Steps to Selling a Home
Cash in on Your Home Sale
Selecting an Agent:
You’ve decided the time is right to sell your home. Great, that’s an exciting first step…but now what? It can be a little intimidating and nerve-wracking to try to figure out where to start the process, and you probably have a lot of questions.
We’d love to come out, meet you at your home and talk through your situation to see if we’re a good fit to help you. We’ll help you consider your options with no obligation and no sales pressure, just useful information. But even if we don’t meet, in this step in the process we’ll share the questions we’d be asking if we were you and had a home to sell.
One of the first questions you should be asking yourself is, “Who is the right real estate agent to help me with my sale?” I say this because your real estate agent should act as your guide throughout the process. Why not have that agent involved from day one so you can get their guidance from the start?
Don’t worry, this isn’t going to turn into a sales pitch saying you should all use our services as a real estate broker. The truth is, who you should use depends on quite a few factors. Ultimately, you want to get the right agent for your particular needs.
To help you pick the right agent, we’ve put together the following list of questions we would ask if we were in your shoes as a home seller interviewing potential real estate brokers.
Top questions to ask a real estate broker before you hire one:
- What experience do you have selling homes like mine?
- Can you provide several recent clients from the neighborhood that we could speak to about their experience?
- What makes you different than other agents?
- Can you provide us with a written Comparative Market Analysis showing the value of our home and what we can expect to walk away with after all selling expenses?
- What are your commission fees?
- Can you explain the Seller Agency Agreement? We do not want to do anything that establishes you as our agent until we are ready to decide on a broker, so when does that relationship start? Can you also explain how it could end if we changed our mind?
- Will we be working with you directly or with your team?
- Do you provide any staging or professional photography?
If, after you ask these questions and follow up on the references, you feel good about the agent, then proceed with hiring them. If you aren’t comfortable, even if it’s just a gut feeling, I’d say keep looking and find an agent you like.
Before we leave this subject, I want to provide a short list of who you should NOT use as your agent:
The agent that values the home the highest. It is often tempting to go with the listing agent that says you’ll get the highest price for your home, but is that realistic, based on recent sales data, or is it just a promise they are making in order to trick you into listing with them in the hopes that they can lower the price later and earn a commission? Be careful; this is a common trick!
The discount brokerage that works anywhere and says they’ll “save you money.” I see this happen a lot. Discount brokerages are tempting on paper, but because of their low fees, they have to operate on a high-volume business model. What does that mean for you? In my experience, it means low touch service, no dedicated agent helping you, low local market knowledge, poorly executed marketing, damaged relationships with the brokerage community and often an overall bad experience.
The first agent you meet. Don’t just meet a broker, talk to them for five minutes and decide they’re someone you’d like to work with. Research your neighborhood online and see who comes up consistently as an active agent. Then meet with them, ask the questions we listed previously, and see how you feel about them. This agent is going to have a large impact on your sale, so take your time on this step.
The tech company making offers without even seeing your home. There is a proliferation of tech companies claiming they’ll purchase your house instantly, allowing you to avoid the hassle of preparing your home for sale and showings. Sounds great! But based on our experiences it’s not likely the path that will get you the most money. From what we’ve seen the offers are below market value and they come with hefty fees in the 6 – 13.5% range. To be fair, for the seller that prioritizes a quick sale over maximizing how much money they make this could be a good option.
Yourself. Why don’t we just get a “For Sale by Owner” sign and do this ourselves to save money? This plan sounds good on paper until you get going. Real estate is not rocket science, but if you don’t do it every day, how would you know what to do? It would be like me coming to your job one day and saying, “No problem, I can do this” without any training or experience. Numerous mistakes can be made due to inexperience (not to mention the added stress!). Neither are worth the potential savings you might reap.
Key to Selecting the Right Agent: Take your time, use our suggested questions above an make sure you feel comfortable with the agent you hire.
Speaking of agents, here is our team at Focus Real Estate:
Valuing Your Home: You’ve decided to sell your home and you’ve had us out to meet you and see your home. Now what?
The next step is to have the agent value your home. Every agent values a home differently, but we take a two-step approach. First, we take a 30- to 45-minute tour of your home, learning about the location, finishes, condition, layout, etc. Next, we compile that information into a Comparative Market Analysis (“CMA”), which is a comparison of your home to other recent under-contract and sold homes in your area, similar to an appraisal.
The CMA will compare your home to other sales and make adjustments in value for differences between them. For example, if your home has a one-car garage, and all the other sales had two-car garages, or if your home is 150 square feet bigger than other sales, the value of your home would reflect that. It’s not a perfect science (it’s subjective!), but we want to do our best to ensure we’re basing your valuation on the most recent comparable sales.
When a home has very similar comparable sales, we can provide a very tight value range, for example we may say your home is worth between $895k – $900k. When a home is very unique and we can’t find many comparable sales to go off, we may have to provide a wider range, such as between $885k – $900k. My point is your home’s value is a range, not an exact number.
In addition to recently under-contract and sold homes, we also look at other active listings. The fewer options available on the market, the higher you can push your price as a seller. The more options available on the market, the lower you need to price your home as a seller to get buyer’s attention.
Once prepared, we’ll deliver your CMA in a written narrative format, answering all the commonly asked questions like: “how much is my home worth,” “how much should I list it for,” “what is the ‘story’ we want to sell to buyers,” “how long will it take to sell,” etc.
In addition to the CMA, we’ll provide you with a breakdown of all selling expenses including broker fees, title work costs, seller concessions, property taxes due, etc.
Once you receive the CMA and net proceeds, we then decide on your home’s value and answer any additional questions you may have. This is an important step. Getting the pricing of your home right is critical and should be a top priority for your agent. To me, helping you understand your home’s true value based on actual data is one of the most important tasks a broker does throughout the entire home-selling process.
If the agent you are planning to use does not provide you with a solid written analysis of the your home’s value compared to other sales, or does not provide you a written estimate of the net proceeds, you might want to rethink your agent decision. Pricing your home right is critical, and you don’t want to move past this step without solid data, so you can have confidence in your asking price.
Key to Valuing Your Home: Get a Comparative Market Analysis based on recent sales to make sure you are listing at a realistic price.
Preparing to List: You’ve seen the home valuation, you feel comfortable with the Focus agent and you’re ready to move forward. Great! Now it’s time to get ready to list, but where do you start? What needs to be done to prepare your home to maximize your return? Don’t worry, we can help.
At this point in our process Stephanie Airman and a Stager will meet with you at the home to get our home preparation plan in place. We’ll walk with you room by room and make sure you feel confident in what needs to be done to bring your home up to a “10” to maximize your sales price.
After meeting Stephanie Airman, will send you a complete “House Preparation Checklist”, which will summarize all the suggested projects and house preparation suggestions from the walkthrough. In addition to listing out what you need to get completed it will also provide contractors that could be a good fit to help you out. You will also receive a staging bid with our list of suggested staging items. With these items in hand you’re going to have peace of mind that you know what needs to be done to prepare your home for sale and ensure you get top dollar!
Key to Preparing to List: Having a team of experts provide you with a list of exactly what needs to be done to prepare your home for sale will lower your stress and give you peace of mind.
Listing Coordinator for Focus Real Estate:
Going Live on the Market: The heavy lifting is done! You’ve hired a Focus agent, they’ve valued your home and helped you prepare it for listing. Now it’s finally time to list it and see what the market thinks. So how does this step in the process work?
First, let’s consider the best time to list your home. Typically, we use our “coming soon” strategy and like to market homes on-line the day before they officially become available. There are a few reasons we suggest our “coming soon” strategy. First, it puts your home on the broker and buyer community’s radar and creates interest. The second reason is that it increases the number of showings on the first day your home becomes available. Having more showings on the first day is good because it increases your chance of receiving multiple offers. By listing a few days early and not allowing showings until Saturday, you’re building up demand. In a “seller’s market” as buyers start to see your home, you will likely get quick offers; however, I suggest you take offers through the weekend and choose an offer to accept the following Monday. While this can be frustrating for some buyers, in my opinion, this will give you the best price because it will help create buyer competition and increase your chances of drawing in multiple offers. When buyers are worried about losing out to other buyers, your price goes up. In a “buyer’s market” making buyers wait is not smart and we suggest you negotiate with the first buyer that makes an appealing offer.
Next, let’s consider how showings work. Like most agents, we use a third party company called ShowingTime to set all of our showings. We start by establishing your showing preferences and then request a showing with ShowingTime. For example, we can set up showings to happen during certain hours, for as long as you want. You can also set up seller approvals before each showing if you prefer.
ShowingTime will notify you, as well as your agent, when each showing is set up so you will be able to see how many showings are scheduling. They will also email each showing agent for feedback after a showing. You’ll receive copies of this feedback and look for trends to see how we can improve the buyers’ experience. If the agents don’t provide feedback, we’ll call them to follow up on their thoughts about the property.
Key to Going Live on the Market Step: The key is to first list your home with a “coming soon” strategy to build up demand. You want to leave the home on the market for a full weekend even if you receive quick offers to increase your chance of drawing out multiple offers and finding the best buyer.
Negotiating with Buyers: Congrats, you have offers on your property! So how should you decide which one is best, and what do you need to know about the contract?
Your agent will help you summarize all the offers and highlight key differences that matter the most. We put all the key points into one side by side spreadsheet so you can easily see the differences. So what are we looking for in the offers?
Five key items to consider when picking an offer
1. Price: First, how much is each buyer willing to pay? This is obvious and important, but it’s not everything
2. Home sale contingency: Does the buyer have another home to sell, also known as a “home sale contingency?” Basically, the contingency gives them the right to back out of their contract with you and get all their earnest money back if their home doesn’t sell. This makes their offer riskier because the chance of it falling through goes up significantly. If that happens, you could waste 4-6 weeks of valuable market time being under contract with a buyer who ultimately could fall through AND get all their earnest money back. That’s a big risk. If you have non-contingent offers, the contingent offers usually get put at the bottom of the list in this market.
3. Financing: How much down payment does the buyer have in the deal? How strong is their lender letter? Your agent should analyze each buyers’ financial strengths and assess which one is most likely to be able to close. Buyers with more cash down can absorb appraisal shortages, if the appraisal happens to come in low.
4. Timing: Can the buyer give you the timing you want for closing and possession? Maybe you want to sell your home, but then stay in it for some time after closing while you wait for your new build to be completed. If you want to stay in your property a while after closing, you can sell it and enter a “lease back” agreement, wherein you lease the property from the buyer for 15–60 days (60 days is usually the maximum time for these agreements). Note that if it’s a “seller’s market” the seller is likely to get the timing they want and in a “buyer’s market” the buyer is likely to get the timing they want. Chat with your Focus agent about today’s market and what you can expect.
5. Additional provisions: If it’s a “seller’s market” some buyers will do everything possible to win, so they oftentimes adjust the Additional Provisions section in their offer. You may see clauses that limit their ability to object to inspection items or that offer to cover appraisal shortages if that occurs. These clauses almost always benefit you as the seller and oftentimes make the difference in terms of which offer you should choose to accept. In a “buyer’s market” you’re not likely to see these same seller friendly clauses make an appearance.
If you look at those five items above in detail, typically, the best offer will make itself clear. Don’t just fall in love with price. Instead, pick the offer that has the best overall package to offer and is most likely to close.
Lastly, don’t forget to thank the other buyers that submitted an offer. Losing out on a home hurts emotionally, and you want to make sure you acknowledge their effort. Let them know that if something happens to your contract, you’ll notify them right away. In this market, it’s not uncommon for deals to fall through, leaving you looking for another buyer, so don’t burn any bridges.
Key to Negotiating with Buyers Step: Don’t base your decision on the highest price. Take into account the price, but don’t ignore home contingencies, buyer financing structure, timing and any special clauses in the Additional Provisions section.
Performing Under Contract: Once you sign the contract, you’ll need to perform according to the obligations agreed to in the document. The good news is the seller doesn’t have to do much in this phase; most of the work during the “under contract” period is done by the buyer.
The other good news is we have a Transaction Coordinator named Kathy Kesteloot on the team. Her role is to monitor the transaction from contract to the closing table, make sure we are meeting all the obligations for our clients and make sure the process flows smoothly. By having an internal Transaction Coordinator on the team you can be confident that you’ll always be in the know about what’s happening and what is needed from you as the seller.
Think of the under contract period as the buyer’s chance to do all their homework on the property they couldn’t do upfront when they made the offer. This is their chance to step back, analyze the property and title work, get an appraisal and review the homeowner’s association document (if there is one) to make sure everything is in order.
Colorado is a very buyer-friendly state, and the buyer’s Earnest Money (the money they put down up front with their offer to show they were serious) isn’t actually at risk until the dates and deadlines in the Contract pass. For example, buyers can back out if they don’t like the condition of the property, at their sole discretion, as long as they do so before the Inspection Objection Deadline. So, as the seller, you should know the deal is not over until you’re walking away from the title company with your check in hand.
If the buyer appropriately backs out of the contact using one of their “outs” (i.e., appraisal, inspections, loan approval, etc.), the buyer receives their Earnest Money back and then you can re-list the property and seek another buyer. If the buyer inappropriately backs out for no legitimate reason, you get to keep the buyer’s Earnest Money and re-list the home.
Another important item to note at this point is the buyer’s lenders often have delays that can affect the closing date. It’s not uncommon for there to be a few days delay, so try to keep your moving plans and dates flexible. If you know upfront this could happen, you’ll be less frustrated if the closing actually is delayed.
Key to Performing Under Contract: The key item to understand is that the contract drives the entire transaction and spells out what each party will do throughout the process and when.
Transaction Coordinator for Focus Real Estate:
Passing Property Inspection: Inspections are a critical step in the process and you should expect that your buyer will have a thorough inspection of the home. Most of the time buyers will find a few things and sellers will need to make a few repairs or concessions to keep the deal moving smoothly towards closing.
Almost all buyers will get a general property inspection, most will get a sewer scope and some will get a radon test. The general inspection will cover all the major systems of the home, such as HVAC (heating and cooling), roof, structural, plumbing, electrical, etc. If the general inspector finds something that they are concerned about, they will raise the issue and, if necessary, suggest a special inspection and offer additional guidance.
The sewer scope is critical because a buyer never knows when there is a sewer line issue; even new homes can have them, and they can cost a lot of money to repair depending on location and the issue. In the past, I’ve seen repairs ranging between $3,000-$12,500!
So let’s assume the buyer has the home inspected, and they find a few issues. Now what? The buyer will submit an “Inspection Objection” to the seller, noting the issues and requesting either repair or cash in the form of a closing cost concession, so the buyer can address the items later. I personally prefer the cash concession route. That way, the buyer can control their own repairs and misunderstandings can be avoided between the buyer and seller. Providing the cash concession also lowers your liability as a seller. Why make repairs that could later be scrutinized by the buyer as insufficient?
So, as a seller, what can you expect to have to repair or pay for? It depends on the state of the market and the degree to which you, as the seller, can find another potential buyer. If it’s a “seller’s market”, the seller may agree to just repair healthy, safety and structural type repairs. Conversely, if it’s a “buyer’s market” the seller may end up having to do all the aforementioned items plus repair some more cosmetic items. It really all boils down to who has more leverage in the negotiations. Your Focus agent can help you understand the market and what’s typically being done for repairs at the time of your sale.
Inspections and the subsequent negotiation between buyer and seller can be tense. If a deal is going to fall apart, it usually happens in this phase.
Remember, negotiating power is about having options, and in this market, the sellers typically have the most options. You can negotiate from a position of strength, but do so reasonably. Your first buyer is likely your best one, and you don’t want to start over in the process if you can avoid it.
Key to Passing Property Inspections: Know where the market stands and who has leverage in the inspection negotiations and act accordingly. Stay unemotional in this phase and don’t derail the sale of a $900,000 home over $250 in repairs.
Clearing Appraisal: Once you’ve passed the inspection phase, it’s time for the buyer to engage the appraiser. The buyer’s lender typically orders the appraisal, so the appraiser is not directed by the buyer or the seller, which keeps the process fair and impartial. Appraisals tend to take a while and are very common sources of delays during closings, so you want to make sure the buyer gets this ordered ASAP after the inspection.
Appraisers must value the home off of other recent sales in the area. As part of our normal process we’ll provide the appraiser with the best comparable home sales that support your value. If they don’t have the sales data they need, then they have to appraise the property lower than the contract price. It’s easy to be frustrated with appraisers when numbers come in low, but really they are only doing their job and making sure that over-enthusiastic, emotionally-driven buyers don’t overpay for the property. They are there to protect the buyer and the buyer’s lender, who does not want to lend money on an asset that is being bought at an inflated price.
If you price the home reasonably up-front based on sold comparable sales you shouldn’t run into any appraisal issues. But what if you do and an appraisal comes in low?
Usually the buyer will first notify the seller the appraisal has come in low. The seller will ask if the buyer wants to move forward with the deal at the current contact price, and then there is some back and forth negotiation. Often times the seller will reduce the price, but not always by the full appraisal difference. How much the seller is willing to come down, or how much a buyer is willing to pay over appraised value is all dependent again on the state of the overall market. If the buyer has a lot of other similar homes they could go buy they’re more likely to push hard to get the price reduced to the appraised value. If they don’t have other options, they’re more likely to pay a little over the appraised value. As we’ve mentioned several times before, your Focus agent can help you understand the status of the market and guide you in your decisions.
Are appraisals worth contesting if you think there is an error? In my opinion, unless there is a clear mistake, like the appraiser missed a perfect comparable sale that would have justified a higher price, it’s usually not worth it. This happens from time to time, but usually getting an appraiser to change their mind is a losing battle and a waste of time.
Key to Clearing Appraisal: Know that low appraisals are common so be prepared for this to happen and keep a big picture perspective. Be willing to give a little on the price if it keeps the deal moving forward to a successful closing.
Preparing to Close: Pop the champagne, you’ve made it! You’re ready to close on the sale of your home. So what should you expect around closing time?
First, you’ll want to review your closing figures. Typically, these can be provided to you by the title company 3-7 days in advance of closing. By reviewing the figures in detail ahead of time, you can take your time and understand all the expenses. If you are the type of person who likes to review every document they sign in detail, you can request the actual closing documents in advance as well. That’s much better than trying to review things at the closing table, where you may feel a little rushed.
Once you’ve reviewed the figures, you’re pretty much set for the closing, which typically takes an hour and a half. As the seller, you’ll need to bring two forms of ID, and your part of signing the documents will only take about 30 minutes. The buyer’s part takes a little longer, but you can’t get your funds until they are done. To plan your day accordingly, expect the overall closing to take about 1.5 hours. Don’t worry, our Transaction Coordinator will be reminding you of all these details before closing so you’re prepared.
Not available the day of closing? You can sign your documents early if needed. Your agent can coordinate this for you with the title company, but remember that you won’t get your funds until the buyer has signed all of their documents.
A few days before closing, the buyer will likely want to do a final walk through. This is one last chance for them to walk through the home and make sure all inspection items were handled, nothing significant has changed at the property and that all the inclusions like the fridge, washer, dryer, curtains, etc., are present. The property does not need to be in perfect condition, but you do want it to be clean when you give the buyers possession. A good rule of thumb is to give the buyers the home the way you’d want to receive it if you were in their shoes. A minimum requirement is to get all your personal items out, sweep, vacuum carpets and wipe down all surfaces. It’s also common courtesy to patch and paint all holes from items you’ve taken off the walls.
Once the buyer has signed the documents and their funds have been transferred to you, you’ll want to give them the door keys, mailbox keys, garage openers, etc., so have these ready at closing.
Closing day is a good time for you to also cancel all your existing utilities on the property, such as gas/electric, HOA, cable, internet, etc. Note that if you are doing a leaseback on the property this will affect when you give possession of the property and when you provide keys, etc. Your Focus agent will help you through this process if there is a leaseback on the home.
You did it, congratulations! You made it all the way through the nine steps, and you’ve cashed in on the sale of your home!