There are several tips for home sellers that can help increase their odds of getting their home sold. Pricing your home appropriately and preparing it for buyers to view are the beginning. To get your home sold, however, sellers have other matters which need consideration.
Pricing is Key
One of the most important things in getting an offer on your home is pricing it right. Overpricing your home will result in it sitting on the market longer. It also reduces the pool of buyers that will consider your home. Of course, you also want to make sure that you’re not leaving anything on the table unnecessarily.
Your realtor should provide you with a Market Value Analysis (also known as a CMA). Understand that the market value of your home is based on recently sold homes that are in your neighborhood. These homes are similar in square footage, room count and condition. The realtor will compare these properties to your home and adjust value for any differences. Just a note, don’t expect that your home will get the same price as a freshly renovated home unless it really is similarly updated.
Presentation matters both online and in person.
The presentation of your home matters both on the internet and in person. Most buyers will start their home search on the internet months before they actually start looking at homes in person. The quality of your pictures and the text used to describe your home can make a difference. Many buyers will also see homes they like on the internet and drive by or visit open houses. Curb appeal matters.
Your realtor should email you a link to your listing for review. View the pictures of your home critically (like a buyer would). If they are too dark, have strange angles or just don’t represent your home well, ask for new pictures.
When showing your home to buyers, it should always be “show-ready”. Dishes in the sink, clothes on the floor or the furniture is often a turn off to buyers. Clutter, pet and cigarette odor and dirty carpets are also a no. Take time to do a deep-clean, purge unwanted items and clean out or organize closets, the basement and garage. Maximize the image of your home as welcoming, spacious and well-maintained as much as possible.
Calculate the expected net proceeds from your sale
You want to have a decent idea of how much you will receive from the sale of your home after paying off your mortgage and other closing costs. This will let you know how much you will have to contribute towards the purchase of your new home or whatever else you plan for your next step. However, you may also discover that you need to bring funds to close the sale. This happens if the sales price is not sufficient to pay off your mortgage and other closing costs. If the deficiency is significant, you may have to do short sale.
Complete any uncompleted projects or repairs
This should be done before the home is put on the market. If the pipes are leaking in the basement, fix them. If the roof was replaced 5 years ago but there are still old water stains on the ceiling, paint it. Completing these projects are important for three reasons – market appeal, property value and financing. A well-maintained home will appeal to a bigger pool of buyers. Property value will be affected because condition is an important determinant of value. Finally, financing is affected because loan underwriting does factor in the condition of the home.
Be prepared for the negotiations
Negotiations should be expected as part of selling your home. Making sure that your home is priced at market value actually strengthens your position. The offer price is key but other terms of the offer are also important. Make sure you are comfortable with the terms presented by the buyer. If your home is not in the greatest condition or you own a condo, you may want to require conventional financing. The buyer may want to have their offer contingent on the closing of their current home. In an area with a seller’s market, this may not be something you’re willing to accept. These are a couple of terms outside of the buyer’s offer price.
Buyers may also ask for sellers to give a credit towards their closing costs or have other contingencies related to the purchase. Closing credits are commonly requested but they are negotiable. Of course, the home inspection is a major contingency in the contract. You want to be willing to negotiate if it makes sense but with an eye on your bottom line. Having an experienced realtor and attorney are important in protecting your interests in the negotiation process.
Reconsider marketing your home “as-is“
Sellers may mean this as a signal to buyers regarding negotiating repairs. However, buyers will often interpret that statement to mean that there is likely a problem with the home that needs to be addressed. They often also assume that the problem is too costly for you to handle. As a seller, you make the decision about which repairs you are willing to make. If the repair is too costly or the list too long, you have the right to refuse or you can counter the request. Don’t limit the marketing of your home by communicating problems where there may be none. Furthermore, if FHA or VA requires repairs they will need to be completed as a condition of loan approval. Weigh whether marketing your home “as-is” helps or hinders in selling your home.
Appraisals can kill a deal
An appraised value that is lower than the sales price can kill the deal. If the appraisal comes back at a lower estimated value the seller will either need to lower the sales price or the buyer’s lender will refuse financing (especially if a FHA loan). Conventional loans may require the buyer to add to downpayment in order to approve the loan if the appraisal is too low. This is why having a credible market value analysis done when pricing the home is important. Also, note that an FHA appraisal will attach to the property for several months. Therefore, any subsequent FHA loan application will use the same value.
An appraisal may also come back subject to certain repairs being completed. Chipped paint, mold, missing handrails, and plumbing problems are condition flags for FHA and VA financing. A damaged roof on either the house or garage is also a deal killer for FHA/VA condition. Finally, missing fixtures in the kitchen or bath and non-functioning furnaces or hot water heaters are also problems for financing. Conventional appraisals are not as strict as FHA/VA but the appraiser will have an eye out for deficiencies that impact the safety, soundness and structural integrity of the home. Homes with these problems will often need a cash offer or rehab loan to get financing.
Condos need a functional and adequately financed association
When you are selling your condo, the buyer’s lender will look to make sure that condos meet certain guidelines. Your condo will need a functioning association to get financing. The lender will look to see that the association has adequate reserves for capital expenditures, insurance coverage, owner occupancy levels at least 51% and no litigation. Association fees also must be no more than 15% delinquent. As a condo seller, you also want to verify whether the condo building or complex is approved for FHA financing. If not, you will need a buyer with conventional financing or cash. Finally, make sure there is a current year operating budget.
Any liens will need to be satisfied prior to closing the sale
Any delinquent property taxes, municipal or mechanic liens will need to be paid prior to closing. Also, if the IRS has placed a tax lien on your property, that will need to be paid or negotiated prior to the sale. If you are selling a condo, you also want to make sure that your monthly assessment fees and any special assessments are paid to date. If your plan is to use the proceeds of the sale to satisfy these debts, factor them into your net proceeds analysis.
Sellers have an important role in helping to ensure that they successfully get to the closing table. If you are considering selling your home in the Chicago area, please contact me for a free consultation.