Selling residential property isn’t as simple as listing your home on the market. Whether you're a real estate investor disposing of an asset or a homeowner making a life change, a series of steps must happen before closing a home sale. These steps begin months before the home becomes available to buyers. This guide will to get you from A to Z when selling your residential property.
#1- Why Sell Residential Property?
The motivation for selling the property plays a large role in how the home is prepared, marketed, and sold.
Sometimes the reason to sell is obvious. You’ve landed a job somewhere else and you have to move. It's not reasonable for you to hold two mortgages.
Or, you're making a big change. Your family is growing and you want to upsize. Vice versa, the nest is empty and you wish to downsize.
A life change means you need to access equity you've built into your property. A change in financial circumstances means a home is no longer affordable. This is a property you inherited but can’t afford to keep. The list goes on.
It's not just the necessitating factors playing into your decision. Timing matters. Example: families waiting to move until school finishes to make the transition easier on their children. Market factors, like a seasonal buying season, means spring brings more attention to your home.
Whatever your motivation, once you commit to listing the home for sale, you must be ready and willing to move.
#2- Determining your selling goals
Your selling motivation influences your goals. First question: do you need to make a certain amount of money from the home sale?
The more equity you have in your property, the more you can get from your home sale. This money can go towards the down payment on the next home, help avoid private mortgage insurance, secure an affordable monthly mortgage payment. The less you owe on a home, the lower your interest rate tends to be.
For real estate investors, selling a property likely means releasing its equity or simply removing the hassle of rental property management. We’ll cover the relevant investor tax implications in selling residential property later.
Another question we ask home owners is if they need to sell quick. This applies to those facing a short sale or foreclosure, owners needing to move now, or those needing the down payment cash a next home under contract.
#3- Working with a real estate agent
The real estate agent advantage
Choosing to hire a real estate professional to help your home sale gives you several advantages. A real estate agent spends time fostering a network of contacts. It's a friend of a friend's scenario. They might instantly know the right buyer or someone who does.
A real estate professional is familiar with other homes on the market. It's not just what the MLS data tells them, but the information about schools, neighborhoods, and amenities. They've been through countless properties and homes, so they understand the intricacies of what is currently out there and how your property compares. They're insights influences the personalized advice on how to position your property to net maximum value. And, because they are not the homeowner, there’s no emotional influence on this advice. You get straight talk.
A real estate professional executes a marketing program to attract qualified and sincere buyers to your property. Your home is supposed to be your safe space. A real estate agent does everything they can to keep it that way by only allowing the right people through the door.
A listing or seller’s agent will be your best advisor when negotiating contracts with potential home buyers. They know what is a reasonable request and what contingencies or amendments make no sense.
Most importantly, a listing real estate agent’s goal is to represent your interest 100%. Their mission is to get you as much money as possible for your home. Properties listed with real estate agents sell for more than homes For Sale By Owner.
Interviewing Real Estate agents
Don't hire the first person you Google. A real estate agent becomes your employee, so you want to hire the right person.
Ask for referrals and recommendations from your network. Have a list of interview questions ready. Include questions about their marketing strategy for your home, their pricing or listing strategy, and their background. Make sure they know your particular neighborhood well.
Get a feel for their personality. You're going to work with him or her a lot, so you want to make sure their style of communication fits with your expectations.
#4- Understanding the Market
When you're preparing to list your property, get a feel for the current real estate market. In Fort Worth, the North Texas Real Estate Information System (NTREIS) is this source of local data. They publish monthly reports comparing year-over-year sales. Going back several months reveals the overarching trends in the local market.
Your real estate professional should spend time educating you on your hyper local market: your neighborhood. We have access to data at a more granular level that provides insights on activity in subdivisions and communities.
This data helps you realistically understand around how long your home will be listed on the market and what comparable properties closed for. Every property is unique, but this information provides a solid baseline.
The timing of your home sale might matter. In Fort Worth, we see more real estate activity in the spring and summer months. Of course, not everyone can wait till to list their home at the most ideal time of year. Home sell 24/7. The most important thing to have a strategy to reach the right buyers for anytime of year.
#5- Preparing Your Home for Sale
How much effort is needed to make your home ready for listing depends on its current condition and your situation. A well-maintained home that is clean structurally sound may only take a week. Others might need a few months’ of work.
1) Mental Preparation
Sometimes the hardest part is becoming mentally and emotionally ready to sell your home. This is especially true when you have lived in the property for a long time. Homes are places where we create memories with the people we love. Selling feels like letting go of those good times.
Once you are ready to sell, stop thinking of it as your home. It becomes property. Take a similar mindset to buying and selling a car. Put aside the feelings and look at the hard facts. A feature that means a lot to you may be worthless to somebody else. This is why using a real estate agent to sell your home is helpful. We definitely understand the emotional aspect behind selling, but when it comes to marketing and negotiations, we are a neutral party. We act an emotional shield in tough negotiations.
If you can't let go of the emotions and personal attachment, you risk missing out on a solid real estate deal. The bottom line is memories don’t influence the value of your home; the current market does.
Part of positioning your property for sale is to make the spaces more neutral and open. “Neutral” means making it so the buyers envision themselves living in your home. Walk through the property with a clinical eye. A real estate professional can help with this.
Our advice is to remove all personal objects like family photos or political affiliations. If your home has anything potentially controversial to prospective buyers, you should remove it.
Open up spaces by removing unnecessary items. Think about packing away things you're not really using. For example, if you are planning to list the home through the summer, maybe put all your winter clothing into storage. Look through kitchens and bathrooms and remove appliances you can live without for a few months. Pare down the dishes. Remove some furniture to declutter walkways and living spaces.
Look for potential hazards. Take steps to remove anything that could potentially harm people touring your home. An example of this is removing your pets during a home showing.
Dirty homes distract potential buyers. Pots and pans piled in the sink, and swept floors, dust bunnies in the corners, all these things turn off buyers, even if they shouldn't. Put your best foot forward with a deep home cleaning. Wash the windows to let in more light, wipe down the baseboards, and clean off the ceiling fans.
4) Landscaping and curb appeal
The first impression is a big one with your potential home buyers. The view from the street and your front door are the first areas they see. You might need to clean or repaint the exterior. Spruce up your landscaping. Planting new flowers adds an eye-catching pop of color. Keep the lawn and bushes well-groomed and trimmed.
5) Home staging
Home staging helps sell homes faster by making it appealing to as many buyers as possible. Buyers get a sense for how big the space is and what it could potentially look like.
If you plan to continue living in your home while it is on the market, thoughtful curating of your existing pieces is part of home staging. This could mean rearranging the furniture or removing pieces to give the room a cohesive look. A real estate professional will advise you if they think consulting with a certified home stager or interior designer will help you achieve more value in your home sale.
Home staging is beneficial if the home will be vacant while listed. Today you have the option to actually stage the home with physical pieces or you can virtually stage the listing photos.
Sometimes sellers vacate their homes but forget the home still needs to be maintained. Continue paying for basic utilities. A home without running electricity and water is a hard sell. Buyers cannot see that the systems are in working order when the power and water are turned off. Plus, mold can grow quickly and any trace will damage your prospects of gaining full sale value.
7) Professional inspection
Your buyer will most likely request a professional home inspection during the pending period. This is a time when contracts can go awry. Make sure yours won't by getting a professional inspection before you list. This inspection will reveal any items to be repaired to put your home’s best foot forward.
Sometimes, you don't have the money to invest in the recommended home repairs. A home inspection prepares you for this reality. You have the option to list your home for sale “as-is” or you can use the information in your pricing strategy.
#6- To Renovate, or Not to Renovate?
This question causes debate among home sellers. Should you renovate to increase the net value on your home?
Chances are you will not get 100% of the monies invested back if you renovate something right before you list it. Savvy real estate investors who bought a distressed property and made repairs with the intent reselling for-profit fall under a different umbrella, and do run a risk of loss.
For everyone else, the best advice is if you're going to renovate a property you should intend to live there at least one or two more years to make the changes worth it. Renovate something like a kitchen or a bathroom may appeal to your taste, but not your buyers. They might renovate it after moving in, meaning you definitely wasted your money.
Some renovations worth a little bit more than others. Putting on a new roof or replacing the HVAC definitely holds more value for a buyer than renovating a bathroom.
Instead of throwing thousands into landscaping or painting the exterior, think about saving that money for the purchase of your next home.
#7- Setting the Listing Price
There are different strategies when it comes to setting a listing price. Real estate agents have different philosophies. Their strategies may even change depending on be home and the neighborhood. You do want to consult with your real estate agent.
The general rule of thumb is an overpriced home will linger on the market regardless of its price point. Underpricing your home hoping to generate multiple offers is also a risky strategy. Usually, your best bet is to price your home fairly and not add much wiggle room.
#8- Be Ready to Show, Always
One of the most challenging things for homeowners when their property is on the market is to keep the home in showing condition at all times. Few buyers buy a home sight unseen. If the property is not vacant, you need to be open to letting people see your home on their schedule. That means keeping your home clean and neat at all times. When someone walks through the door, they don't know if it was clean last week. They only know what it looks like right now.
We recognize up keeping a home in a show-ready state can be a challenge. After your home has been deep cleaned, spend at least 15 minutes every evening and every morning doing some straightening. This includes picking up stray laundry, sweeping the floors, and removing all the dishes from sinks and counters. This constant but quick maintenance goes a long way to keeping the home always presentable. You'll never head to work and worry about someone seeing your dirty underwear on the floor.
Let's say you get a call that someone wants to see your home in half an hour. What do you do in a pinch? Throw the dirty dishes in the dishwasher. Remove the “stuff” from the counter tops, the kitchen table, and the coffee table. Put it in your cabinets if you must. Shove all the laundry in the drawers. Close all the drawers and cabinets. Wipe down the sinks and mirrors. If you still have time, do a spot sweep.
Yes, dropping everything to accommodate someone can be a hassle. The thing is, you never know if that will be the person who will write the best offer on your home.
Your real estate professional may want to host an open house. The thing is, most home buyers who are interested in your property when it first comes on the market won't wait until a Sunday open house to visit your home. It must clean from the day it lists on the market.
#9- Handling Multiple Offers
Sellers dream of a bidding war to drive the best closed price possible.
The reality is multiple offer situations, while not unheard of, aren’t the normal. Whether your property receives high potential buyer interest depends on the neighborhood, your property, the current market conditions, and your price point. A fairly priced home in a high-demand neighborhood with low inventory is more likely to receive more than one offer.
The key with multiple offers isn’t just to look at the highest price. Purchase agreements come with a range of contingencies. Two buyers could submit an offer with the same purchase price, but one might offer to buy “as-is” with a higher earnest money deposit while the second requests a later date to close and needs more financing.
Since every real estate transaction is unique, and your needs vary, consult with your real estate professional when comparing the multiple offers. While you can leverage the multiple offers to land more favorable terms, the wrong counteroffer risks deterring your potential buyers.
#10- Pending Sale
After you and a home buyer have signed a mutually beneficial purchase agreement, your home is under contract. The work to achieve a closed sale is far from done.
As the property owner, it is your responsibility to maintain the property in the same living conditions as your buyer initially saw the property. Any significant damages or changes will result in significant changes to your purchase agreement or cause the sale to fall out of contract.
Unless the property sale is “as-is,” be aware that the home inspection and appraisal results often lead to some additional negotiations for repairs or closing credits. Your real estate professional knows what are reasonable requests and will continue representing your interests.
The home buyer likely will visit your home several times during the contract period, such as to consult with the home inspector or for the bank appraisal. The buyer may wish to bring outside vendors into the home, such as to take measurements for renovations. It’s your interest to be accommodating. We know this is a hectic time for you, as occupied properties may be preparing to move during the under contract time period.
The day before or the day of closing, the home buyer and their agent will conduct a walk-through to make sure there are no surprises to the structure and condition of the home. While rare, we have seen homes fail to close due to this final walk-through.
#11- Understanding Capital Gains Tax
Residential property sales are subject to capital gains tax because they are considered a capital asset. Hopefully, you will sell the property for more than you paid, resulting in a capital gain.
As long as you and your home fit certain criteria, these gains will be excluded from capital gains tax. These criteria include:
- Owning your home for at least two years
- Living in the home for at least two years, even if it wasn't consecutive
- You have not exempted the gains on another home sale in the last two years
Because tax laws can change from time to time, it's worth looking at the existing tax policy. As of 2019, you can exclude up to $250,000 for singles and up to $500,000 for married couples filing jointly.
What if you do not meet this criteria? If you have owned the home for less than one year, you will owe short-term capital gains tax. This tax is what most real estate investors face when buying and renovating distressed properties. The rate is equal to your tax bracket.
If you have owned the home for more than one year, but do not fit into the other criteria, you will need to pay long-term capital gains tax. How much you pay again depends on your tax bracket.
The good news is that there is no real estate transfer tax in Texas. We're one of 12 states without this tax.
#12- Closing the Sale
Your responsibilities at the closing table are slightly less than the home buyer’s. However, you may be responsible for paying a prorated amount of property taxes and HOA fees. You will have money in escrow for fees split between you and seller.
During closing, the real estate agent is paid their commission, which typically is 6 percent of the final sales price.
Once you sign your portion of closing documents, it’s not necessary to be present at closing. You can be represented by a real estate attorney or your listing agent.
Do make sure the buyer receives all the home keys, mailbox keys, and automated door openers in your possession, even if they intend to change the locks.
Your Residential Property Sales Guide
Having someone in your corner with real estate sales experience improves the selling process. You have plenty to do, between moving your possessions, securing a new place to live, and preparing for the sale. Don’t add the work of marketing, showing, and negotiating your home to it.
At Chicotsky Real Estate Group, we enjoy advocating on behalf of our clients. Our years of working as a Fort Worth realtor means we know the market and neighborhoods. We understand how to position your property to attract qualified buyers.