Most people only sell a home two to three times in their life. Usually, it’s the biggest financial transaction they ever make.
It’s no wonder then why it’s important to know all of the ins and outs on how to sell your house.
Not only will you be more educated on the process of selling your house, but it can also save you time and money.
In this post we’re going to educate you on the home selling process. We’ll show you what information you will need, as well as mistakes you can avoid that can end up costing you thousands of dollars.
There are three different ways that you can sell your house.
1) Sell your house yourself.
This approach is also known as a “For Sale by Owner”. While this is certainly possible, it may end up costing you more money in the long run.
Data from the National Association of Realtors ® shows that selling with an agent will likely be more profitable overall than a sale by an owner.
In addition to money, it will also cost you time and a substantial amount of effort, which may not be feasible if you already have a full time job.
2) Sell your house with minimal assistance from a real estate agent or an attorney.
Similar to selling your house yourself, you’ll be doing most of the work.
Usually, in these cases the attorney or agent will do the absolute minimum, which may include showing you what paperwork you need to have.
If you’re working with a real estate agent who provides minimal service, they may also put your home on the MLS.
But either way, you’re doing the majority of the work and the negotiating with buyers, which is guaranteed to occupy a considerable amount of your time.
3) Sell your house with a full service Realtor ®
This is what we’re going to cover. You will learn how working with a full service Realtor ® can allow you to sell your house fast and at the highest price. We’re also going to tell you what you need to watch out for. This includes what other listing agents aren’t going to tell you, and how you can save on real estate commissions. We’re going to take you step by step through the entire home selling process. By the time you’re done reading, you’ll be much more educated on the process of selling a home and what steps are involved.
One of the biggest financial transactions of your life, selling your house is an important process with eight critical steps. (Note that if you plan on selling your home by yourself or with minimal assistance, you can begin on step 2).
These eight steps include:
Step 1: Choosing Your Real Estate Agent
Selecting your real estate agent is one of the most important decisions you’ll make when selling your home.
Your ultimate goal is to put the highest amount of cash in your pocket from the sale of your home. This means you need to fully understand how your agent plans to help you reach that goal.
An important part of choosing an agent is comfort level. We always suggest interviewing at least two or three different real estate agents before making a decision.
Doing so will give you a better idea of what services they offer, and who you feel most comfortable with. Both of these things can be extremely critical towards your end goal of selling your house fast and for the highest amount.
There are several ways to find a Realtor ® to sell your home, including:
Once you have interviewed at least two or three agents and made a decision onwhich one to go forward with, there are three extremely important questions you should ask your real estate agent:
While you will likely have several other questions in addition to the ones mentioned here, these three are absolutely critical to understand before you begin working with your Realtor ®.
It doesn’t matter if your Realtor ® is a family friend, someone you found online, or someone from a local real estate office.
Knowing the answers to these three questions will help you net the most for the sale of your home, and save on costs.
It can also help establish a level of comfort with a person you will be working closely with over the next few months in the process of selling your home.
So, why are these three questions so important when beginning work with your listing agent to sell your home?
Let’s review each one in a little more detail.
QUESTION 1: How Much Do You Think You Can Sell My Home For?
This is an extremely important starting point that cannot be emphasized enough.
You might already have a rough idea on what your home might be worth. But do NOT base this off of Zillow’s Zestimate, or any other online home value estimate.
While sometimes they can be a useful place to begin, these online home value estimates don’t include several key factors that have a tremendous impact on your home’s value.
Online home valuations cannot and do not take these factors into their calculations.
In fact, despite being one of the most popular real estate websites, Zillow even admits that their home value estimate is not always accurate.
When interviewing a real estate agent, you want to make sure they know:
- Your neighborhood
- The local schools (whether they are good or bad), and most importantly
- The comparable homes (also known as comps) that have sold near yours
Why does all of this matter?
This information can and should be used when negotiating with buyers and their agents to sell your house for the most money.
Most Realtors ® will have a comparative market analysis (also known as a CMA) when interviewing with you.
What’s a CMA?
A CMA is a summary of homes that have recently sold in the area that is similar to yours.
There is a certain set of criteria that you want to make sure your listing agent is using when establishing a CMA for your property. These can vary depending on where you live. For this example, we’ll use the average suburban area. Properties included for a typical suburban neighborhood should be:
- In close geographical proximity (within a half mile radius at most)
- Those that have most recently sold (within the past six months at most)
- Those that are closely comparable in interior square footage
- Those that have the same or close to the same number of bedrooms and bathrooms
- Those that have a similarly sized lot
These are the same requirements a real estate appraiser uses when appraising a property. The more similar characteristics that a property has to yours, the better.
After the agent has the selected comparable homes, they’ll make certain adjustments based on a few key factors:
Condition of the Home
The most important of all is usually the condition of the home. If your home is in much better condition in comparison with one of the ones its being compared to, then your home should have a + adjustment and should be valued higher.
Location of the Home on Its Street
Other adjustments can include the location of the home on its street. For example, if your home is on a quiet cul-de- sac, and a home it is being compared with is on a busy street, your home may receive a 7%-10% positive adjustment in its listing price as a result.
So, if the home on the busy street that it is being compared to sold for $800,000, your home may be worth roughly $50,000 to $80,000 more.
Other adjustments can be based on evaluating the comparable homes’ different neighborhoods, different schools, and the property condition.
What’s Not Included in a CMA….But Should Be
There is one thing that is not typically included in a CMA or online home value estimate that has a huge impact on the potential sales price of your home.
This is the layout and floor plan.
It can vary drastically from house to house, and often comes down to personal taste. But if the layout and floor plan of your home is in line with what a certain buyer is looking for, it can have a big impact on the desirability of your property.
But the same principle works both ways. If your home doesn’t have an ideal floor plan or layout in the eyes of your prospective buyer, they might be turned off, even if everything else is perfect.
Get An Accurate Listing Price When Selling Your Home
When speaking with and interviewing real estate agents and reviewing their proposed CMA, there is one thing you absolutely must be aware of:
There are some agents who will suggest a listing price that is higher than what is realistic so that you will decide to work with them to sell your home.
This should ring some alarm bells.
When you sign a contract to work with an agent, it is usually an exclusive agreement between you and the real estate brokerage for a certain period of time. That period of time is up for discussion, but it is typically around six months.
It may be very tempting to work with an agent who suggests or even “guarantees” they can sell your house for a higher amount than you think your home is worth or what other Realtors ® are suggesting.
Our biggest words of advice: If it sounds too good to be true, it probably is.
And it will cost you a lot more money in the long run. This is because of the ever-important number of days on the market for a property.
What’s So Important About Days On The Market?
The longer your home stays on the market, the more you start to lose leverage as a seller. Depending on what type of real estate market it is, the average days on market can differ. In a seller’s market, the days on market are usually shorter. In a buyer’s market, they’re usually longer.
If your home is on the market longer than what is average, buyers will begin to wonder whether there is something wrong with your property that could explain why it hasn’t sold sooner.
Eventually, your agent will most likely tell you that the longer the house is on the market, the more it can hurt your sale. They may say that despite having done a substantial amount of marketing, the best thing that can be done is a price reduction.
But why wasn’t this considered when you first started working together, before you put your home on the market?
The bottom line is that it should have been.
This type of scenario is extremely common, but there are ways you can steer clear of it when you sell your home.
So, How Do You Avoid An Unrealistic Listing Price When Selling Your Home?
The Difference With Condos
If your property is a condo, these comparison guidelines may be a bit different.
Comparing your property to others within the same complex is always best, even if you have to look beyond the last six months for the most recent sale.
Next, An Example
Imagine that you are about to sell a single-family residence, and your real estate agent has just presented you with some comparable properties nearby.
With your hypothetical property and these three comparable properties in mind, here’s a rough idea of how your agent should be making adjustments.
Note: Most Realtors ® don’t go to this in depth level the way an appraiser would. But to get the most accurate value of what your home might sell for, this is a good approach.
Now, let’s break down what your home value would come out to based on the three comps.
If we wanted to, we could make an adjustment for the lot size. But depending on the area, the difference between a 6,000 and an 8,000 square foot lot doesn’t have as big of an impact as the other adjustments.
Determining Your Home’s Value
Next, we take the sum of all three and divide by three to get the average.
Remember, this is just an example of how your potential Realtor ® should be looking at the comps and making adjustments. This can vary by market, neighborhood, and the type of home, but this gives you a good idea on the approach your listing agent should be using.
If you’re speaking to a listing agent who doesn’t understand this, doesn’t include adjustments, and is just listing similar homes that sold close to yours, do not count on them to be able to negotiate top dollar for you when selling your home.
Once a Realtor ® shows you these numbers, they should also have a suggestion on the list price for your property. But it’s important to keep one thing in mind.
The list price and the sale price of your home are two very different things.
The list price can be used strategically to attract more potential homebuyers. Listing your home at a certain price does not mean that you need to sell it at that price.
A good agent with an understanding of the sales activity in your neighborhood will list your home at a price comparable to other homes that have recently been sold in your area.
They’ll do this with one goal in mind: to meet or exceed your expectations by selling your home for the maximum price in the least amount of time.
Our example provided a comparative market value for your home at $1,343,000. This may mean having a listing price of $1,299,000.
So, why is the listing price lower?
Because you will likely get more attention on your property than you would if you listed it at around $1,350,000.
The majority of buyers these days are doing their own research online. They have easy access to a lot of data, such as price per square foot in the neighborhood they’re looking in, as well as the average sold price.
We always suggest listing a home a tad under market value or at market value to attract more eyeballs.
Key Takeaways For Question 1:
- Make sure your Realtor ® provides you with a detailed explanation of properties in your area that have recently sold and that are similar to yours
- Make sure they do not give you an exaggerated value that you know is unrealistic
- Make sure their suggested list price is around market value
QUESTION 2: What is your marketing plan?
Marketing plays a big role in selling your home for the highest amount.
But here’s what you probably won’t hear from another listing agent. Through the MLS and automatic syndication to all of the real estate search websites such as Zillow, Trulia, Realtor.com, 80% of the marketing will be the same no matter which real estate agent you decide to sell your home with.
It’s the other 20% that can make a difference.
And here’s something to consider. If you’re in a neighborhood where the same Realtor ® consistently sends out postcards saying something like “Just Listed,” then guess what? They are using that extra 20% to market themselves in your neighborhood to get the next listing, as opposed to marketing your home to possible buyers.
This does NOT help sell your home. Instead, this agent is using your home sale to market themselves rather than your property.
Make sure your agent is marketing your property, not themselves.
In the real estate industry this is called “farming.” It’s a method that has been used for decades, but one that needs to change. In fact, it’s one of the reasons why SoldNest was founded.
Homeowners who sell their home are often completely unaware of this tactic. They may think that the Realtor ® who has been selling homes in their area for the last twenty years is the neighborhood guru, and therefore is the best Realtor ® to sell their house.
Maybe they are. But it’s not because of the postcards they send. You want to make sure they have a detailed marketing plan, in particular, one that will reach the most eyeballs of potential buyers.
Where are buyers looking?
The National Association of Realtors ® and Google recently teamed up to uncover trends and insights around digital media usage among home shoppers.
They found that over 90% of homebuyers search online. And maybe what’s even more astounding is that real estate related searches on Google have grown over 253% over the last four years.
The majority of buyers are searching online, and have social media accounts such as Facebook and Instagram.
It’s critical that your agent has a unique game plan on how to advertise your home through digital marketing.
Remember, no matter which agent you decide to list with, you’re going to get a lot of exposure through the MLS, Zillow, as well as many other websites and applications.
But if you can tap into this buyer pool even further, your chances of selling your home for maximum value increase.
Things That Do Not Have An Impact On Your Home Sales Price
Here are a few things that do not have an impact on how much your house will sell for:
- Postcards and flyers.
These do more to market the Realtor ® than your home. Flyers are nice, but by the time a potential buyer sees them, they are already irrelevant.
- A website without proper marketing.
Many listing agents will say they’ll have a website made for your home. But the question you should ask is “what are you going to do with it?” Most only get it to impress the homeowner. A website or domain name of your home means absolutely nothing unless they plan on advertising your home online. Most will put the domain name such as www.youraddress.com on the flyer that is distributed at your open house. But this makes no sense, since by the time the buyer sees the website address, they’re already at your home.
- The name of their brokerage.
Some Realtors ® will say something like “Our company is the 2nd largest in the nation.” That’s nice, but how does this sell your home for more? It doesn’t. The buyer doesn’t care who the listing brokerage is. They care about things like the location, schools nearby, and the condition of the property. Many Realtors ® will use this brokerage point to try and gain credibility, but it has no impact on your home’s selling price.
The “Homebuyers Lined Up Around The Block” Line
Be extremely cautious of real estate agents who tell you that they have a certain number of buyers looking in your area.
Unfortunately, numerous agents exaggerate and will say this to try and convince you that they have buyers lined up ready to buy your house.
If this is the case, then ask them to bring an interested buyer to see the house before signing a contract. Then watch how fast they back pedal. Even then, if you want to maximize your homes selling price, then you want full exposure and the most amount of buyers seeing your agents marketing.
So, what should your agent include in their marketing plan for your property?
The Importance of Digital Marketing
Unfortunately, many real estate agents do not implement digital marketing strategies when selling homes.
But with most buyers searching online either on a website or on one of the search apps on their phone, it’s critical your listing agent has a targeted digital marketing plan to maximize exposure when selling your home.
The reason why is simple. The more eyeballs that see your home, the more potential homebuyers that will come to visit. The more buyers that see your house, the more demand it receives, and the better the chance you have of selling for more money. If we know that over 90% of homebuyers search online, then why would you want your marketing dollars spent on neighborhood postcards or newspaper ads? The answer is that you don’t. The chances of your neighbor buying your home are extremely low, and the chances that a buyer finds your home for sale in the local newspaper is also extremely low. Again, many agents use this approach to use your house to market themselves as the “local expert”.
You want your home to have the highest exposure possible. This includes the MLS, all syndicated real estate search websites, and digital marketing.
Unless there’s a very specific reason that you do not want your home placed on the MLS, any agent who advises you on this, you should be highly cautious.
There are some listing agents who might suggest this, so that they can have the least amount of advertising as possible to other agents and buyers, giving them an opportunity to try and find their own buyer and double their commission.
As previously mentioned, you’ll get 80% of the same marketing no matter which Realtor ® you decide to list your home with. But the extra 20% can help sell your home for more money.
In this day and age when the majority of buyers are searching for properties online, the right digital marketing plan is a must.
QUESTION 3: How much do you charge?
When selling your home, your goal is to put the most amount of money in your pocket. Paying the lowest amount in commissions helps you do that. It’s easy to figure out what you could potentially net from your sale with a home sale calculator.
One of the biggest misconceptions is that a Realtors ® commission is non negotiable.
But here’s a little secret: you can pay however much you want.
Here’s how it works:
- When you sell you home, you pay your listing broker and you pay the buyer’s broker.
- Depending on your area, this can be 2.5 - 3% each, which makes a total of 5-6% in commissions.
- Many listing agents will avoid talking about their commissions when initially speaking with you because they don’t want to have an uncomfortable conversation. Many of them can’t justify the real estate commission that they charge.
- Some may tell you that they are suggesting a lower than average commission, but what they don’t mention is that they are also paying less to the buyer’s brokerage.
Remember to always ask the agent how much they charge, what the total commission is and how much is going to their brokerage and how much to the buyer’s brokerage.
When a home is listed for sale and when an agent uploads it into the MLS, there’s a section that shows how much the seller is paying in commission that only other real estate agents can see.
Anything less than the average can sometimes convince buyer agents to not show your property to their clients. Your goal should be to pay the lowest amount in real estate commissions, while receiving top-notch service from an experienced real estate agent.
The Scoop on Uploading To The MLS, and Other Property Sites
Before real estate search websites and applications were around, a listing agent’s job of “marketing” a property was much harder than it is today.
Today, it only takes your agent about half an hour at the most to input all of your home’s information into the MLS. When they press submit, it’s automatically syndicated to hundreds of websites, including all of the big ones.
So if an agent’s job of marketing a property has become much easier, why are homeowners still paying the same amount in real estate commissions as they did before these resources were available?
It’s a great question that I don’t think anyone can answer. And it’s also the main reason why SoldNest was created.
Compared to the average 5-6% total commissions charged by other Realtors ® and brokers, we only charge 4% (1.5% to SoldNest and 2.5% to the buyer’s brokerage), while providing better marketing and better service.
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Step 2: Getting Ready to Sell Your House
Now that you’ve decided which listing agent you’re going to partner with, it’s time to get your home ready to sell.
The First Impression
"You never get a second chance to make a first impression," the old saying goes, and it’s especially true when selling your home.
Whether it's at an open house or a private showing, it's imperative to make a great first impression to all potential homebuyers. When a buyer visits your home, they generally get a good idea of whether or not they like it within the first twenty seconds or so.
There are numerous things to consider in order to get your home to look its best. Not all of these are mandatory and you may not be in a position to do any of them, but the more appealing your home looks to a homebuyer, the better the chance of selling your house for the highest amount in the shortest amount of time.
Staging can be an added benefit by helping to get a homebuyer emotionally excited about your house.
A good professional home stager will know which furniture should be placed where, what color scheme will go best, and can also give advice on any work you might have done on the property.
Although staging can sometimes make a difference in appearance, it’s not always mandatory.
If you’re not using a home stager, you and your Realtor ® can boost the overall appearance and feel of your home with strategic furniture placement, by considering things like:
- Buyers want to visualize how things will fit
- Will their couch go in that corner?
- Does it make sense to mount the TV on that wall?
Placing furniture and other items in their ideal locations can help increase buyer enthusiasm about making an offer on your home.
Improper staging or leaving your home vacant can leave buyers less interested in purchasing your home.
When selling your home, one of the first things you’ll want to do is sit down with your listing agent and get their opinion on what should be done. They should be able to provide you with their opinion and then you can choose what you want to have completed.
The more you can do the better, but having a newly remodeled home is not mandatory to reach a high sales price.
The goal should be to do what you can while still being within your comfort zone.
Step 3: Preparing and Planning
Now that you have your home ready, the next step is to fill out disclosures and start some of the pre-marketing.
Your listing agent will guide you through this process.
It’s very important that you fill out all of the necessary disclosures and paperwork. When selling your home, and depending on what state, city, or even neighborhood you’re in, there are certain documents that you need to fill out.
A few of the important ones include disclosures, in which you’ll need to disclose every single thing you know about the house and neighborhood.
Some of these documents will ask you a lot of questions, and it’s important to be as thorough as possible. This not only helps you from preventing a potential lawsuit down the road from the buyer for not disclosing something about the house that you should have, but it can also help the buyer make a better informed decision when thinking about writing an offer.
The more information the buyer has up front, the higher the chance they submit a better offer. These disclosures are part of a package that your listing agent should have ready for any interested buyers and/or their agents.
During this same time, there are several things that your agent will be doing.
When you sell your home it’s not mandatory that you do property inspections. However, it’s almost always beneficial.
The most common inspections include a home, termite, roof, pool, and chimney. But depending on your state and the area you live, there are other inspections that can be common.
We almost always advise our clients to get a home inspection, and because we live in California where they are common, a termite report completed before we list the home for sale.
Why Do A Home Inspection?
Step 4: Listing Your Home for Sale
After all of the prepping and planning, it’s time to put your house up for sale.
“Going on market” or “on the market” usually refers to the home being on the MLS. Your Realtor ® will input all of your homes information including the photos, video and property description into the MLS. This usually only takes about half an hour or so.
Shortly after, your home is automatically syndicated to hundreds of real estate search sites including Zillow, Trulia, Realtor.com, Homes.com and many more. At the same time, all of the other marketing that your real estate agent has planned should also be starting.
Allowing access to your home is important. Your agent will usually leave a lockbox containing a house key that allows any potential buyers (only with their agent) and their agents to visit the property.
The easier it is for potential buyers to access your home, the greater your chance of reaching your target sales price.
Your agent should coordinate with you on how buyer agents should schedule a showing. You can have them call your agent directly and then they would call you (assuming you’re still living in the property) to confirm the time, or the buyers agent can call or text you to confirm the time.
The latter is usually more common and if this is the route you choose, your listing agent should leave a comment in the private remarks section of the MLS (only other agents can see this) giving specific showing instructions.
Make sure your agent is specifically clear on how and when to show your property. If certain times of the day are better or if a certain amount of time is needed in advance, then it’s especially important that your agent puts a description under the private remarks so that other agents are aware.
Scheduling an Open House
Open houses are great, but usually aren’t the deciding factor in selling your home.
It’s an opportunity for buyers to view the home so that they don’t need to schedule a private showing with their agent. Open houses will usually receive the highest amount of traffic on the first weekend after the listing is posted.
The Truth About “Broker Tours”
You might hear your Realtor ® talk about a broker tour during the first week your home is on the market.
Here’s something you might not hear - they can be a waste of time and are really meant to give you, the seller, an impression that your agent did a lot of work on getting other agents by “marketing” the house.
This couldn’t be farther from the truth.
It’s kind of a known action amongst Realtors ® at a broker tour to leave your card behind so that the homeowner can see how much “traffic” your agent generated.
Chances are, the agents attending don’t have a buyer interested in your house. But they may leave their business card anyway. When your agent shows you all of the cards, you may think “Wow, our agent has done a great job of getting other agents to our house”.
In reality, there’s a broker tour just about every week. And your listing agent can schedule your home to be on tour.
It doesn’t hurt to have a broker tour, but just keep in mind that when you see all of those cards, your agent didn’t “market” the house to buyer agents.
Most of the time, the agents who attend are simply there because they like to look at homes in order to stay up to date with market activity.
Keeping Emotions At Bay
Selling a house can be a very stressful time - especially when your home is on the market and other people are coming through to look at it.
If you’ve owned the home for a long time, maybe there’s an emotional attachment.
Removing all or most of your emotions can drastically help during this time. It’s hard to do, but looking at this as a financial transaction can benefit you in helping to transition to your next phase in life.
Step 5: Waiting for an Offer
Waiting, waiting, and more waiting. This is what happens after your home is put up for sale, and the anticipation can start to build quickly.
Your Realtor ®should be giving you consistent updates on your home’s activity at least once a week, if not more.
Your real estate agent should open up dialogue with buyers and other agents to not only gauge interest, but to also get feedback.
Remember the Days on the Market
The number of days your home is for sale can have an affect on your potential selling price. The longer your home is on the market, the more leverage you start to lose and the more buyers will gain.
Buyers will start to wonder why your home hasn’t sold. Is there something wrong with the house? Is it over priced? This is where a price reduction might be necessary. Usually when this happens, the home was over priced to start with, either suggested by the Realtor ®or an adamant homeowner who thought their home was worth more than it is.
This is why it’s imperative that your listing agent understands the comps as well as current market activity and is well versed on the adjustments that were made before suggesting a list price when selling your home.
Keeping Emotions At Bay
When a buyer is interested in your home, they will usually ask their agent to start gathering info about your property.
This will mainly consist of looking at recent comps that have sold, as well as asking for any disclosures and/or inspections you may have done. Depending on your state and area, the protocol may be a little different, but it’s always better to be over prepared with as much information upfront for your homebuyer so that they can make a strong offer.
After looking at the comps and asking your agent for any disclosures and inspections you might have, the next step for the buyer would be to discuss with their agent about writing an offer. The discussion is about price, contingencies, and a few other terms that will be included in the offer.
Your agent should go over what you want to look for as a seller in an offer. Price is obviously number one, but there are a few other key things your agent should be looking out for when a buyer submits an offer, which we’ll touch on shortly.
The goal is to get the highest price when selling your home, but the highest price is not always the best offer. If there are other terms in the offer that don’t fit what you’re looking for, then the highest price might not be the best offer.
Your real estate agents job is to negotiate the best possible price with the best possible terms. Part of what makes a great listing agent is knowing how to negotiate with buyers and their agents. Some Realtors ®are not well versed in this and don’t utilize certain negotiating tactics when trying to maximize your homes sales price.
To ensure your listing agent will know how to negotiate top dollar for your home, ask them what their strategy is to do this. This should not be a broad answer, but should be backed up with facts, such as statistical data on recent neighborhood sales and current market trends and why they think they can get the sales price that they told you.
When an offer comes in, your agent will let you know and will usually want to sit down and discuss to ensure you understand the details.
You have three options when a buyer submits an offer on your home.
Rejecting the offer means simply that - you reject it and don’t want to negotiate with them. This happens sometimes, but usually in cases when there’s a lowball offer, or for some reason there’s a waiting period where the seller might want to wait to look at all offers.
If you accept the offer, you are accepting the buyers offer price, contingency periods, and anything else that they have stated or outlined in their offer. When you do, the contract is ratified and the clock starts ticking.
The third option is to send them a counter offer. This usually isn’t done how you see on the real estate listing TV shows where they are talking and negotiating on the phone. This can happen, but it’s followed up with legal documents that are part of the contract where you are countering something about their offer.
Possible Items In A Counter Offer
- Contingency timelines
- Close of escrow
- Rent back (so that you can stay in the house a bit longer after the sale)
In some cases, there will be one counter offer that you send to the buyer. If they agree to it and sign it, then you’re in contract.
In other cases, there can be numerous counter offers, where your listing agent and the buyer’s agent are negotiating until either both parties agree on all terms, or you don’t and the offer is void.
Once you and the buyer agree on terms and the contract is ratified and the sale turns to pending, it’s not time to celebrate yet.
There are contigency periods that the buyer has to complete to further do their due diligence.
Step 6: Reviewing the Homebuyer's Contingencies
Usually within the first few days (at the most), the buyer will deposit a “good faith deposit”, which is commonly known as an escrow deposit.
Depending on the state and area you live in, this can be different amounts, but when selling a home in California, this is usually 3% of the purchase price.
This deposit will go towards the buyers down payment, but is held in escrow in good faith of the buyers agreement to purchase your property.
The buyers escrow deposit is NOT at risk until they release all of their contingencies. If they release all of their contingencies and for some reason want to back out of the transaction, then their deposit can be at risk.
As soon as the contract is ratified, the clock starts ticking for the buyer’s contingency periods. Their lender will start on the loan process immediately, their appraisal will be ordered, they will start ordering any inspections, etc.
Common Contingencies in a Homebuyer’s Offer
On an offer contract, the buyer has options if they want contingencies and how long these should be for.
The three most common contingencies are the buyer’s loan contingency, an appraisal contingency, and an inspection contingency.
Another contingency that you might see is an offer contingent on the sale of the buyer’s home.
The Three Most Common Contingencies In A Homebuyer’s Offer
Buyer Loan Contingency
This is contingent on the buyer getting their loan conditionally approved. Most homebuyers will get pre-approved before they start really looking at homes for sale.
A pre-approval means the lender did a credit check, checked the buyers bank statements for sufficient collateral and reserves, as well as gathered their most recent pay stubs, W-2’s, tax returns and so forth to make sure they qualify for the home loan.
When a contract is ratified, the underwriter at the buyers lender will also need to see other documents to give them the full conditional home loan approval. These include the purchase contract, title report, and a few other documents. A buyer will release their loan contingency when they and their loan officer are 100% confident that the financing will not be an issue.
When a homebuyer is purchasing a house for sale and is receiving financing from a lender, the lender will require an appraisal of the property.
Since the lender is putting in the majority of the money on the purchase, they want to make sure the collateral being used for the home loan (your house) is worth what the offer price is in the contract.
If the appraisal matches the purchase price or comes in higher, then everything is good and the buyer will release their appraisal contingency.
If the appraisal comes in less than the purchase price, then the buyer can back out of the transaction, try to renegotiate with you and your Realtor ®, or if they really want the house, they will end up paying bit more out of pocket.
Banks will use the purchase price, or the appraised value for qualifying factors, whichever is less.
This is a time frame for the buyer to do any and all inspections.
These can include the same inspections you might have done, or different inspections. Sometimes a homebuyer will want to have their inspections completed, even though you might have already provided inspections upfront. This is perfectly normal. Purchasing a house is a major financial transaction and it’s always better that everyone involved does as much homework as possible and not try to avoid any short cuts.
Once the buyer is confident on the inspections, they will release their inspection contingencies.
The Next Steps
When the buyer releases any and/or all of their contingencies, they will do so on a legal document that is part of the contract and signed by all parties. The typical timeline can be anywhere from 0-21 days (give or take) for any of the contingencies.
Some buyers will waive their contingencies in their offer (this is much more common in a seller’s market where there is low inventory) and some might leave them as they are standard in the contract.
They can also be modified in the offer contract. For example, if an inspection contingency is 17 days standard in the contract, a homebuyer might take this down to 10 days to make their offer look a little stronger.
As a seller, this is a good thing, as it shows more commitment from the buyer.
This is what you’re really waiting for, as when the buyer releases all of their contingencies their escrow deposit can be at risk. When they do release them, you’re about 90% of the way done and can feel pretty confident that the transaction will close.
During this same time, you can really start to get everything ready for your next adventure and start making immediate plans if you need to.
Step 7: Waiting for the Lender
After the buyer removes their contingencies, it’s really a waiting game for their lender to send their loan documents to the escrow company to be signed.
There are conditions (paperwork) that the buyer needs to fulfill before the underwriter will give the ok to draw the final loan documents, but this has nothing to do with the seller.
About a few days to a week before your estimated closing date, you’ll be scheduled to sign the legal documents of the transaction at the escrow company. Your agent will keep you informed about this.
You’ll be signing the legal documents that will transfer the property to the buyer. You’ll need to bring your drivers license and your bank account info (routing and account info) to give to the escrow company so that they can wire your home sale proceeds as soon as the transaction is complete.
Around this same time, the buyer will be doing a final walk through of your home. This is meant to make sure the home is in the same condition as when they first saw it. The buyers will sign a disclosure that is part of the contract verifying the property condition is the same and good to go.
Once the underwriter at the buyer’s lender gives the green light, they will draw up the loan documents and send them to the escrow company for the buyer to sign.
Step 8: Closing
When the buyer signs their loan documents at the escrow company, you’re a couple days away from the transaction being official.
It’s important that when you leave the home, you leave it in good condition with nothing left behind, and if there are any special instructions coordinated in the contract, be sure to follow through on them. Your agent should remind you of what these are, if any, and should also be explaining the closing process.
A few key things are to leave all the sets of keys, garage door openers, as anything else you can think of that should stay behind.
At this same time, it’s safe to take the utilities out of your name.
Here’s how the closing typically works. Again, this will depend on which state you’re in, but in California, this is the usual process:
The Three Steps To Closing A Sale
Once the buyer signs their loan documents at the title company, the escrow officer will then send them back to the lender so that the underwriter can make sure all of the T’s are crossed and all of the I’s are dotted.
Once the underwriter signs off on the loan documents and there are no more conditions for the buyer to fulfill, the loan is ready to fund.
Funding means that the lender sends the buyers loan amount to the escrow company via wire.
Once the escrow company receives the funds, they will disburse the funds accordingly i.e, paying off the sellers mortgage, paying commission checks to the buyer and listing agent’s brokerage, net proceeds to the seller, etc.
Usually the day after the funding is when the transaction becomes official. This is known as recording.
Recording is a process where the escrow/title company physically sends someone down to your County recorder’s office with a copy of the grant deed. Someone at the counties office will give it the final stamp of approval.
Once this happens, the transaction is official and you can officially celebrate!
By now, you have learned the eight steps involved in the home selling process. Each and every step is an important one, and all are interconnected. Selling your home may seem complicated, but with the help of the right real estate agent, it doesn’t have to be.
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