Thinking of Selling Your Home? Should You Sell Yourself or Hire An Agent???
(Part 2 of 2… continued from last month)
Last month I described the steps that you, as a seller, would encounter to prepare your home for sale and to get it “listed”. These steps, if followed properly and with the proper timing and execution, can be achieved in 3-5 weeks.
Not everyone has the resources or ‘equity’ to have a professional list their home and want to look at alternatives, such as doing a ‘For Sale By Owner’ to save on commission. I have advised people in the past to look at the pros and cons of each and to make their own decisions. I then take them through the steps of preparing a home for sale, the necessary steps to achieve maximum value, and the rewards and possible pitfalls of selling your own property. Then with that knowledge about what goes into a real estate transaction, they can make their own educated decision.
You have endured 2 months on the Market and have been inconvenienced 23 times for showings, and finally AN OFFER.
Now we are moving forward to the second phase of the home sale. You have properly prepared your home for sale. You have already de-cluttered, de-personalized, Scientifically Staged, had Professional Photos taken, figured out how to get your home on the MLS (so buyers can find your home), bought a lockbox, installed a sign, and managed and logged all the showings.
This hard work has resulted in an agent calling you on a Friday evening, just as you are sitting down for dinner, and tell you that they have a buyer ready to make an offer on your home. Woooohoooo. “Someone wants to buy MY home,” you think to yourself. (This is how the conversation typically goes when I have a buyer that wants to buy a property listed as a For Sale By Owners). The conversation goes something like this. “Mr/Mrs. Seller, I have a buyer interested in your home and they have told me they are ready to write an offer. I have some questions so that I can best prepare an offer. Where can I find the Disclosure Statement, and the inclusions/exclusions list? Are you offering a home warranty to the buyer? What is your time frame for moving? Do you have a fax, or can I send the offer for esignatures? My buyer has to sell their home first; is this ok? They need closing cost help, and I’ll be putting that into the offer.”
Most sellers would respond, “Ummmm, I’m not sure what you are talking about, Disclosure Statement? Inclusions? Um, warranty? I would like to move after the holidays. Esignatures? Let me call you back.”
My response, “Well Mr./Mrs Seller, a disclosure statement is required by law in a real estate transaction in the state of Maryland. Inclusions are typically what stays or goes with the property excluding personal items. Some sellers elect to enroll their home in a home warranty program when they list to protect themselves and then the buyer for a year after the sale.” Then I take a deep breath and realize that not only am I going to have to do all the work for my buyer, but I’m going to have to walk the seller through their legal obligations in regard to a contract of sale in Maryland.
You finally receive a Contract.
You have navigated through the above questions from an agent or buyer, and now you are awaiting for the ‘Contract to Purchase’ from the buyer. This day or two from the time that the buyer/agent tells you they are going to write an offer until you finally receive it is STRESSFUL, and you are asking yourself a million questions: Have they found another home? Did I vacuum before they saw the house? I hope the kitchen was clean? Did I price my home to high? Too low? Where the heck am I going to move? I heard my neighbor was going to sell their home; maybe the buyers want their home instead?
Then you get the offer from the other agent or buyer and it is 38 pages with a bunch of terms, figures, and addendums. If you are an attorney or deal with contracts on a daily basis you can navigate your way through what it all says and make sense of everything. If not, it could be a little overwhelming. But you finally figure out the terms of the offer and can estimate how much you will be walking away with when you settle. If this amount is where you want it to be, great, move forward and sign the contract.
If not, time to negotiate!
There is an art and science to negotiating a contract of sale. When do you call the other party back? How much should you counter? Are there other parts of the contract to negotiate besides price? These are just a few of the variables that go into negotiating a contract.
Sellers are emotionally invested in their home and have memories of raising their family, having Thanksgiving dinner, waking up Christmas morning with the kids. These emotions and emotional attachment to your home have ‘value’ to you, but have no ‘value’ to a potential purchaser. The first rule of negotiations is that the person with the greater emotional attachment usually gives in first and ‘loses.’ This is why professional athletes have ‘agents’ that do their contract negotiations with the teams, the same reason why home sellers hire ‘agents’ to negotiate the terms of the contract for their home sale.
Skilled negotiators are worth their weight in gold. After a few rounds of going back and forth with counter offers you finally agree to the terms of a contract with the buyer. You are emotionally drained and feel like you have been in a 10 round fight with Mike Tyson coming to terms on the exact structure of the contract but you did it. There is a meeting of the minds and a signed contract. This is why having a skilled negotiator can easily put $10k to $15k additional profits in your pocket at settlement.
Home Inspection Issues… Now What?
About a week after you get a contract with a buyer, there will be a home inspection on your home. This is typically a 3-4 hour process where a home inspector does a thorough inspection of your home. The inspector’s job is to ascertain the condition and to identify problems with your home as it currently sits. From this roughly 30-page inspection the buyer will send a list of repairs to you to fix prior to settlement. Some of these repairs are necessary under the contract of sale and/or non-negotiable (unless you originally agreed to an as-is contract from the beginning) and some of the repairs can be negotiated.
Once this addendum is received, you have a specific time frame to respond to these repair requests. This is basically a second round of negotiations. And if you thought coming to terms on the contract of sale was an arduous process, the process of negotiating inspection issues can be tougher and more emotional. You know that window lock that didn’t work correctly? Or that door that you had to put pressure on to lock? Something you just lived with. Well now, the buyer wants it fixed before they will purchase. Thinking to yourself, “That door has been that way since we moved in 8 years ago, and I have dealt with it. Why can’t the buyers?” And sellers become defensive and emotional again. Buyers and sellers can go back and forth a few times to finalize the details of what exactly will be fixed before settlement.
Now you, the seller, have a list of 8 items that need to be fixed prior to settlement: 3 plumbing issues, 2 electrical issues, a broken window pane, missing shingles replaced, and your HVAC system serviced. How do you know who to call? Do you call 3 contractors for each issue to get quotes? Maybe, but time is slipping away, and there are only 2 weeks left before settlement when the issue must be fixed.
Not only did you have to negotiate your contract and your inspection issues, you also have to coordinate the repairs.
Then, in the final couple of weeks before settlement there will be a termite inspection completed on your home. There will be an appraisal. A survey. And if there is a title issue you be will asked for additional documentation to get this issue resolved. Plus you need to call the utility companies, your insurance company, and the post office to let them know of your move. This all has to be done from 9am to 5pm, as these businesses don’t work nights and weekends.
Settlement Day – You started this process 3-4 months ago, and you are finally at the day that you have anticipated for months, the day that you sell your home and get your check. Settlement takes place at a ‘Settlement/Title Company.’ They are responsible for preparing all the legal documents for the transfer of sale from you to the buyer and recording the deed at the court house. When reviewing all these documents you get to what is called a HUD-1. This form includes all of the accounting that goes into the transaction. How do you know if the form is correct and all the figures are put in the correct column? Hopefully you know what key line items to double check and who you are to question if they don’t appear correct. If all of this is correct, you sign all the legal documents, turn over the keys to your home and get your check.
Now you know the details; the choice is yours.
Over the last 2 months I have taken you on a journey from preparing your home for sale to walking away from settlement with a check and some of the major steps in between. The decision is yours. If you think that this process is not overwhelming and will not cause too much stress, then going the For Sale By Owner route could be for you. If, like most, it appears overwhelming, and you would like a professional real estate agent in your corner, looking out for your best interests, fighting over your every time, then make sure you find a Real Estate Agent that puts their customers’ self-interest above their own. Find one that uses proven strategies that helps sellers unearth additional profits when selling. Because, like everything in life, not all agents are the same, make sure you find the right one.