go for well over list price, and vice versa. Do some research at websites that collect this data, such as http://realestate.yahoo.com/re/homevaluesor www.domania.com. This information will also help you decide which of the incoming purchase offers are realistic.
Do your own homework.
Don't wait for your real estate agent, if you work with one, to put a dollar figure on how much your house is worth. For one thing, less scrupulous agents may inflate their estimates to capture your business. More important, you want to be educated about your house's real value so you can work intelligently with your agent and make rational decisions when negotiating with buyers.
Ask a real estate professional for a CMA.
Often, real estate agents are willing to provide you with a competitive market analysis at no cost. This report is a useful tool that uses comps to estimate the approximate value of your home.
Step 3: Assemble Your Team of Professionals
Most sellers prefer to work with a real estate agent or a lawyer at some point in the process. (In fact, in a handful of U.S. states, a lawyer must help finalize the sale.) Real estate agents usually charge a commission — usually about 5-6% — to be split between your agent and the buyer's agent, if any. Lawyers sometimes charge by the hour, but more commonly charge a flat fee to represent you from the contract phase until closing.
Despite the costs, experienced, responsible professionals can ultimately save you time, money, and aggravation. Unfortunately, there are plenty of incompetent or unethical ones out there, too. Take the time to get referrals from friends, and meet with a few prospects before you hire anyone.
Or, if you're organized, good with finance and legal issues, and have some time to spare, you can sell the house on your own, and save the commission.
Step 4: Make Your House Look Its Best
Before putting your house on the market, make it look as attractive as possible — buyers will pay thousands of dollars more for a house they like the look of. Usually you don't need to do a major remodel, although a fresh coat of paint can brighten your home's prospects considerably.
Step 5: Fill out Any State-Required Forms
The Seller will probably shoulder the main paperwork burden in this transaction — preparing the purchase contract. An experienced real estate attorney will be able to draft a contract based on your needs and the process should not take too long. You should be prepared to tell your attorney any fixtures that you plan on removing from the home such as window treatments (curtains, blinds), chandeliers and other lighting, and anything else which is attached to the house or the buyer may expect to be included. In addition, you should be prepared to provide your attorney with a timeline as to how soon you can move out of the house and close the deal.
Step 6: Advertise and Hold an Open House
Advertise on the MLS.
If you're working with a real estate agent, the agent should help place put the property into the online Multiple Listing Service, and maybe in the classifieds too. If you don't have an agent, you can take the same steps yourself (one website, www.iggyshouse.com, allows you to put your house on the MLS for free). Then interested buyers can make an appointment to see the house in person.
Hold an open house.
Many home sellers find open houses a useful tool. They're certainly good for bringing in the crowds. Some of the visitors will merely be curious neighbors. Welcome them, too — they may mention your house to their househunting friends. Others will be genuinely interested buyers, including some who were reticent about making an individual appointment.
Step 7: Receive and Review Purchase Offers
With any luck, one or more prospective buyers will present an offer to buy your house. (If you're in a hot market, you may want to set a deadline for receiving such offers.)
Evaluate the offer or offers.
Here's where your real estate agent can play an important role, meeting with the agents who present offers and helping you decide whether a particular offer is worth accepting. If you're choosing between more than one offer, don't assume you'll want to accept the one for the most money! A high bid with shaky financing, or one made contingent on the buyer selling his or her house first, may actually drop to the bottom of your pile. You don't want to enter into negotiations only to have them fall through.
Consider a counteroffer.
If none of the offers you receive are acceptable, you can counteroffer, suggesting changes in terms or even a higher price.
After counteroffers have gone back and forth between you and the buyer, and you've both indicated your acceptance, the Seller’s attorney should draft a Contract of Sale with all the particulars. After the Contract of Sale is signed by both parties, you're technically "in contract" to sell your house. At that point, you're legally bound to sell your house, and can't change your mind without potentially facing a lawsuit. (The exception is if you included conditions or "contingencies" in the contract, such as the buyer furnishing you with proof of his or her financing, and these conditions aren't met.)
Step 8: Closing the Deal
The signed purchase contract will include a closing date or time limit, usually several weeks in the future. During this time, the buyer will line up financing, inspections, insurance, and more. As the seller, your main duties will include:
- making your house available for inspection
- negotiating with the buyer over repair issues that come up, and
- moving out your possessions.
You probably will meet with the buyer on the closing date along with the respective attorneys and the bank (lender’s) attorney. The closing is where many documents are signed. Some of the important documents include the deed and the mortgage. Title insurance is issued to the buyer and the lender as well at closing.
Once the closing occurs, the buyer has the right to full possession of the house. If you can't be out by that date, you may be able to negotiate a short-term rental agreement with the buyer.
After the Sale: Tax Considerations
Assuming you make a profit on your sale, you might have to pay capital gains tax. The IRS website at www.irs.gov can tell you more.
Republished and edited with permission – Nolo.com