The Offer Process Introduction
The challenge to everyone involved in the home-buying and selling process is that not only is the transaction complex, but it is also under a time constraint. Buyers are trying to get into a home because their pre-approval will expire, and sellers are trying to get an offer in hand before they have to re-sign with an agent.
As a home seller, each offer you receive is going to be an opportunity to sell your home. Working with your agent, you are going to have to cull the good offers from the bad, discern who will get you the best price, and who will be the right fit for buying your home.
You Got an Offer! Now What?
Assess and Negotiate the Offer
Increasingly in the real estate market, it has become common for counter-offers, counter-counter-offers, and all the way on down. If the buyers are lowballing you, it’s important to strike the right balance of firmness while not frightening the buyers away.
Your agent will have a good idea of the kinds of negotiation tactics that have come into popularity in the market, and can probably make an educated guess as to what the buyer’s agent is coaching them to do. Depending on the market, and what else is being sold in the neighborhood, the price is likely the first thing to budge on. What not to budge on is the buyer’s financial fitness, and it’s important that they send you a pre-approval letter.
Additionally, real estate contracts are seemingly becoming more and more complex, but the parts of any contact to be most wary of is anything non-standard. Watch out for anything handwritten into the contract, or an addendum with a radically different style of language. Remember… your agent is here to help!
Pricing strategy and counter-offer strategy
If you’ve priced your home fairly and you’re in a seller’s market, counter with your original list price, or reject the offer entirely and invite potential buyers to resubmit. They’ll get the idea that you’re pretty firm on price, and if they’re serious about buying your home, they’ll come back with a better bid, allowing you to begin the real negotiations from a more favorable position.
If you do make a counteroffer, make it time-sensitive. That way, you won’t get caught up in a never-ending (and legally binding) negotiation, and you’ll still be free to entertain better offers, should they arise.
As you probably recall, buying a home is an expensive process. Your potential buyers may request that you cover part of their closing costs. Depending on your options, you might want to consider doing so. But if you’re going to make that concession, try to work those closing costs into the overall price of the home.
For example, you might stipulate that you’ll cover closing costs at the time of the sale, but only if the buyers are willing to compensate you with a higher purchase price. The buyers get to conserve cash flow when they need it most, and you’re not losing any money. It’s a win-win.
Be prepared. Ask yourself these questions (and discuss with your agent).
- What is your lowest price for the house you are willing to sell it for to determine how/when to counter?
- Does the market conditions warrant you counter offer?
- Should you make a full price counter offer?
- What are the offers and conditions, contingencies, fixes, closing costs etc. you are willing to negotiate on?
How to Negotiate (Tip: Trust Your Agent)
Your agent is a key part of the negotiation process and can guide you to the best decision for your situation and needs. Being informed as to the process, however, is key to understanding the choices you can make, and ultimately the choice of when to negotiate, capitulate, or accept an offer is up to you, the seller.
3 Quick Negotiation Tips For Every Home Seller
Know your market. Find out what comparable homes have been selling for in your neighborhood. Some real estate markets are relatively steady, but others have been appreciating rapidly, and your home’s market value may even surprise you.
Price your home fairly.
It may be tempting to go for a pie-in-the-sky price, but that will only hurt your chances of selling, and the longer your home sits on the market, the less interesting it becomes to potential buyers.
Don’t immediately accept an initial offer. The first offer is likely to be well below the buyer’s actual price limit, and some buyers may lowball in an attempt to drive your asking price down. Trust your agent in the negotiation process.
Negotiating with the Appraisal
While separate, both the appraisal and the inspection are points of the home-selling journey when price negotiation can change radically. Hopefully, you have a good sense of your home’s value going into the home-selling process, and neither the appraisal nor the inspection turns up anything surprising. But if you truly aren’t sure what your home is worth, and/or it’s been many years since your home has seen any repairs, then it might be a good idea to get an appraisal or an inspection before your home even goes on the market.
If your home doesn’t appraise for the agreed-upon price, you still have several options. The first one is the simplest, and the least popular, which is to lower the sale price. Another option is to walk away from the deal. There is also the option of trying the split the difference between the sale price and the appraisal with some of the other costs. Sometimes, a low appraisal is just as bad for the buyer as it is for the seller, and the buyers will be amenable to getting a 2nd opinion, that is, a re-appraisal. No matter what you choose, you are going to have to work with the buyer if the deal is still going to go through.
Negotiating With the Inspection
If the inspection reveals serious problems that come as a surprise, the buyer is going to want to negotiate on the sale price. When choosing between fixing the problems yourself or dropping the sale price, consider what percentage of the sale the fix ultimately costs.
If a fix is less than 5% of the sale price, then offer to fix it yourself. If the fix is more serious (let’s say, more than 10% of the sale price), then you might want to lower your offer. This is not only because of the expense of the fix but also because of the time that may be involved. Keep in mind, the higher the price tag on a repair, the longer it will be before you can move out.
Your Home is on the Market But No Offers! Now What?
From the time the contract with your agent is signed, the clock is ticking. The rule of thumb is that the faster a home is sold, the closer to the desired price the homeowner will get, so both you and your agent will be working to get your home on and off the market as quickly as possible. But what does a homeowner do if there are no offers forthcoming, and there’s no one to even negotiate a number down with? Fortunately, these problems take one of a few typical forms, and the way the problem presents itself can give you a clue as to how to solve it.
Preparing for the Close
As the contract approaches the close, make sure you’re prepared well in advance for the closing. In addition to your agent, talk to your real estate attorney and make sure you understand any fees, taxes, commissions, or points you may have to pay. You don’t want the entire contract to be derailed by any sort of disclosure law or title insurance problems. When it comes to home selling, being ahead of the next step is a crucial part of the process and one you will want to practice every step of the way.
What to Expect in the Closing of Your Home Sale
As part of the purchasing agreement, you and the buyer chose a closing date by which all negotiations, repairs, and inspections must be completed. As this closing date approaches, what are the preparations that you as the seller should make? And what are common hiccups that occur in this closing process? Here, we cover a few of the most common issues pertaining to closing.
What is Open Escrow?
From the time that the buyer puts their good faith deposit into escrow until the sale is clear to close, the sale of your home is in a period called “open escrow.” During open escrow, many things can happen. During this time, the buyer is working out their final loan paperwork and forwarding it to the escrow company until the sale is completed. As the seller, it is your responsibility during open escrow to complete any repairs or any other changes to the property negotiated upon during the working out of the sale contract. During this time, you will also work out the transfer of utilities and make other preparations to move. A mistake many first-time home-sellers make is to cancel their home insurance too soon. It’s important to remember to not cancel your home insurance until after the sale is completed.
When you are getting ready to close the sale of your home, it’s important to ensure that all the closing documents prepared by the closing attorney, or escrow officer, are signed and notarized. While each transaction is different, and local laws vary, here are some of the documents you are likely to see at the time of close.
- Certificate of Title
A legal statement that you have the right to sell the property.
The transfer of the title. This document has several names depending on region; warranty deed or grant deed, for example, but they each serve the same function. At the moment when the deed is signed, ownership is transferred.
- The HUD-1 Settlement Statement
An accounting of all the monetary transactions involved in the sale of the home. This form will be filled out by both the seller and the buyer, with columns for each. Go over this document closely.
- Bill of Sale
An itemized list of everything that is transferred in ownership, which can include things like furniture. Double check the list to make sure everything is there and listed at the correct price.
- Statement of Closing Costs
A description of the closing costs and a statement that you are aware and agree to them.
- Statement of Identity/Information
This document is called Statement of Identity or Statement of Information. This is a statement that declares that you are who you say you are. Valid photo ID will be required.
- Loan Payoff
If there’s any money still left to be paid off on your loan, this statement says that it will be paid off at time of closing.
- Mechanic’s Lien
This document isn’t always included, but it is a statement that declares there is no possibility that a sub-contractor could have a lien on the house due to lack of payment. The document states that anyone who was involved with prior repairs or renovations on the home have been paid in full.
- Final Closing Instructions
Sometimes this document is signed at the opening of the contract, other times, it is signed at the end.
Other Considerations On Closing Day
Both the buyer and the seller will sign a stack of paperwork to complete the sale. While buyers have much more to sign, sellers still have a few important documents to prepare.
- Ensure all closing documents prepared by the Closing Attorney (or Escrow Officer) are signed and initialed and notarized
The closing attorney will bring most of this paperwork with them, but the seller needs to remember:
- The Deed to the home (if the home has been paid off and there are no liens)
- Government-issued photo ID such as Driver’s License or Passport
- A Certified Check for the Escrow Company
- The Keys to the Home
Make sure you’re aware of the following:
- The date you plan to close?
- The date when the buyer’s loan will be funded?
Make Sure It All Adds Up
The seller does not have nearly as much paperwork as the buyer in order to close the sale, but each document in the seller’s pile is vital. Make sure all monetary accounting of the transaction add up. Also, as you prepare to close, make sure that the closing date is clear and works for both parties, and double check to make sure the buyer’s loan is funded.
If not, you could be in for some serious complications. After all the work you put into selling your home, make sure you keep up the same dedication right up to the close as you did during the rest of the process.
The Final Walkthrough
The final walkthrough is the buyer’s last chance to have a look at your home before the sale closes. Not quite an official inspection, this walkthrough is a spot check that you’ve done the work agreed upon in the purchase contract. To prepare for the final walkthrough, your home will require one more clean and polish. Making sure all storage spaces, closets, and bedrooms are vacated. In the event that you have worked out with the buyer a move-out date after the transfer of the deed, simply make sure the buyer is able to give the home one more full inspection.
Unless you have worked out a delayed possession of your home with the buyer for after the close of the sale, the final walkthrough will be one of the last times you will be inside of your home. For those planning to promptly vacate the property, here are some good things to keep in mind as you prepare for that final walkthrough.
It’s important to schedule some buffer time between the date of your move out and the final walkthrough. You should aim to vacate the property two or three days before the buyer comes around to inspect it. This will give plenty of time to make sure absolutely everything is vacated and to deal with any hiccups that come along the way.
Clean, Clean, Clean
If you can afford to have your home professionally cleaned, do it. If you are doing it yourself, make sure you take the cleaning job to the next level. This means vacuuming air vents, scrubbing the inside of the oven, and shampooing the carpets, among other things.
The new buyers are expecting a vacant home, which is different than when you showed it. Unless the new buyers purchased the show furniture, you are going to have to make arrangements to sell or otherwise get rid of it. This is one of the many tasks made easier by the buffer window.
In the course of getting couches through doorways, the door frame can get damaged or scuffed. Make sure you touch up these dents or scuffs on doors, walls, or floors after you complete the move-out. If there is no time to address issues before the walkthrough (again, this is the reason for the buffer), then notify your agent so at least the damage doesn’t come as a surprise.
It’s best to avoid leaving the last of the trash in the trashcan. If you can, work out something with a neighbor, or spring for the city to make a special pick up.
Home How-To Manual
It’s a kind gesture to gather appliance manuals and warranty cards all in one place. Also, other useful tips to the new owner like trash days, nearest pizza places, and cell phone dead zones are great to pass along.
Handing Over the Keys
In many home sales, the seller and the buyer never meet. The buyer most often does the final walk through with either their agent or your agent and does a sight check to make sure all of the repairs and changes negotiated upon in the contract were addressed.
When it comes time to close, you will bring the keys to the Escrow Office/Closing Attorney’s office on the day of the close, and hand them over once all the paperwork has been signed. The keys will then be delivered to the new owner after the change in deed is registered by the county. After that, your home is sold!