Thinking of Selling?
There’s a lot to think about!!
QUESTION #1: WHAT’S MY HOME WORTH?
When a home owner decides to make a move, usually the first topic of conversation is the value of the property. This is not only the first topic that comes up; it is also usually the most difficult. Home owners rarely understand how to determine the true value of their property. It is common for one to start with what he or she paid, then based on what one has heard or read, come up with today’s value – then often one adds every cent that was put into the house. It would be nice if it were that easy – or if that was a valid way to come up with a value. It is not.
One of the many reasons to use a truly educated and professional Realtor is because he or she will come up with the true value of the property you wish to sell – as well as the property you may want to purchase.
Let’s start with determining value. Any property is only worth what someone is willing to pay for it in the current market. It’s perhaps an overused saying, but it is very true. You could put half a million dollars into your home, it doesn’t really play that big of a role in determining present value.
WHAT ABOUT ALL OF THE IMPROVEMENTS I’VE MADE?
Upgrades do make a difference and most often a Buyer is willing to pay some premium for the improvements – but that number is never based on what you as the owner actually spent.
If you begin with what you paid, bring the value up to market and then add all of the improvements – that would mean you lived “free” for as many years as you owned the home. Many people who hold a property for several years certainly do realize a nice profit when they do sell. If you’re selling a home you’ve lived in for twenty or more years, chances are the home no longer meets code in one or more areas. This means a new owner automatically will have immediate expenses once the home changes hands – or, you will be looking at making several necessary improvements prior to putting your home on the market. In some situations, work will be required prior to a sale. For example, if your home is wood frame and has a shingle roof that is more than 16 years old then the roof must be replaced to get new insurance on the home. If the prospective Buyer is paying cash, you can negotiate with the Buyer what gets done and when. However, if your Buyer is getting financing to purchase the home, the roof will have to be replaced prior to the sale as the bank will require the insurance to be in place prior to the closing. If your home was built in the mid 80’s to early 90’s, there’s a good chance it has polybutylene pipes. Here the same rules apply as with the roof, if a mortgage is involved, a bank will not issue a mortgage without home insurance and an insurance company will not write a policy on a home with polybutylene pipes. A good Agent knows the rules and can advise you accordingly so there are no surprises.
HAVE A HOME INSPECTION BEFORE YOU LIST YOUR HOME.
When I have a seller who has lived in a home more than ten years and the home is more than 15 years old, I suggest they have a home inspection prior to listing the home. Yes, it costs from $250 – $500 depending on the size but it is money very well spent. Too often after an older home is under contract, and the Buyer does their inspections, things come up that are problematic and can result in the cancellation of the contract. Time is money and so much time can be saved by doing the inspection first, taking care of any issues that come up and then moving forward with confidence that the sale will go through. A good Agent will advise you, based on the results of the inspection, which contract you should use – the standard Contract for Sale and Purchase or an AS IS contract….read on.
WHAT TYPE OF CONTRACT SHOULD I USE?
This is a very important question and needs very careful consideration. If you own an older home and there is a good chance that it no longer meets code requirements in some areas, then it is time to discuss which type of contract you should use. The Florida Bar Association has prepared a standard contract for purchase and sale. It is an excellent contract that protects the Seller and the Buyer and treats both parties fairly. Once signed, it is a binding contract and both sides have responsibilities they must live up to in order to arrive at a successful close. It is the contract of choice. There are times however, when it makes sense to use another contract which is referred to as an AS IS contract. If you inherited a piece of property or you’ve owned it for some time but rarely used it, then there could very well be some aspects of the property you are simply not aware of. If it is evident that the homes needs more than updating due to any issues that involve plumbing, electrical work, structural work, etc. – then there is a decision to be made; to do the work required prior to the sale or to sell the house AS IS, discount the price accordingly and let the new Buyer take on the necessary work. If you have had a home inspection done, as recommended by your Realtor, the scope of work required will be spelled out and then you can make the decision intelligently. When you do decide the best way to go is with an AS IS contract, the Buyer has the right to do their own inspection and to walk away if he or she feels the amount of work to be done is more than anticipated. He or she may also come back to the table and want to renegotiate the price. The Seller may renegotiate rather than having to put the home back on the market. A good Agent will make sure the time for the prospective Buyer to complete inspections is short so if the deal falls through the time frame to get the property back on the market is limited. If the Seller does not want to give the Buyer an easy out – which the AS IS contract does do – then it is important that the Seller carefully disclose all defects to the Buyer and that the Buyer signs off on these defects prior to entering into a binding contract. By doing so the Buyer is acknowledging the fact that the property needs improvements and will request that certain items be completed prior to the sale. As per the contract, the Seller is obligated to make repairs up to a certain dollar amount. Although it may take a bit of time to get the details negotiated, both parties are bound by the contract and obligated to work out an agreement satisfactory to both sides. An important addendum to the contract spells out the obligations with regard to both radon and mold. Since both radon and mold often are present in Florida properties, a thorough inspection includes tests for both. If the radon level is high and/or if there is a presence of mold beyond safe readings, then the seller has an obligation to correct either or both. Both of these tests can be done prior to the listing to eliminate any surprises. Again, a good Agent will be able to advise you in this respect as well. From experience, the Agent knows which properties are more likely to have higher radon counts and will also be able to walk through the property knowing what to look for with regard to possible mold issues.
SHOULD I SELL MY HOME FURNISHED OR UNFURNISHED?
When people are buying vacation homes it is truly a benefit to start off with a furnished place. Often if a Seller is downsizing, much of the furniture currently in the larger home will not fit in the new home. Or if a Seller is moving from a condo to a larger home, often the scale of the larger home is such that the furniture in the condo just doesn’t fit well into the larger space. Just as often, the new home is coming furnished or the Buyer is now spending more time at the vacation home and wants to decorate it and refurnish with new furniture. Putting a value on the furniture is the next hurdle. It does not matter what you paid, do not expect to recoup even fifty percent of the furniture value. If you’re hoping to make money on the furniture then move it, nobody is going to pay you what you want. It is too easy today to pick up good furniture at bargain prices. Once in a while a Buyer comes along that is willing to overpay just for the convenience but that happens very seldom. If you really don’t want to move the furniture then consider it as part of the house and let it go. If you really don’t want to do that, then donate it and get a tax write off. If the furniture is really high end then it needs to be itemized and priced piece by piece so that a potential Seller can evaluate it and determine what it is worth to him or her. Bottom line, if you have fifty thousand dollars’ worth of furniture, you could expect to sell it for ten to fifteen thousand and you’ll probably get an offer for even less. The best advice is to plan on moving furniture that you really are attached to or you can’t imagine selling for a low price. If you cannot use it in your new home then consider putting it in a consignment shop. Remember though, they will discount it to sell it and then you’ll get at most half of what it sells for. Think about it and make a good decision when it comes to moving or leaving furniture. A good Agent will help you make the best decision based on what you have to sell.
STAGING YOUR HOME
OK, you’ve had your home inspected, made some other important decisions that needed to be made prior to listing, now – getting your home ready to show is next. Unless you’ve moved out already, there is furniture in the home and, in most cases, lots of other stuff as well. Next is another difficult task – cleaning out and clearing out. Take a look at some home listings that appeal to you and pay special attention to the details. Look at counter tops, furniture arrangement, even notice the walls and what is on them as well as what is not on them. Clean and orderly is very important. Clutter must go. If there is too much furniture, perhaps one or two pieces will need to be removed. If the home looks stark, perhaps some floral arrangements or plants need to be added along with one or two pieces of furniture. Trust your Realtor! An experienced Agent knows what sells and what does not and will advise you accordingly making sure your home is staged to show it off. Personal items such as family photographs must be put away. Expensive items that could get broken must be removed. Jewelry and other valuables should be carefully stored. Your Agent will have a professional photographer come in and take photos that will show off the house (if you have an Agent who does not do this, find another Agent!). Professional photos are critical when it comes to marketing your home and every good Agent knows that. A virtual tour and in some cases, a video taken from a drone will be included, especially if the property is on or near the water.
YOU HAVE A CONTRACT! NOW COMES THE WAITING GAME….
Your Agent has negotiated a good contract, everyone has signed and a closing date has been agreed upon. Time to celebrate? NO, not yet. Unfortunately there are several things that can go wrong during the next thirty to forty five days – which is the normal time it takes for a closing. This is where a good attorney comes in play. Your Agent will advise you to either have your own attorney review the contract or she will refer you to an experienced Real Estate Attorney in the market area you are selling in.
What could go wrong? Sometimes it’s as simple (or complicated) as the Buyer simply getting cold feet or having a life changing event take place. If the Buyer simply decides he or she has made a wrong decision you will likely be entitled to keep their deposit. A good Agent will make sure there is a healthy deposit held in escrow. This makes it much harder to walk away from.
A very well intended Buyer could suffer a stroke, have an accident, or have some other event take place that could prohibit him or her from going forward. This is where having an attorney is critical. There are several factors involved that will determine who this situation gets resolved.
The Buyer, despite having a strong pre-approval letter, has his loan denied. This will rarely happen with an experienced Agent. Your Agent will do everything legally possible to determine the credit worthiness of the Buyer and not recommend you take an offer from a Buyer who does not have solid financials. Often a Buyer has the cash but prefers to get a mortgage due to the low rates. He or she will provide information that shows they do have the cash making this scenario much less of a risk.
The Buyer is paying cash so you’d like to close sooner. It’s not that simple. The Buyer wants to make sure he or she is getting clear title to the property. Title Insurance must be issued and that takes time. If the property is in a gated community there are additional documents that are required and getting these documents can take up to thirty days. The Title Company, which may or may not be a law firm, cannot close without receiving required documents from the management company. If a Seller has not paid an assessment or is behind in dues or fees, the management company will not provide necessary documentation until those bills have been paid.
There are several other issues that can delay a closing – weather, difficulty obtaining insurance, inability to get needed repairs done on time, and new requirements from underwriters are examples.
Your Agent working closely with your attorney will do everything possible to make sure the contract closes on time and most of the time, it will. However it is important you understand ahead of time what is required and how the process works so that you can do your part to make the closing smooth and successful – which is of course everybody’s goal!!