Selling a house is a big transaction and it can overwhelm homeowners who are in the market to sell- for the first time. Whether you are selling to downsize, upsize, move out of the area or you are selling a rental property, there are many factors to consider before putting your house on the market.
Is It A Good Time For You?
Consider your financial situation realistically before you consider selling a house. You may want to keep the following points in mind:
Home Equity: Home equity is the homeowner’s interest in the property or any amount that the homeowners will get after paying for any liens (mortgage, secondary mortgage etc.) on the property, when he sells the property at current market value. Doing some research on equity might give you a rough idea of your property’s worth in the current market and a ballpark figure that you may earn from the transaction.
Mortgage: If there is a mortgage on the property, then you may want to look at the mortgage statements to check how much amount will go towards closing the mortgage, secondary mortgage or any line of credit. There may be fees or charge involved in closing the mortgage before time that must be factored in too.
Taxation: You may owe taxes on the capital gain when selling a property. Depending on the value of the property sold, you may have to pay less or no taxes on your primary property in which you lived for two years out of the last five years. In case you have lived in the said property for less than two years or if it is the rental property then the taxes on capital gain will be more and you may consider consulting your accountant before you decide to sell.
To Choose A Real Estate Agent Or Sell Yourself (FSBO)
After you have checked on your financial readiness, you may want to decide whether you want to sell on your own or work with a real estate agent. Selling on your own is known as “For Sale By Owner (FSBO)” and you may eliminate the real estate agent commission.
But it takes a lot of time and effort from the homeowner to sell a property on their own. According to data from the National Association of Realtors, selling a house without a realtor leads to lower sales prices. Real estate agent works for you and they bring their industry knowledge to help you decide the price of the house and complete all the paperwork for you. Choosing the right real estate agent is critical as a good real estate agent will help you decide the correct price for the property, negotiate with prospective buyer’s realtors to get you a good deal and market your property to attract more prospective buyers.
Understanding The Steps:
Real estate transactions are time consuming and it is vital to understand the steps involved in order to plan the transaction efficiently.
Decide the right price: You can start with deciding the price at which you will list the property. Arriving at the correct number where you are able to take out closing costs, realtor (buyer and seller) commissions and some equity is an ideal expectation from the transaction. But there are other factors to consider like the price at which similar houses are being sold in your area and the condition of your property. A real estate agent can help you get the information on the competition in the market and the prices at which houses sold in your area in the past.
Listing the house: Listing the house means to advertise that the house is on the market for sale. You may consider popular websites to advertise the property, if you are selling on your own or if you have involved a real estate agent then they do it for you. They have access to multiple listing service in the area where they can publish the listings.
Showing: You would receive requests to show the house, once it is listed. The prospective buyers would want to see the house before they decide whether they would like to put an offer on the property.
Offer: After the showing, the prospective buyer may decide to put an offer on the house. This offer will have the offer amount and details of their condition to buy the house along with what they are expecting in the transaction.
Contract: Contract means when the buyer and seller agree to the terms and conditions of the transaction and decide to proceed. This contract is a legal agreement and both the parties are expected to perform what they have promised in this contract.
Escrow Account: An escrow account is opened with an escrow agency that helps hold the property in trust while the transaction is being finalized. They also hold on to the earnest money from the buyer and they are responsible to calculate the final amounts due to both parties in order to close the transaction.
Inspection: The seller is obligated to give access to buyer’s home inspectors during the inspection period. The home inspector will inspect the property and send a report to the buyer. The buyer gets to choose, at this time, whether they want to go ahead with the transaction or pull back. They may ask the seller to make certain repairs or replacements.
Appraisal: Usually, appraisal follows the inspection period. Appraisal means valuation of the property by a licensed appraisal. The buyer is responsible to conduct the appraisal of the property and they may choose to renegotiate the agreed price of the property, if the appraisal comes below the contracted amount.
Closing: Closing is the final step in the process and both parties sign the closing documents to finalize the transaction. Escrow company ascertains what amount is due from the buyer, the amount the seller is responsible to pay, which includes paying lender in case there was a mortgage on the property, closing costs and the commission for the realtors.
Preparing The House For Inspection
In most real estate transactions, the closing is contingent on the results of home inspection. No buyer would like to buy a house that has multiple problems and so you may consider preparing your property for inspection. The inspectors will look at the house with a keen eye and as a seller you would want the home inspection go smoothly.
Clean The House and Declutter: Clean the property before the inspection and clear out all the areas that will be inspected, so as to avoid any red flags for the buyer. You may also consider decluttering the laundry room, cleaning the dryer vent, checking the bathrooms for clogging and cleaning the bathrooms. A simple change of HVAC filters and cleaning the gutters may also be considered.
Fix Water Damage and Leaks: Don’t forget to fix the water leaks and restore the water damage on the property. The home inspector will most definitely look for water leakage and damage, as it is considered on of the biggest red flags. Most common areas for leaks are kitchen and bathrooms, and under any appliance that may leak, for example-dishwasher and refrigerator. Don’t forget to check for leaks on the exterior of the house as well.
Appliance Maintenance: Seller may consider having a regular maintenance done for the appliances in the house including the HVAC. Buyer will definitely get impressed to see a clean inspection report on the appliances. Also, having the maintenance before the inspection may save you costly fixes later on.
Selling your house may seem like a big task but you can get a hold of the process by planning it in advance and preparing for it.