Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to [email protected].
Question. Kim from TN writes: Hi Brian. I’ve been on the fence about selling my home and buying in another neighborhood that I really want to live in. I’ve owned this house for about seven years and have enough value in it to afford a better house. I’ve never sold a house before. I’ve talked to a few friends about it but they don’t have any experience either. I also talked to my folks but it’s been almost 20 years since they bought their home. What can you tell me about getting started so that I do this right?
Answer. Hi Kim, since spring is the most popular time to begin the selling process, I think many readers have something is common with you. Selling your home can be nerve racking if you don’t know what to expect and overwhelming if you try taking on everything at the same time. I suggest you look at this as a process with multiple steps. It should be less intimidating if you take it step-by-step while keeping an eye on the next steps to come.
Step 1. You have several options for your end goal. Take some time to consider them before deciding what you want to accomplish. Kim, it sounds like you’ve already decided that you want to buy up and have even decided on the neighborhood you want to live in. That should make your decision easier but there are still things to consider about how you’ll best accomplish this.
A basic option is considering if you want to rent out your current house to become a real estate investor. Often the best time to become an investor is when you move up to your next home. Another important decision is if you are going to buy first or sell first. An important consideration here is if you’ll need a contingency clause in a purchase offer to sell your existing home before you can close on a new home. That contingency clause can seriously weaken your purchase offer. On the other hand, if you sell first, you’ll need a temporary home until you close on your new home. Another possible option is refinancing your existing home to come up with the down payment for your next home (this can be a long shot). Refinancing maybe the same option that allows you to keep your current house as an investment to rent out.
I suggest you make a basic decision about what you want to do with your current house and then talk over how to accomplish this with an agent and possibly a refinance officer. They’ll help you understand all of the variables and if your decision is actually possible along with helping you put a detailed plan together. So, step 1 involves deciding what outcome you want and talking to the right professionals who can help you.
Step 2. This step assumes you’ve made the decision to sell whether that is before or after you buy your next home. This is about working with an agent to get the highest purchase price. It means understanding the current market. Are houses selling quickly or slowly? Are prices going up or mostly stable? If you’ve already bought your next house you may need to sell quickly if you’ll have trouble paying two mortgages. That can mean selling at the lower end of the price range. Same thing if you have a contingency purchase offer on your next home. Otherwise, if you have time, you can hold out for a higher price. That can mean making repairs, painting, or new carpet. If houses in your market are selling fast, you might only need to make minimum improvements. But if the market is a little slow, you may need to do more to get the best price. All of these are things you agent can help you with.
Step 3. This is often the most intense step. It requires that you get the house ready to sell. It requires getting the painting done, the carpet replaced, or whatever you and your agent decide on. It also involves staging the house. This usually means doing a bit of uncluttering to make the place look more open and welcoming. This is where your agent should really shine. You want to do this fairly quickly and before your agent begins marketing your home aggressively.
Step 4. This is the heart of the plan to sell your house. This is when your agent begins marketing your house. There is more to it than just listing it in the MLS. Videos and photos will be taken. Other agents will be invited to view the home and likely there will be an open house. Your agent will take care of most of this and coordinate with you. Your biggest responsibility will be keeping the house staged and presentable so that it can be shown on short notice.
Step 5. For some sellers, this can be a stressful time. Agents and people are going to be dropping by to see your house on short notice. You’ll probably have a lock box and these people will come in even when you’re not home. Many agents prefer that you not be home when the house is being shown. Fortunately, most of this activity happens in the first 3 or 4 weeks. If you house doesn’t sell in that time, you’ll still have people coming to view it but less frequently. The best way to deal with any stress is to always keep the house staged for viewing and have a place you can get away to on short notice while it is being shown.
Step 6. Receiving a purchase offer(s) is what you’ve been working towards and anticipating. You’ll have to decide whether to accept the offer or make a counter offer. Any paperwork you sign involving purchase offers is legally binding. It’s important that you understand what you are signing. Don’t be shy about asking for clarification and paraphrasing what you understand different parts of the offer to mean. Offers typically include the offer price, earnest money, and the amount of down payment. Also, fully understand the closing date, any details of escrow, items (appliances, furniture, etc.) both included and not included in the sale and contingencies. At a minimum, contingencies will likely include a home inspection and appraisal. Again, your agent will help you understand all of this as well as with negotiations if you make a counter offer. Deciding on a best offer and accepting it is a personal decision based on your needs and wants. A best offer for you probably isn’t the same as for someone else.
Step 7. This step varies depending on any contingencies you agree to. It means scheduling and accommodating the home inspection and appraisal. It also means acting quickly to make any repairs that you agreed to.
Step 8. This is the closing. This is mostly about the seller’s financing. This is when you walk away with your money. Your biggest responsibility is making sure the house is in the same condition as when the buyer agreed to buy it. You’ve probably already moved out. You may or may not have signed the closing paperwork in advance of the seller signing and delivering the money. Requirements vary by state but mostly you have to show up with proof of identification, the house keys, and garage door openers. The paperwork you’ll be signing is legally binding. You want to be sure you understand what you are signing. Of particular importance to you is that the closing costs are paid as agreed by either the buyer or seller. You also want to make sure any mortgages you have on the house are being paid off (first mortgage, and/or second mortgage or home equity line of credit).
Kim, in a nutshell, those are the basic steps to selling your house. Books have been written about the details of each step but a good agent will walk you through each one.
Please comment with your thoughts and experiences about the house selling process. Our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions or inquiries to [email protected].