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Selling Your Home - Pricing the House to Sell
What is the difference between list and sales prices?
The list price is how much a house is advertised for and is usually only an estimate of what a seller would like to get for the property. The sales price is the amount a property actually sells for. It may be the same as the listing price, or higher or lower, depending on how accurately the property was originally priced and on market conditions. If you are a seller, you may need to adjust the listing price if there have been no offers within the first few months of the property's listing period.
What are the two most important factors when selling a home?
Price and condition are the two most important factors in selling a home, even in a down market. The first step is to price your home correctly. Use comparative sales information from your agent, or pay for a professional appraiser (usually $200 to $300), to objectively evaluate your home's worth. Second, go through the house and repair any obvious cosmetic defects that could deter a buyer. In a down market, you may have to consider lowering your price and/or making a major repair, such as replacing the roof, in order to lure a buyer. Also, make sure that your home is getting the exposure it deserves through open houses, broker open houses, advertising, good signage and a listing on the local multiple listing service or online listings provider. If this isn't happening, take it up with your agent or agent's broker. If you are still not satisfied you are getting the service you need, you may have to switch agents.
What is the best time to buy?
Because many buyers prefer to move in the spring or summer, the market starts to heat up as early as February. Families with children are eager to buy so they can move during summer vacation, before the new school year begins. The market slows down in late summer before picking up again briefly in the fall. November and December have traditionally been slow months, although some astute buyers look for bargains during this period.
What is the difference between market value and appraised value?
The appraised value of a house is a certified appraiser's opinion of the worth of a home at a given point in time. Lenders require appraisals as part of the loan application process; fees range from $200 to $300. Market value is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparable properties, performed by a real estate agent or broker. Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth.
What is the difference between list price, sales price and appraised value?
The list price is a seller's advertised price, a figure that usually is only a rough estimate of what the seller wants to get. Sellers can price high, low or close to what they hope to get. To judge whether the list price is a fair one, be sure to consult comparable sales prices in the area. The sales price is the amount of money you as a buyer would pay for a property. The appraisal value is a certified appraiser's estimate of the worth of a property, and is based on comparable sales, the condition of the property and numerous other factors.
How does someone sell a slow mover?
Even in a down market, real estate experts say that price and condition are the two most important factors in selling a home. If you are selling in a slow market, your first step would be to lower your price. Also, go through the house and see if there are cosmetic defects that you missed and can be repaired. Secondly, you need to make sure that the home is getting the exposure it deserves through open houses, broker open houses, advertising, good signage, and listings on the local multiple listing service (MLS) and on the Internet. Another option is to pull your house off the market and wait for the market to improve. Finally, if you who have no equity in the house, and are forced to sell because of a divorce or financial considerations, you could discuss a short sale or a deed-in-lieu-of- foreclosure with your lender. A short sale is when the seller finds a buyer for a price that is below the mortgage amount and negotiates the difference with the lender. In a deed-in-lieu-of-foreclosure situation, the lender agrees to take the house back without instituting foreclosure proceedings. The latter are radical options. Your simplest, and in many cases most effective, option is to lower the price.
How is the price set?
It's very important to price your home according to current market conditions. Because the real estate market is continually changing, and market fluctuations have an effect on property values, it's imperative to select your list price based on the most recent comparable sales in your neighborhood. A so-called comparative market analysis provides the background data upon which to base your list-price decision. When you prepare to sell and are interviewing agents, study each agent's comparable sales report (the data should be no more than three months old). If all agents agree on a price range for your home, go with the consensus. Watch out for an agent whose opinion of value is considerably higher than the others.
What are the standard ways of finding out how much a home is worth?
A comparative market analysis and an appraisal are the standard methods for determining a home's value. Your real estate agent will be happy to provide a comparative market analysis, an informal estimate of value based on comparable sales in the neighborhood. Be sure you get listing prices of current homes on the market as well as those that have sold. You also can research this yourself by checking on recent sales in public records. Be sure that you are researching properties that are similar in size, construction and location. This information is not only available at your local recorder's or assessor's office but also through private companies and on the Internet. An appraisal, which generally costs $200 to $300 to perform, is a certified appraiser's opinion of the value of a home at any given time. Appraisers review numerous factors including recent comparable sales, location, square footage and construction quality.
How do you prepare a house to sell?
Doing whatever you can to put your house's best face forward is very important if you want to get close to your asking price or sell as quickly as possible. Short of spending a lot of money, here are several ideas for making your home show better:
* Sweep the sidewalk, mow the lawn, prune the bushes, weed the garden and clean debris from the yard.
* Clean the windows (both inside and out) and make sure the paint is not chipped or flaking. And speaking of paint, if your home was built before 1978, new federal law gives a buyer the right to request a lead inspection. If you think you might have some problems, do the inspection yourself beforehand and make any fixes you can.
* Be sure that the doorbell works.
* Clean and spruce up all rooms, furnishings, floors, walls and ceilings. It's especially important that the bathroom and kitchen are spotless.
* Organize closets.
* Make sure the basic appliances and fixtures work. Get rid of leaky faucets and frayed cords.
* Make sure the house smells good: from an apple pie, cookies baking or spaghetti sauce simmering on the stove. Hide the kitty litter.
* Put vases of fresh flowers throughout the house.
* Having pleasant background music playing in the background also will help set your stage.
Where do I get information on housing market stats?
A real estate agent is a good source for finding out the status of the local housing market. So is your statewide association of Realtors, most of which are continuously compiling such statistics from local real estate boards. For overall housing statistics, U.S. Housing Markets regularly publishes quarterly reports on home building and home buying. Your local builders association probably gets this report. If not, the housing research firm is located in Canton, Mich.; call (800) 755-6269 for information; the firm also maintains an Internet site. Finally, check with the U.S. Bureau of the Census in Washington, D.C.; (301) 763-2422. The census bureau also maintains a site on the Internet. The Chicago Title company also has published a pamphlet, "Who's Buying Homes in America." Write Chicago Title and Trust Family of Title Insurers, 171 North Clark St., Chicago, IL 60601-3294.
Is a low offer a good idea?
While your low offer in a normal market might be rejected immediately, in a buyer's market a motivated seller will either accept or make a counteroffer. Full-price offers or above are more likely to be accepted by the seller. But there are other considerations involved:
* Is the offer contingent upon anything, such as the sale of the buyer's current house? If so, a low offer, even at full price, may not be as attractive as an offer without that condition.
* Is the offer made on the house as is, or does the buyer want the seller to make some repairs or lower the price instead?
* Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.
Seller
Information
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| Pricing a home
If you're planning on selling a house, you'll have
to decide what price you're going to ask for the home. This is one of
the most important and difficult decisions you'll have to make. Buyers
select by comparison shopping, so your home will have to have a fair
market price in order for it to sell. A real estate professional can
help you determine the market value of your home while still obtaining
the top-dollar price for your piece of property.
Making Your Home Look Its Best
When you're selling your home you'll want to put forth the very best
product. Buyers aren't coming for just a quick look but for a careful
inspection. Keep the exterior neat by painting the trim, clipping the
hedges, mowing, edging, and weeding the lawn and you may even want to
plant a few flowers.
Inside you'll want to lighten up the darker corners,
perhaps add some fresh paint and put the clutter away to give the rooms
an open feeling. Make sure there are no "stale" odors in the
home. This can be especially important for remote areas such as a basement
or attic. On the day of your open house, you may want to consider baking
some cookies or bring in some fragrant fresh flowers. This will add
a cheery and pleasant scent to your home. These little things just may
help you sell your home a bit more quickly. The Offer
When you have a home for sale, eventually a prospective buyer will "make an offer." As the seller, you basically have three options: you can accept the offer, reject the offer or give a counter offer. A counter offer usually will encourage a buyer to continue their negotiations. You may also receive multiple offers. You may prefer to take slightly less for your property from someone who is willing to pay cash, versus someone who needs to sell their current home first. Contingencies, move-in dates, and financing are all things to consider when weighing an offer. If things seem a bit overwhelming, rely on your experienced real estate professional, who can go over the various points with you, and help you choose the best offer.
Sell Fast: Do What No One Else Does
selling in The Current Market (Jan. 1st, 2007)
Here's a short note from a seller in Florida that could easily be any seller in North America in our current market place:
"I have an investment property in Poinciana, Florida, that I have been trying to sell since February this year (2006). It is a brand new 4 bedroom, 2 baths, 2 half-baths condo and we did have it under contract for sale twice and both times, the deals fell through at the 11th hour. We now have it on the rental market and are still having a difficult time finding a qualified tenant. I am currently working with a property management company and am not pleased with the results to date. I am wondering if you have any investors that may be interested in purchasing the property at a discount or any creative ideas for selling/renting in the current market."
If you're going to sell in this market there are really only a few -- but very important -- things you must do.
- Fix up the place. I'm dealing with sellers these days who think that if they just make the house look better than how they've been living in it, then maybe that will draw the buyers. This approach is not working in today's market.
One of the ways to overcome this push-back is to simply visit some houses that are in the same market area and type of home that you own. How do they look compared to yours? On top of that -- how does your house look compared to the new construction in your price range? Make the house look, "Wow," in this market or you'll lose buyers right when they walk into the front door.
- Price it below market. Don't mess around on this second point or you could lose more money as each month floats by without a sale. If the fish are biting at 20 feet, no expensive bait is going to bring those catfish up to 10 feet. The same is true about your house. If your competitors are selling at $30,000 or $50,000 less than yours, the hot tub, new kitchen and bath are obviously not attracting your "fish." Get with it, lower your bait, and sell now so you can take advantage of the lower prices when it comes time for your own purchase.
- Market the deal as much as the house. If you will consider closing costs, don't just say you will, put a dollar mark on it. Offering $5,000, $10,000 or more right up front in your marketing will draw some of the cash-poor buyers to your doorstep.
- Bonuses and higher commissions. Well, it's not just the buyers who are cash-poor these days -- some agents are looking for a little more income themselves. Offer more than your competitor's commission offer. If the competition is listed at 2.5 percent -- pop it up to 3; or go from 3 to 3.5 percent. Another strategy is to offer the same on commission, but throw in a bonus of $2,500, $5,000 or more, to the selling agent. In some offices agents must split the commission with their brokers, while bonuses pass through without any split involved at all.
- Offer other non-real estate incentives to the buyer. Vacations, automobiles, jet skis, media centers, shopping sprees -- could be what the buyer wants when it comes to moving into their new home. Check with your loan officer to make sure you can put together a program that will allow such incentives or you can construct them outside of the sales contract in a separate agreement between the buyer and the seller.
In essence, make your house a one-of-a-kind deal that the buyer would be crazy to turn down.
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The Multiple Listing Service
Even before the sign is up and the brochures are ready,
your agent should list your property with the local MLS (Multiple Listing
Service). The MLS is a database of all the homes listed by local real estate
agents who are members of the service, which is practically all of the local
agents.
Important information about your property is listed
here, from general data such as square footage and number of rooms, to such
details as whether you have central air conditioning or hard wood flooring.
There should also be a photo, and a short verbal description of what makes your
house "special."
Agents search the database for homes that fit the price
range and needs of their clients. They pay special attention to homes that have
been recently placed on the market, which is one reason you get a lot of
attention when your house is first listed. Many agents will want to preview the
home before they show it to their clients.
The main point about having your house listed in the MLS
is that you expand your sales force by the number of local MLS members. Instead
of having just one agent working for you, now you may have hundreds or more,
depending on the size of your community.
The listing agent’s main job to make sure that the other
MLS members know about your house. This is accomplished through listing your
house in the Multiple Listing Service, broker previews and advertising targeted
toward other agents, not homebuyers.
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The Purpose of Advertising in General
Every home seller likes to be assured that their listing
agent or the real estate company will run ads featuring their home. Newspaper
ads could be large display ads with lots of listings or small classified ads
featuring just your property. Ads may also appear in local real estate
magazines and your listing will also show up on the Internet.
Of course the agents and companies will run ads
featuring your house, but not for the reasons you expect.
You see, the main job of advertising is not to sell your
house directly. Advertising creates phone calls and some of those callers
become clients of the agents answering the calls. This builds up a pool of
homebuyers looking for property in general, all represented by selling agents.
Multiply this by all the agents and companies who also advertise homes, and
there is a large pool of homebuyers in the market at any given time – all of
whom are represented by selling agents.
The agents representing those homebuyers know about your
home because it is listed in the Multiple Listing Service, has been on office
and broker preview, and because your agent may have also sent flyers to all the
local real estate offices.
The agents match up their clients with available homes,
one of which may be yours. Then they show the homes to their clients, who
eventually make an offer on one. That is how your house gets sold. Ads
create a pool of clients, one of which buys your home. Ads do not usually sell
your house directly.
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The "Real" Role of a Listing Agent
When you bought your home, you probably used the
services of a real estate agent. You found that agent through a referral from a
friend or family member, or through some sort of advertising or marketing. The
agent helped you in many ways and eventually you found the house of your
dreams, made an offer, closed the deal, and moved in.
For whatever reason, now it is time to sell your home
and you need a real estate agent again. Many home sellers, especially those
selling their first home, tend to think all agents are similar to the one that
helped them buy their home.
Although real estate agents can (and do) work with both
buyers and sellers, most tend to concentrate more on one than the other. They
specialize. When you bought your home, you probably worked with a "selling
agent" – an agent that works mostly with buyers. Because of the nature of real
estate advertising and marketing, the public’s main image of the real estate
profession is that of the selling agent.
As a result, many homeowners expect their listing agent
to do the same things that a selling agent does – find someone to buy their
home. After all, they do the things you would expect if they were searching for
buyers. A sign goes up in the front yard. Ads are placed in the local newspaper
and real estate magazines. Your agent holds an open house on the weekend. Your
house is proudly displayed on the Internet.
But this is only "surface" marketing. More important
activity occurs behind the scenes. After the "for sale" sign goes up and flyers
are printed, your agent’s main job is to market your home to other agents, not
to homebuyers.
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Open Houses Don't Work
Industry statistics reveal that Traditional Open Houses are not
very effective at selling homes. In fact, less than 1% of
homes are sold as a result of a traditional open house.
They're a huge waste of your time and effort, and
they're a shameful waste of your client's time and effort
as well.
Despite this, thousands of agents waste an average of $150-$300
(and 3-4 hours of their time) every single week advertising traditional
open houses. This is like throwing your hard earned money
out an open window 99% of the time. In the vast majority
of cases, traditional Open Houses don't benefit the seller. They
don't benefit the buyer. They certainly don't benefit you. In fact,
the only one who benefits is your local paper who keeps
pocketing your wasted advertising dollars.
As a result, I don't run traditional Open Houses
(and neither should you.)
Instead, I conduct a highly effective Tour of Homes. Just as the
name suggests, your Tour of Homes makes it easier for buyers by
giving them the opportunity to view several homes in one afternoon,
and represents a great way for you to easily showcase several of
your listings at once.
Here's how it works. I advertise the tour as
running during a set time period—for example between 1:00
and 3:15 on Sunday. I typically put six homes in a similar price
range on the tour, and each home is "open" for a specified
10 minute period with an allotment of 15 minutes to get from one
home to the other. (For example, house #1 on the tour might be open
from 1:00-1:10 , house #2 from 1:25-1:35 etc.) Prospects are told
they can meet us at any home on the tour at the specified time.
There are multiple benefits of this approach. For your sellers,
it means that the tour of their home only lasts 10-15 minutes, so
they don't have to give up a whole afternoon of their weekend (and
neither do you.) More importantly, it's a proven fact that the tour
format attracts a larger number of motivated buyers than a traditional
open house. We've also found that buyer prospects attending the
tour are better qualified because they have chosen to view our client's
home at this specific time. Net, net, a tour of homes tends to set
up an auction-like atmosphere (multiple buyers all viewing the house
at one time creates a fear of loss in those buyers who are interested
in the home), which ends up benefiting my clients in terms of a
faster sale and a higher price.
Even if you're currently operating with a small listing
inventory, you can still conduct, and benefit from, a full-fledged
Tour of Homes. All you need is a reasonable inventory
you can choose from, and there's no rule that says they have to
be yours.
Try this. Approach another agent (or two or three) in your office
and ask if you can "borrow" their listings. Specifically,
ask them if you can open house some of their listings this weekend.
Why would you want to do that, they might ask? Well, you will explain,
it will give you an opportunity to get face-to-face with some buyers,
and in return for giving you this opportunity, you'll be giving
their listings some bonus exposure.
What you'll find is that other agents are usually more than happy
to let you do this.
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Seller's Resources
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Overview of the Buying & Selling Process |
| Buyer |
|---|
| 1 |
Considers purchasing a home |
| 2 |
Selects a real estate agent |
| 3 |
Determines needs and wants |
| 4 |
Discusses financial issues |
| 5 |
Views & researches target homes |
| 6 |
Makes an offer to buy |
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|
| Seller |
|---|
| 1 |
Decides to sell property |
| 2 |
Selects a real estate agent |
| 3 |
Determines needs |
| 4 |
Prepares home for marketing |
| 5 |
Agent markets the home |
| 6 |
Accepts, rejects or counters offer |
 |
|
| 7 |
Offer Accepted |
 |
| 8 |
Loan Application |
| 9 |
Inspections |
| 10 |
Title Search |
| 11 |
Appraisal |
| 12 |
Loan Approval |
|
| 13 |
Closing Papers Signed |
| 14 |
Documents Recorded |
| 15 |
Funds Available To Seller |
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Preparing your home through the eyes of a buyer |
The effort put into repairing and cleaning your property is likely to be returned in a fast sale at an attractive price.
- As buyers approach your property the first time, impressions are formed
quickly.
- Paint house - this can do more for sales appeal than any other factor.
- Yard - Remove all toys, garbage, garden tools and other items from
view.
- Mow lawn and keep edged.
- Close garage doors.
- Put colorful flowers in front of house.
Often, while waiting to be let in, the first thing a buyer looks at
closely is the front door.
- Put new paint on the front door.
- Buy a new door mat.
- Buyers take a close look at the basement of a home. They will look
for bad wiring, leaky pipes and signs of decay.
- Clean out basement and dispose of everything you are not going to move.
- Ensure that there is plenty of lighting.
- Sweep or vacuum floor.
- Stack items neatly against walls.
The kitchen is often the most important room in the house. Make it
bright and attractive.
- Put a vase of fresh flowers on the table.
- Replace curtains or clean existing ones.
- Remove appliances from counters.
- Create a pleasant fragrance in the kitchen (i.e. vanilla, cinnamon).
It is important that bathrooms are clean, bright and smell fresh.
- Install a new shower curtain and replace worn throw rugs.
- Polish all fixtures.
- Open windows.
- Hang bright, fresh towels.
- Remove stains from toilets and bathtubs.
- Use air freshener.
- Display colorful soaps.
The living room
- Clean out the fireplace and place logs in it.
- Polish all woodwork.
- Put big furniture in storage so rooms are not cluttered or crowded.
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Possible work orders
The following is a list of some possible work orders. The work orders
must be completed prior to closing and the seller is responsible for having
them done. Check with your local authorities for specific requirements.
The following conditions may require a work order:
- Broken windows.
- Debris in crawl space.
- Dry rot or deteriorated wood.
- Earth-wood contact.
- Overgrown shrubbery.
- Electrical not in working condition.
- Gutters and downspouts blocked or missing.
- A hot water tank without a 3/4" discharge line.
- Inadequate foundation ventilation.
- Inadequate attic ventilation.
- Less than four feet of waterproof material around tub enclosures (tile,
formica, etc.).
- Less than 18" clearance between soil and floor joists under entire
house.
- Peeling or missing paint.
- Plumbing not in working condition.
- Single oil or gas space heaters to heat entire house.
- Water damage inside home.
You might have to:
- Paint the exterior and interior if in bad condition.
- Hook up to public water or sewer if available.
- Get county certification if home is on septic or well.
- Remove unused oil tanks or fill with cement-slurry or polyurethane
foam.
Other items to remember:
- Inspectors will need access to the attic.
- Leased equipment cannot be included in the sale (i.e. hot water tank,
alarm system, etc.).
- All assessments must be paid.
- Joint maintenance agreements will be required for common road easements
for maintenance on home where property line is within 3' of structure.
* Check with local authorities for specific requirements.
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While your house is being shown
Before Your House Is Shown
- Tag or remove items not included in sale (i.e. water conditioner, chandeliers,
plants, drapes).
- Open shades and curtains to let in light.
- Turn on enough lights so home is well-lit during showing.
- At night, turn on porch light and outdoor lighting.
- Tidy all the rooms. Neatness makes a room easier to view.
- Clean dirty dishes in the sink and put away any dishes on counter.
- Keep toys in the children's rooms.
- Put away items in the yard such as bicycles, gardening tools and skateboards.
- If fall or winter, light a fire in the fireplace.
While Your House Is Being Shown
- When possible, leave while the property is shown. If not, remain in
an area not being shown by the sales associate.
- Let the real estate expert show your house. Answer questions candidly
when asked, but avoid questioning potential buyers.
- Refer inquiries about seeing your house to your Realtor to take advantage
of the agent's professional skills in selling your home.
- Don't mention items you wish to dispose of unless asked.
- It is best to be away when your agent is holding an open house.
- Keep pets outdoors or in one area.
- Keep children quiet and in one area.
- Keep radio, stereo or TV on low volume.
- Keep money and other valuable items out of sight.
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Answers to frequently asked questions
What is title insurance?
Title insurance protects the named insured against loss because of defects,
liens, encumbrances, adverse claims or other matters not shown or disclosed
to the new owner that attach before date of policy.
What is a wood-destroying organism inspection report?
A wood-destroying organism inspection report is a written opinion by
a qualified state licensed structural pest control inspector based upon
what was visible and evident at the time of inspection. The inspection report
does not in any way represent or guarantee the structure to be free from
wood-destroying organisms or their damage, nor does it represent or guarantee
that the total damage or infestation is limited to that disclosed in the
report. Wood-destroying organisms include subterranean termites, dampwood
termites, carpenter ants, wood boring beetles and wood decay fungus.
What are the hazards of lead-based paint?
All buyers and sellers are required by law to receive and read a pamphlet
outlining the hazards of lead-based paint for homes built before 1978. Be
sure to ask your real estate agent for a copy.
What are closing costs?
Closing costs are an accumulation of charges paid to different entities
associated with the buying and selling of real estate. For sellers, they
are usually about 9.5-10% of the total sales price of a property. Some of
the closing costs you might encounter are: discount points, escrow fee,
documentation fee, homeowners' association fees, pest/rot inspection, real
estate commission and title insurance premium.
What is the difference between "pre-qualified" and "pre-approved"?
If a buyer is "pre-qualified" it has been determined, with
a loan officer, what price the buyer can afford based on the down payment,
debts and the amount the mortgage company will approve for the mortgage.
Being "pre-qualified" is only a determination of probable credit.
If "pre-approved", credit, employment and funds have been approved
by the lender.
What should a home inspection include?
Every inspection should include, but not be limited to, an evaluation
of the following:
- 1. Foundations
- 2. Roof
- 3. Heating and air conditioning systems
- 4. Ventilation
- 5. Common areas (for condominiums)
- 6. Septic tanks, wells or sewer lines*
- 7. Insulation
- 8. Plumbing and electrical systems
- 9. Ceiling, walls and floors
- 10. Doors
- 11. Hazardous materials concerns*
* There may be an additional fee for this.
What property details are usually included by Listing Services?
Usually, properties listed will include the following details:
- Location
- Photograph
- Price
- Utilities
- Amenities
- Annual property tax
- Current financing (when assumable)
- Listing company
What pages are generally included in the Purchase and Sales Agreement?
- Agency Disclosure
- Financing Addendum/Clause
- Earnest Money Receipt
- Inspection/Clause
- Conditions/Disclosures Addendum
- Contingency
- Addendum Outlining Special Conditions
- Lead-Base Paint Notification
- Property Disclosure Form (completed by Sellers)
What is the difference between a REALTOR® & Real Estate Agent?
REALTOR® identifies real estate professionals who are members of
the National Association of REALTORS® and subscribe to its strict Code
of Ethics. Not every real estate agent is a REALTOR®. A REALTOR®
may be an appraiser, property manager or involved in some other aspect of
the real estate business.
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