As a homeowner, there can be a million reasons to sell your home. The kids could be out of the house and it is time to move onto something smaller. Or just the opposite – you are expecting your family to expand. The reasons can be financial, personal, or professional.
Besides these individual motivations, what considerations go into deciding when the home itself is ready to sell? Even if it’s time for you, it might not be the perfect time for your home. Here are some important considerations for deciding if now is the right time to sell your home.
The Best Time to List, and Sell, Your House
It is important to consider not only if this is the right time for the market, but if it is also the right time of year to sell the house. As a homeowner, you may have heard of the “magic selling window,” from March to May a period of time within which you have to sell your home, and while this is not the only ideal time to sell your home, there is some truth to it. This is one of the many where areas a local real estate specialist can be crucial. An agent who knows your location can give you the best information on timing.
The Costs of Selling a Home
There are several upfront costs associated with selling your home. Some of these costs will apply to anyone selling their home, and these include agent’s commission, marketing and staging the home, and home cleaning and repairs. Besides these, there are a few other costs that might come up depending on your situation; these include paying off the mortgage, and closing costs on the home sale. In most cases, the buyer will pay the closing costs, but if the home buyer is struggling to make a down payment or they are a first-time buyer, then your agent may advise you to cover the closing costs for a buyer that is credit rich but cash poor. A good estimate is to expect these costs to add up to 8-12% of the home sale.
If everything goes correctly, home sellers should be seeing a profit at the end of their home selling journey, but no matter what, selling your home will almost definitely cost some investment up front and post-sale from the sales price.
Why should you know what your house is worth?
Learning the Value of Your Home: How, What, and Why
In the course of selling your home, its value will be estimated several times over. First, you may go online and try to estimate the value based on what else is being sold in your local area, Homes.com offers a home values section that will show you home value estimates of properties in your area. Later in the home selling process, your agent will essentially do the same thing, just with more tools at their disposal, as they look at market comparables (homes of similar size age and type in our area). Then, your home will be appraised, and this will be the final word on the value of your home. Some homeowners who want to jump to the end will hire an appraiser at the beginning of the process, and there are some advantages to this. An appraiser is an impartial state-licensed agent, most often hired by the buyer at the request of the loan company, and the appraiser gives the true market value of the home. Even if you hire an appraiser to learn for certain your home’s value, a buyer may request their own appraisal anyway, so many homeowners choose to save money by waiting for the sale to be in process before getting an appraisal.
Your Real Estate Agent and Comparables (Comps)
Understanding the value of a property is part of the real estate agent’s job, and one of the many things they bring to the table when you hire them. When they help you look into the value of your home, they’ll be looking at a comparable market analysis. Using this method, the agent will look at comparables sold over the last 90 days in your market.
So what are comparables? Also referred to as comps, comparables are homes that share a market and similar features with your home. Ideally, a comp is a home that is physically close to yours, with the same interior square footage, the same lot size, and the same number of bedrooms and bathrooms. It is the real estate agent’s job to find a ‘comp property’ that is closest in all these aspects, and more than one, if and when possible. The more comps you can find, the closer the price estimate can be.
The Other Homes Being Listed
No matter what you think your home should sell for, the price-point on your home is limited by what other homes in your neighborhood are being sold for. This is another thing your real estate agent will help you take a look at. It’s possible to price your home higher than the other homes on the block, but your home should offer more: more yard, more bedrooms, better upkeep.
If there are multiple homes being sold close by, the general idea is to find a price that gets the best value for you, while staying somewhere in the middle of the pack. One wise Real Estate Agent adage says, “The Highest Priced Home on the Street Sells Last.”
How to Get a Home Appraised
Most instances of home appraisal occur because, in the process of selling your home, the buyer is required to have the home appraised by the lender of their mortgage to ascertain the home’s true market value. Home appraisers are objective third-party professionals licensed by state and local government to give fair assessments. In almost all instances, the home buyer pays for the appraisal fees as part of the closing costs.
There are other reasons to have a home appraised, as well. Anytime you are looking to borrow money on your home, such as to pay for an extensive remodel, a lender will ask for an appraisal.
For the most part, the appraiser will be looking at those macro factors in the valuation of your home, but there are a few small things you can do to increase your home’s value:
- Signs of Age: If your home is showing signs of its age, think about ways to make it more contemporary. Carpet, fixtures, and cabinetry should be as new looking as possible.
- Curb Appeal: In a similar way, keep the yard as fresh and welcoming as you can; anything you can do to reduce the overall impression of age will give your home its best chance at a high value.
- Make Improvements and Keep Records: Make sure there is a paper trail of all the home improvements you make; for instance, any fixes on the faucets or the building’s electrical should be recorded.
Finding an appraiser in your area should be easy. If you are selling your home, then the lender will provide a list of approved appraisers for the buyer to hire; if you are looking to appraise your property value for other reasons, then your lender or local real estate agent will have recommendations.
For the most part, appraisers provide a neutral, objective assessment of the value of a home. If you feel something is off, however, it is possible to challenge the appraisal. If you wish to challenge the appraisal, then you must contact the lender who the appraisal report was sent to. The process to get the property re-appraised is lengthy, but if the estimate was off by enough, it may be worth the effort.
Understanding Your Home’s Equity
Your home’s equity is the difference between your home’s value and the debt you owe on it. Knowing your home’s equity can mean knowing if you will make a profit on selling your home or not. If the value of your home’s possible sale is lower than your mortgage, this is called being “underwater.” This may be a reason to reconsider selling the home at the moment, or, if market values are continuing to slide, it may be smart to sell now and get out. If you are still paying off the mortgage on your home, it’s important to consider your home’s equity before selling. Even if your home isn’t underwater, waiting to sell and paying off a bit more of the mortgage could end up making for a much larger profit on the sale of your home.
Value vs. Equity
While connected, your home’s value is not the same as your home’s equity. Equity is the difference between your home’s value and the debt you owe on the property. It is simple enough to think of it as a math equation: Value-Debt=Equity. Knowing the equity of your home is an important part of deciding whether or not to sell it, and your home’s equity will tell you if you are going to make a profit or not when you sell. Homes that are worth less than the amount of their mortgage are considered to have negative equity, and are referred to as being “underwater.” In this case, it might be smart to wait to sell the home or to sell it at a loss if a foreclosure is looming.
To find out how much equity you have in your home, you have to find out both the home’s debt and its value. Knowing how much debt is as easy as reading your last mortgage statement. Knowing your home’s value is more variable. There are tools online that will give you an estimate of your home’s value, which might be enough to give you an idea of what the home is worth. Estimates are useful tools, but they are not absolute. If you need to know the true value of your home, then you have to go to an appraiser, and depending on your situation, paying for the professional appraisal might be worth the cost.
- Find a Good Agent
While some homeowners decide to go the “for-sale-by-owner” route, having a good agent can transform your home-selling experience. Interview at least three agents before you settle on one, and make sure you ask them a lot of questions.
Ask them about their track record selling homes, what makes them different from other agents, and how they would market your home. You’re going to want to find an agent that not only is knowledgeable but also listens to you – someone with whom you feel you have good communication. Most agents are specialists in either a neighborhood or a type of property, so find one that has a specialty that covers your home.
Selling a home is like a business, and every business needs good marketing. Clean and de-clutter your home, tidy up the lawn, and spring for a new coat of paint. Hire a professional photographer so your home sparkles online. A professional stager knows how to make your home look good in photos and in person. You’ll want to strike the right balance of making your home neutral enough to appeal to anyone, while highlighting the home’s personality so that it stands out. Finally, make sure the pets have somewhere else to stay before and after the open house.
- Set a Reasonable Price
Real estate agents say that time and again, homeowners, whether they are first-time sellers or not, overprice their home. Set a reasonable price from the beginning, based on Comparables – homes in the same market with same features as yours. An overpriced home may languish for a long time on the market, and you’ll have to drop the sale price lower than you would have if you had set a more moderate price to begin with. Pay attention to those Comparables and be competitive, remembering that they say the most expensive home in the neighborhood sells last.
Whether you are a buyer or a seller, it takes an entire team of people to sell your home. As a home seller, who is included on that team looks a lot different than when you bought your home.
The members of your home selling team may include;
- Your selling agent (also sometimes called a listing agent)
- Home stager
- Home photographer
- Contractor for repairs
- Real estate attorney
- Home inspector
Deciding to Use a Listing Agent to Sell Your Home
What is a listing agent?
The listing agent is also sometimes referred to as the seller’s agent, someone who will work with the home seller, often exclusively (although there are certain locations that allow a selling agent to work both sides of a real estate transaction.)
Home sellers will research options in a listing agent through personal contacts, local advertising, friend recommendations, social media, home listing portals (like Homes.com), mortgage broker recommendations or other means whereby introductions are made. There may be a period of interviews, meetings, calls or a selection process to decide which listing agent the home seller would like to work with.
The listing agent will then arrange a meeting at the home seller’s property, evaluate the property and then run a comparative market analysis on the home, via commercially available industry software or proprietary location data, and will then provide the seller with a ballpark range of their home’s value. Note: this is a non-binding estimate that the seller should consider. Local market factors can dramatically change the value a house sells as. A great listing agent will factor in these considerations when presenting their estimated home value. The listing agent and the seller will come to an agreement as to how much to list the property for, with an expectation of a time to sell that considers the seller’s need to move, financing and other possible factors influencing the speed with which the seller desires to sell. To become the ‘official’ listing agent who represents the seller in the real estate transaction, the agent will then provide the seller with a contract which the seller must sign.
At this point, the listing agent can begin marketing the property using a variety of techniques and tools such as the Multiple Listing Service toolset, Homes.com (and / or other national portals), local advertising and other promotional platforms to publicize and highlight the home’s features. The listing agent will also organize the listing photos, video or other media and work with the home seller on an attractive and accurate description of the property to accompany the general home’s information. Listing agents will also facilitate open houses and home tours to allow potential buyers to see the house from the inside via appointment or at set times during the week.
What the Listing Agent Will Do For You
Selling a home can be like owning your own small business, and your listing agent is your business partner. In the course of selling your home, your listing agent will be there with you through almost the entire process, from coming up with the sale price to handing over the home’s keys. In a few instances, these jobs are done by multiple people from the agency, each specializing in one particular step of the process. For the most part, though, you will be dealing with one agent that will get to know and trust through the bumps and hiccups of your home selling journey.
Here are just some of the things Listing Agents will do.
Determine Your Home’s Value
Finding the right price to value your home at is an art unto itself. Homeowners often over-price their home, only to find that their home languishes on the market and de-values steeper than what they could have gotten if they had gone with a lower price, to begin with. Your Listing Agent will know your market and know what homes are selling for. They will use Comparables, homes of a similar size and description, to find the right balance on price.
List the Home
One of the tools that a Listing Agent has access to is a Multiple Listing Service (MLS). The agent will use this not only to help price your home, but also to attract other agents and brokers. It’s possible to get on an MLS without an agent, but it will require paying fees.
Marketing is an essential aspect of any home sale. An experienced agent will have a list of go-to contractors, home stagers, and photographers in order to make your home shine. When you first meet with your agent, you should ask what kind of marketing plan they employ, and how much they plan to spend. An agent with a marketing plan versus one without is often the difference between a good and bad agent.
Show the Home
An agent’s involvement with the showing of the home can vary depending on the seller, but when it comes to dealing with potential buyers and gauging their worthiness to buy your home, the agent’s experienced selling-eye will be invaluable.
Negotiate With the Buyer
In many home sales, the buyer and the seller never actually meet. While the contract is being worked out, the Listing Agent will meet with the Buyer’s Agent (sometimes called the Selling Agent) to work out the details of the purchase contract. Your Agent will not only have more experience reading these contracts and knowing what is usual or unusual about them, but also will be able to be detached enough to negotiate effectively.
Be There at the Close
An agent, in particular, one with some legal expertise, can be there with you at the close. Along with a Closing Attorney and/or an Escrow Officer, they will help you review the final documents to sign to complete the sale of your home.
Consider More Than the Cost of a Real Estate Agent
If you are thinking of selling your home without an agent just for the savings alone, then you may want to reconsider. In many For-Sale-By-Owner situations, the sellers are greatly disappointed in the amount of money they saved by the end if there were savings at all.
On the other hand, if you are thinking of going the FSBO route because you have a strong personal conviction for doing so, you don’t mind research and legal documents and can keep a cool head during negotiations, then selling your home without an agent might be the right choice for you.
Read: What are the advantages and disadvantages of FSBO vs selling with a real estate agent?
Read: How to find the perfect real estate agent for your home sale
Read: How to understand and negotiate your home listing agreement
How to Find a Home Inspector
In home sales where the buyer is obtaining a mortgage from a loan company, the company will require an appraisal and an inspection, both of which the buyer will pay for. In some instances, the seller might offer to cover these costs. Sometimes a homeowner who truly does not know the condition of their home will hire an inspector before putting it on the market. In many cases, homeowners will wait for the buyer’s inspection, because this inspection will happen whether you hire someone to inspect your home before putting it on the market or not.
Often, the home inspector finds an issue that needs to be addressed about the home’s structure or upkeep, usually minor. It does happen, however, that an inspector will find a big issue with the home – one that can derail an entire sale. To prevent this from happening, some homeowners will pay the cost up front to have the home inspected before it ever goes on the market. If you are thinking of selling your home and are truly in the dark about your home’s condition, then you might consider getting a pre-inspection.
What to Look for in an Inspector
Home Inspectors are state/county licensed contractors whose business success depends upon their reputation for being objective and accurate in their assessments. Failure to do their job in a professional way can mean that they can lose their business, so most Home Inspectors are trustworthy by nature. When hiring a Home Inspector, make sure up front that they are Licensed, Bonded, and Insured. If they are not, then they are not actually a home inspector. In addition, ask about the home inspector’s experience. Most home inspectors come from a lengthy background in construction or have worked before as an electrician, and will have specialties that they bring to your home.
What Home Inspectors Do / Don’t Do
Home inspectors will do a top-to-bottom evaluation of the physical condition of your home, inside and out. They will be looking at insulation, electrical wiring, plumbing, and any other areas of damage. They will be interested is spots where gathering moisture is an issue, mold, or trouble spots in the yard. This will help you price your home accurately and will give any potential home buyers an idea of how much money they might need to invest in the home’s upkeep. Things a general contractor might not cover are problems with sewage or pests; in particular, termites. Depending on your state or country, a separate termite inspection might be required, and otherwise could be a good idea.
Home Inspector Industry Associations / Affiliations
Many agents will have a recommendation for a home inspection company or individual, though there are also industry associations that offer training and membership generally denote higher levels of training and expertise. Look for members of ASHI (American Society of Home Inspectors) and INTERNACHI (International Association of Certified Home Inspectors).
Using a Home Stager / Home Photographer
Good marketing is key to keeping your home from spending too much time on the market, and hiring professionals to stage and photograph your home can be key to good marketing. Many homeowners try to save money by cutting these professionals from the process, but considering the amount of money in play in the sale of your home, the up-front costs of having the marketing done right are negligible.
How to Find a Contractor
If you already know what needs to be fixed around your home, you can get started with your contractor before your home ever goes up for sale. In some cases, your agent might make some suggestions of what could be worked on to give your home a boost in market value. This could be as simple new window screens or a coat of paint for the exterior. During the negotiation process, the buyer will ask for some repairs, however small. If you do not already have a contractor you work with and trust, your agent can be a valuable resource for choosing one.
There are many national websites for finding reliable contractors and tradesmen, although we don’t recommend anyone over another, some of the more popular sites are; Angie’s List, HomeAdvisor and Contractor Connection.
How to Find a Real Estate Attorney
An attorney’s role in the home sale can vary. There will be multiple legal contracts for the home seller to go over, not just the final purchase contract. In some cases, your agent will act as an attorney in reviewing the closing paperwork, but other times it is worth it to have an attorney review in addition to the agent. There is also your agent’s contract, which you might consider showing to an attorney. Generally, your agent will recommend an office or personal connection. Do you research, it’s your choice whether to use their preferred attorney or your own.