Selling Your Home? 10 Things You Must Know
We understand that the decision to sell your home is a difficult one to make. Congratulations on taking that call! Now that you’ve made up your mind, here’s a helpful guide with a lot of important information for you.
1. All About Market Conditions
Current market conditions will always have an impact on your sale. It can affect the price you expect, how fast you are able to sell and more. Read on.
It is a common thinking that the winter market is always slow and might not be a right time to put the house on the market. But the fact is that, in the winter market there might be less buyers, but they are serious buyers looking for a right house. It is the right time to take advantage of less inventory and selling the house at a good price.
Real estate agents and sellers close far fewer deals in winter than they do in spring or summer. While sales may be slow, if winter happens to be the most convenient time for you, go right ahead and put your home on the market. Buyers are always looking.
Markets usually fluctuate from being a buyer’s market to being a seller’s market. It’s all about demand and supply. In a buyer’s market, buyers have lots of homes to choose from because the demand is low. In a seller’s market, there are a lot more buyers and fewer sellers. Your realtor should be the best judge of the local market scenario.
Pricing it right
The price that you set for your home will also depend on the market. It’s not uncommon for highly-priced homes to sell in a seller’s market. However, in it’s a buyer’s market you may not get the high price you are hoping for. It’s important to work with a realtor who understands the market and can help you with your pricing strategy.
Selling & Buying
If you plan to buy a home around the same time that you’re selling, you will have to work out a start strategy with your realtor. If you sell at a high price you will have enough capital to buy a house even in a seller’s market. There are always crests and troughs in the market price cycles and how the market behaves. It can be a good idea to sell your house in seller's market and take a longer closing. Then buy a house as soon as the market eases a little bit.
If you plan to sell and then move into the new home that you’ve just bought, you should try and time the ‘closing date’ (the date you leave your old home) well. You should have a home by the time your closing date rolls in, so that you’re all set to move out. Realtors help buyers with conditional offers, this means offering to buy without putting down the entire amount, so that the seller is not paying to maintain two homes at once. It is also possible to extend the closing date. Finding a good realtor adept at negotiations can make your transition from selling to buying seamless.
You’ve found your dream home but no seller yet? Depending on your situation, mortgage lenders can offer ‘bridge financing’. This means you get money to make the down payment for your new home, while looking for a seller.
2. The Perfect Realty Match
Realtors are important for many reasons. Here’s how you can find a good one.
While driving around, if you see signs of realtors selling the kind of houses you like, remember to take down their details and get in touch. If there’s a particular neighborhood you’re keen on, you may want to find realtors who work in the area. Don’t forget to ask friends, family and your neighbors too!
Remember the realtor who helped you buy your current house? If you had a good experience working with him or her, there’s no reason you shouldn’t reach out. Not only do they know the house well, which can help them close a sale sooner, but working with them to buy a new house may be a lot easier.
Screen, screen, screen
Buying and selling a home is a big deal. If you’re stuck with the wrong realtor, the process can turn out to be a lot more stressful. Feel free to interview and screen the right candidate for the job. Work with someone you’re comfortable with.
Not all money
While choosing realtors, don’t fall for boasts of a high selling price for your home. Remember to question how they arrived at the price and ensure the reasons are credible and valid before signing an agreement.
3. Important: The Listing Agreement
The Listing Agreement is an important document as it gives the realtor the authority to sell your home and negotiate on your behalf to get you the maximum money for your house. And in return he is compensated with a fixed mutually agreed remuneration.
The Listing Agreement contains all the relevant and important information of your working relationship and terms with the realtor. Further, it includes all the relevant details of your home. The Agreement is also a way for buyers to contact you or your realtor, as it’s placed on the board’s Multiple Listing Service. You must pay attention to the details of the Listing Agreement as it also works as a foundation for the buyer to draft his offer.
Let’s look at what the Listing Agreement contains in more detail.
The Listing Agreement authority is a legal description of the relationship between the brokerage and you. It also includes other details like duration and time limit for the sale.
Other legal information in the Listing Agreement includes the zoning code, the lot number, land surveys etc.
Money, Price & Commission
The Listing Agreement includes the real estate commission that is owed to the brokerage service. The commission is usually a percentage of the sale and it is not uncommon for sellers and realtors to negotiate before arriving at a final percentage.
It also includes the price of the property and other financial information such as the minimum deposit you will need with any offer. An existing mortgage should also be included in the agreement. If it is to be taken over by the buyer, do mention good points of the mortgage such as a low interest rate.
The listing agreement will have to be as elaborate as it is possible about the items that are included with the price. The items are usually divided into Chattels and Fixtures.
Chattels include moveable items like microwaves, refrigerator, dishwashers etc. These moveable items are not necessarily always a part of the deal. Depending on the market conditions and also whether you want to include them, the realtor can advise you on making a list of ‘Chattels’.
Fixtures are easier to list as these include all the permanent changes you may have made to your home, such as central heating, wall-to-wall carpeting, pre-installed lighting etc. However, some items can be listed in both Chattels and Fixtures. Buyers almost always expect a basic list of fixtures to be included in the deal. You must make a clear list of Fixtures you intend to leave behind.
Listing Services are of two types, Exclusive and Multiple Listing. Exclusive Listing typically means that only the brokerage you have chosen to work with can find a buyer for your home. Multiple Listing allows your home to be put on the Multiple Listing Service, giving you a wider choice of buyers.
Sometimes, realtors will pay and operate the Multiple Listing Service. This helps them work with other realtors and their buyers to sell your house sooner. The brokerage commission you agreed upon, however, will remain the same even if a realtor opts for the Multiple Listing Service.
You will have to describe your home objectively including all the relevant details such as the architectural style of the property, how old it is, the number of rooms etc. Whilst being objective, don’t forget to include features that are sure to be appreciated by most buyers, such as spectacular views or a fabulous location.
An important factor to remember when describing your property is being as honest as you can about any problems. Does the roof leak in the winters? Is there a problem with the air-conditioning? Professional realtors will always advice you to include them in the Listing Agreement. Dishonesty can lead to litigation.
We’ve just discussed minor defects but what about major problems? Discuss with your realtor how this can be handled in the Listing Agreement. You must find a balance between being honest about a major problem, such as need for repair and renovation, and attracting buyers to at least take a look.
These days real estate boards require sellers to include all improvements and renovations done recently. Further, they also need a list of major faults and defects of the home. This is also known as the ‘Seller Property Information Statement’.
Appointments & other notes
The Listing Agreement includes appointment schedules and other important instructions for visitors such as a pet that’s wary of strangers!
Last but not the least, the complete date mentioned in the Listing Agreement communicates to potential buyers how much time you will need to move out of the property after the sale is closed. Typically, sellers request between 60 and 90 days. However, if you’re flexible about this and can move earlier, it’s a good selling point to include in the agreement.
4. Determining the Asking Price
The Asking Price will depend on various factors. This is something you must work out with your realtor. But also remember your financial requirements and why you decided to sell your home in the first place. Finding a happy balance between your expectations and what you can get is important.
Maximizing the Market Value
When it comes to pricing your home you must make the most of the market value. The market value is the amount that buyers are willing to pay for properties like yours at a given point of time (i.e. when you’re looking to sell).
If your asking price is way higher than the market value of your home, you will scare many potential buyers away. The buyers that do approach you may come prepared for some hard-nosed bargaining, knowing fully well that you’re asking too much. Buyers are far more careful about familiarizing themselves with the market and comparing properties before making an offer.
If you are not sure of the market value and ask for too less, obviously, you may end up losing thousands of dollars. It’s good to work with a realtor on maximizing the market value to work to your advantage.
Comparative Market Analysis
Realtors have methods and processes that help them understand the market value of a property well. They’re often the first to get news about latest developments in the area. They use this ‘insider’ information to analyze and value a property. You can also keep an eye on developments in your neighborhood that could affect the price of your home. Further, realtors are constantly keeping up with mortgage-related news that can affect the market such as a rise or cut in interest rates. Working with a realtor should help you price you property appropriately.
But it’s not just the general market conditions that affect the price of your property. Realtors use a technique called the Comparative Market Analysis (CMA). Using the listing services that they have access to, realtors will compare the price of your home and the prices of recently sold properties in the same category, such as size, neighborhood etc. Based on this comparison and further analyzing your home, the realtors will arrive at an Asking Price that’s as optimized as possible.
Remember that it’s very important to determine the asking price of your property first and then list it on the market. A new listing gets a lot of potential buyers and attention. You must capitalize on this and the last thing you need is being unsure of the price when an interested prospect shows up!
5. A legal eagle onboard
Hire a lawyer to carefully review all the legal documents involved in the process of selling your home.
Your lawyer will not only help review all the documents you sign but will also, more importantly, play a crucial role in going through the buyer’s offer. It is important for you to understand the terms in the buyer’s offer before you sign it. Once you commit to an offer, you’re legally bound to fulfill all the obligations mentioned in the document.
Finding a good lawyer
Did you have a positive experience with a lawyer that helped you buy you current property? If yes, then he or she will be a good choice. The lawyer will be familiar with the property and all the legal documents involved during the time of purchase.
Also be sure to ask your friends and associates for a good recommendation. You can compare the fee and experience of a shortlist of real estate lawyers and reach out to the ones you like. Do keep that in mind that you are entitled to an estimate and break-up of legal fees before you hire a lawyer.
6. Getting your home ready
You don’t have to break the bank to make your home attractive to potential buyers. Here are a few ideas to get your home ready for viewing.
Time to give your home a nice scrub! You don’t have to do it yourself. Get a cleaning service to do a thorough cleaning job. Make sure that every inch of the house is scrubbed clean. You may also have to arrange for a cleaner to come in periodically if you do not have the time to do it yourself. Every room, including the porch and the garage, has to look sparkling clean. Pay extra attention to the kitchen and bathrooms.
Once that is done, it’s time for you and your family to join hands and re-organize the home. This will depend on how cluttered your home is. Delegate and make sure that each of your respective rooms are de-cluttered and organized. Files, toys, gadgets etc. should be tucked away in their respective places for the new few weeks. Having a yard sale or taking a trip to a local charity to give away stuff you no longer need may also be a good idea to help de-clutter.
Now that you plan to sell the property, efforts to beautify the house seem pointless. Unfortunately, it is important. The small things often make a big difference - a few flowers in vases, some indoor plants, a throw over an old sofa and trimming the lawn - can make your irresistible to the buyer. Most of these little changes hardly cost any money.
If possible, you may also consider some minor painting work that you can do yourself. Fix any chipped paint, neutralize bold wall colors and remove old wallpapers to make the house more appealing. Painting doesn’t cost much and yet gives your home an instant make-over.
You may also want to finish doing any minor repairs before listing your property. This helps minimize the ‘negatives’ you have to mention in the Listing Agreement. Also, if you haven’t mentioned many repairs with the intention of completing them before the sale, make sure you do them. Needless to say, doing minor repairs that are visible (and also hidden) enhances the appeal of the property. Cracked ceilings and leaky faucets hardly help the seller command respect!
Invite an objective viewer
Consider inviting a friend or family member who doesn’t live in the home to take an objective view of the entire house. Walk through the house together and help him or her make a list of things that are bringing the ‘look’ of your home down. Set aside time to attend to these issues over the next few days.
De-politicize & personalize
Your home has to now be converted into a ‘property’. As far as possible, you may consider removing objects that make overt statements about you – such as political affiliations, personal beliefs etc. This one’s entirely up to you, of course. But if you’re prepared to be practical about the sale, then you must work on creating a neutral environment. Think of a hotel room for reference. The buyers should be able to place themselves in your home and visualize a future in the property. Realtors can sometimes offer great advice in this area. Be sure to check with them.
Don’t spend too much
Making home improvements is important to help speed-up the sale process. But you must also take into consideration your budget. Here are a few factors to keep in mind while making small changes and minor repairs & renovations.
Make a list of repairs, changes and additions you want to make to the house. Estimate the cost each of them. Now, shortlist the changes that spruce up your home the most for the least price. If your budget allows it, add a few more changes to the list. Don’t forget to seek help from your realtor who may have ideas about improving your home specifically for sale purposes.
While discussing home improvement with your realtor, don’t forget to also disclose all the major and minor problems with your property. As discussed earlier, these will have to be included in the Listing Agreement and honesty is the best policy when it comes to your relationship with the realtor. An experienced realtor has sold enough homes to help resolve you problems and negotiate the best deal for you - even if you cannot afford to fix major defects.
7. Let the Sale begin
After you’ve made the required changes to your home, your realtor will take over to market your place to potential buyers. Here’s a quick guide to help you understand what most realtors do to sell a property and how you can do your bit.
First and foremost, your realtor will place a big, noticeable ‘For Sale’ sign in front of your house. As courtesy and also to avoid the inquisitive ‘drop-by’, you should inform your neighbors in advance. For years, the ‘For Sale’ sign has helped sell millions of properties, why throw away a perfectly good marketing tool just because there are so many others these days!
Classified ads are also great to get leads. You can give your realtor a good photograph of your home. Alternately, the realtor may arrange a professional photographer for the property. Other avenues like realtor magazines, real estate listings in local newspapers and ads on cable TV are good options as well. Your realtor may also explore local mailers.
The Multiple Listing Service is a great tool to maximize exposure for your home and your realtor may do this. MLS listings also appear on www.mls.ca. The internet is the first place that people look before buying any products and services these days, including real estate.
Realtors are very well-connected with potential buyers, other realtors and investors. Word-out-mouth is often their top marketing strategy. They’ll only appreciate it if you can help them with a few of your own contacts.
The ‘Open House’
Let’s not forget the lure of the Open House. Some mellow background music, chatter of people, colorful balloons and food can help market your home. However, at an Open House, it’s your home that will be the ultimate marketing tool. Think of Open House as the medium while your home is the ad! Your realtor will take care of this and help him or her with little things like food if required.
Also, don’t forget to have an Open House for the public on a weekend so potential buyers get a sense of the neighborhood. If you live in a great area there’s no better selling point than the people and the local vibe. Your realtor would love to tap into it to market your home. But here are a few things you must do to help the process:
- Make sure all the renovations, repairs and ‘neutralizing’ of the home is done.
- Keep all valuables and expensive things locked-up. Your realtor might also have a registration process for visitors with their names and numbers.
- Your realtor will serve some food and drinks but make sure you don’t cook anything with a strong smell. Also consider using potpourri, room fresheners or even bake bread or muffins!
- Make sure the house is safe for everyone, in every possible way. Keep pets, electrical wires, items that can lead tripping etc. out of the way
5. Get out of the way.
People will feel absolutely comfortable without hopeful sellers hanging around. Try and get out of the house during the Open House or when realtors bring people for viewing.
Be prepared for interruptions
The sale phase is going to be stressful. You will have individual buyers coming in to view your property. While your realtors will schedule appointments and give you notice in advance, get ready for a change in your routine. Try and be positive about it. After all, every viewing is a potential sale.
You may consider installing a lock box, which is a small safe that can be placed outside your door.
The realtor can access the key with a code that only he knows (so do you, of course). It’s a worthy investment and far safer than leaving the key ‘under the mat’!
8. Getting Money Ready
Before the sale begins, you must be ready for the money that will be coming your way.
If your mortgage is ‘free-and-clear’, you don’t have to worry about the following. Go on to the next section! For others, here are some important factors to consider
Most people will use the money secured from the sale to pay off their mortgage. This is also known as discharging the mortgage. However, depending on the type of mortgage you have, penalties may apply. Those with an open mortgage can discharge penalty-free, while those with a closed mortgage may have to pay penalties for the discharge.
If you intend to buy a new home with the proceeds of the sale, you might want to check if your mortgage is portable. A portable mortgage lets you carry your mortgage to finance your new home purchase. The good news for those with a portable mortgage is the fact that you can do so without penalties. If the current interest rates are higher than your old interest rates, you’re in luck. You got a new home and a mortgage to finance it at a lower interest rate!
Assuming the mortgage
You can avoid paying penalties for discharge or simply choose to make things easier for your buyer, by allowing him to take over the mortgage. This is known as assuming the mortgage. Lower interest rate on an assuming mortgage is a great selling point to attract buyers!
Vendor Take Back
If your buyer can’t find a lender, you can lend to the buyer. This is known as Vendor Take Back. You can review this option with your realtor and lawyer, as the process can get quite complicated.
If you sell your home before you manage to buy one, your lender may offer ‘Bridge Financing’ to act as down payment for your new home.
Capital Gains Tax
Depending on your situation you may have to pay capital gains tax. If you had tenants living in the property or if it’s your vacation home, you will have to pay capital gains tax. However, if the property you manage to sell is your primary home, you won’t have to pay any capital gains tax on it.
Don’t forget to account for taxes in addition to the brokerage commission, as the services provided by realtors is subject to HST.
9. Offer Time
Get ready for the offer
Your realtor will have to disclose every offer made for your home. You may be called for a meeting to discuss the offer, where the buyer’s realtor will be present and you will be told the offer price.
At this meeting, you can have a separate discussion with your realtor in another room on what you think about the offer.
While the offer you get will depend on widely on many factors, here are a few common types of offers.
Firm Offer to Purchase: This means the buyer has no conditions and is agreeing to the listed price.
Conditional Offer to Purchase: This means the buyers is interested but has some conditions. For example: ‘subject to financing’.
Acceptance of Offer: You can choose to accept, reject or submit a counter offer.
Responding to the offer
When it comes to responding to the offer, you will have to work with your realtor to decide what works best for you. Depending on various factors, such as time limits, market conditions etc., your response to buyers’ offers will vary. Here are some common responses by sellers to buyers’ offers.
a. Accept the offer
When you get the price you were expecting, there aren’t any difficult conditions attached to the offer and you are ready to sell, you can accept the offer. In some situations, such as a buyer’s market, you may have to accept an offer that’s not ideal for you.
b. Reject the offer
When you think the offer is far from what you expected or you and your realtor can get more offers, you can choose to reject the offer.
c. Sign back or Counter
This is done to kick-off a negotiation process. You don’t accept nor reject but you’re signing back or you have a counter offer to make. Now, it’s up to the buyer to accept, reject or make a counter offer.
Situations to “Sign Back” or “Counter”
1. More Money
Sellers want more for their property and buyers want to get a good deal on their new home. The most common situation leading to Sign Back or Counter offer is that the seller wants more money. This is absolutely common and there’s nothing wrong about this. So feel free to ‘Counter’ asking for money if you think it’s right.
Be sure to discuss this with your realtor.
2. Moving the Closing Date
More often than not, dates don’t align perfectly. You may have been so busy trying to sell your home that you haven’t had the chance to look for a new one. Of course, you want to spend as much time as possible finding the dream home of your choice. But the buyer is in a rush to move in. That’s when you may have to negotiate the closing date and mention this in the ‘sign back’. Just as you would ‘sign back’ for more money, you can ‘sign back’ for a closing date that works better for you. You might also get money from the buyer for rent or motel charges. A good realtor will help you with all these negotiations.
3. Difficult Conditions
Quite often, offers are conditional. Here are some common conditions in real estate negotiations.
Buyer to obtain financing
Many buyers do not look aggressively enough for a mortgage until they’ve zeroed in on the home of their choice. If your buyer hasn’t obtained financing yet, then he may make an offer with this condition. Not all sellers are patient enough to wait for the buyer to obtain financing. However, in a sluggish market, sellers rarely have a choice unless there are lucky enough to get more offers. Typically, the buyer’s realtor will be honest about his client’s chances of approval.
Approval to assume mortgage/p>
If you have mortgage with good terms and a great interest rate, the buyer can assume the mortgage. However, will the lender approve your buyer? If the buyer qualifies, you won’t have a problem. The buyer’s realtor will offer honest feedback about the odds of approval. You can take your decision based on this.
Sale of purchaser’s home
Often, buyers don’t sell their home until they identify a new property they want to buy. This protects them from the expense of owning two properties. Now, it’s really up to you and your realtor to see if you want to wait for the purchaser’s house to sell. You must discuss the odds of the purchaser’s home selling with your realtor as well as his. If you’re looking for a new home yourself and you like the offer you may decide to wait. Many sellers don’t like to take a chance and don’t like this condition.
This condition is becoming so common, that in absence of any other condition and given that the offer includes a good price, the seller shouldn’t mind this one so much. If you’ve followed your realtor’s advice and spruced up your home, with all the minor repairs and renovation take care of, you shouldn’t have a problem. Also, if you’ve been honest about all existing defects in the Listing Agreement and the buyer has still given an offer, the process should be straightforward. Beware that it’s not common practice to refuse an inspection and you may make the buyer and his realtor suspicious if you’re considering doing so.
The Negotiation process
A good negotiation is a win-win process for all concerned parties. It is important to hold your ground and play fair – a difficult task for anyone. More so for you, a home seller. You may need the money to buy a new home, you may have other expenses lined-up and you want a good price. Before the negotiations, you may sit and have a serious chat with your realtor about how low you can agree to go. You may also create a budget of expenses that you foresee after the sale, such as buying a new home, paying penalties on mortgage discharge, capital gains tax etc. A good offer should allow you to meet all these expenses and leave a little for profit. Negotiate with a cool, calm head. Of course, you have your realtor to rely on to help you do so.
10. Closing the Sale
Finally, you can consider your home sold! Or can you? Please ensure that after you receive an offer and agree to it, all the documents for the sale are in place and the ‘sale’ is legally binding. Here are a few important pointers to help you out.
Work with your realtor and lawyer to officially close the deal.
While closing a real estate sale is a complicated process, the team of experts you have hired will do most of the work for you. You will have to give them any paperwork that they may require from you and a fair deadline to get their work done.
What are the things you should remember during the closing? Here’s a checklist that can help ensure that you do most of the things required from a seller during a closing. Use this as your reference point but be sure to get checklists from both your realtor and lawyer as well.
Things to do to ensure smooth closing
- Notify the lawyer about the offer and the impending signing of the agreement. The lawyer should be ready with all the legal documentation for the process.
- Fulfill any of the conditions required by you as the seller before the closing date. Be sure to finish any minor repairs or renovations.
- If the buyer is assuming your existing mortgage, your lawyer as well as your lender should be immediately notified. Before considering the deal closed, you must make sure the buyer qualifies to assume your mortgage.
- Notify the telephone, cable and utilities companies about the sale. You may wish to transfer or remove services. Often, real estate lawyers are adept at handling the transfer of utilities and this is also included in their fee.
- Make sure to call your insurance agents and inform them of the sale. You will have to cancel or transfer your homeowner’s insurance onto your new property.
- Contact a reliable and professional moving company to help you move. These days you can find reviews of many moving companies on the internet.
- Be sure to inform all concerned and relevant parties about your change of address, including friends, business associates and the post office! Your driver’s license and registration will also have to reflect your new address, so notify the Ministry of Transportation of the same.
- Keep both your realtor and your lawyer informed about any changes in your home after the sale has occurred.
Keep in touch with your lawyer
In order to close your mortgage with the money got from the sale, also known as discharging the mortgage, your lawyer has to ensure that you get a statement from your lender demonstrating that you have no outstanding balance on the mortgage and also a statement of penalties, if any. Shortly before the closing, you will have to sign the paperwork that will help the title to be transferred to the buyer.
The proceeds of the sale will be received by your lawyer on the closing day. The lawyer will have to pay off the mortgage and make other payments with the proceeds and give you a cheque for the rest.
Ten Things You Now Know!
These are the ten most important things about selling your home and you’re now familiar with each and every one of them. Congratulations and happy selling!