Step 2: How to Prepare to Sell My Home
As a homeowner, there can be a million reasons to sell your home. The kids could be out of the house and it is time to move onto something smaller. Or just the opposite – you are expecting your family to expand. The reasons can be financial, personal, or professional.
Besides these individual motivations, what considerations go into deciding when the home itself is ready to sell? Even if it’s time for you, it might not be the perfect time for your home. Here are some important considerations for deciding if now is the right time to sell your home.
The Best Time to List, and Sell, Your House
It is important to consider not only if this is the right time for the market, but if it is also the right time of year to sell the house. As a homeowner, you may have heard of the “magic selling window,” from March to May a period of time within which you have to sell your home, and while this is not the only ideal time to sell your home, there is some truth to it. This is one of the many where areas a local real estate specialist can be crucial. An agent who knows your location can give you the best information on timing.
The Costs of Selling a Home
There are several upfront costs associated with selling your home. Some of these costs will apply to anyone selling their home, and these include agent’s commission, marketing and staging the home, and home cleaning and repairs. Besides these, there are a few other costs that might come up depending on your situation; these include paying off the mortgage, and closing costs on the home sale. In most cases, the buyer will pay the closing costs, but if the home buyer is struggling to make a down payment or they are a first-time buyer, then your agent may advise you to cover the closing costs for a buyer that is credit rich but cash poor. A good estimate is to expect these costs to add up to 8-12% of the home sale.
If everything goes correctly, home sellers should be seeing a profit at the end of their home selling journey, but no matter what, selling your home will almost definitely cost some investment up front and post-sale from the sales price.
Why should you know what your house is worth?
Learning the Value of Your Home: How, What, and Why
In the course of selling your home, its value will be estimated several times over. First, you may go online and try to estimate the value based on what else is being sold in your local area, Homes.com offers a home values section that will show you home value estimates of properties in your area. Later in the home selling process, your agent will essentially do the same thing, just with more tools at their disposal, as they look at market comparables (homes of similar size age and type in our area). Then, your home will be appraised, and this will be the final word on the value of your home. Some homeowners who want to jump to the end will hire an appraiser at the beginning of the process, and there are some advantages to this. An appraiser is an impartial state-licensed agent, most often hired by the buyer at the request of the loan company, and the appraiser gives the true market value of the home. Even if you hire an appraiser to learn for certain your home’s value, a buyer may request their own appraisal anyway, so many homeowners choose to save money by waiting for the sale to be in process before getting an appraisal.
Your Real Estate Agent and Comparables (Comps)
Understanding the value of a property is part of the real estate agent’s job, and one of the many things they bring to the table when you hire them. When they help you look into the value of your home, they’ll be looking at a comparable market analysis. Using this method, the agent will look at comparables sold over the last 90 days in your market.
So what are comparables? Also referred to as comps, comparables are homes that share a market and similar features with your home. Ideally, a comp is a home that is physically close to yours, with the same interior square footage, the same lot size, and the same number of bedrooms and bathrooms. It is the real estate agent’s job to find a ‘comp property’ that is closest in all these aspects, and more than one, if and when possible. The more comps you can find, the closer the price estimate can be.
The Other Homes Being Listed
No matter what you think your home should sell for, the price-point on your home is limited by what other homes in your neighborhood are being sold for. This is another thing your real estate agent will help you take a look at. It’s possible to price your home higher than the other homes on the block, but your home should offer more: more yard, more bedrooms, better upkeep.
If there are multiple homes being sold close by, the general idea is to find a price that gets the best value for you, while staying somewhere in the middle of the pack. One wise Real Estate Agent adage says, “The Highest Priced Home on the Street Sells Last.”
How to Get a Home Appraised
Most instances of home appraisal occur because, in the process of selling your home, the buyer is required to have the home appraised by the lender of their mortgage to ascertain the home’s true market value. Home appraisers are objective third-party professionals licensed by state and local government to give fair assessments. In almost all instances, the home buyer pays for the appraisal fees as part of the closing costs.
There are other reasons to have a home appraised, as well. Anytime you are looking to borrow money on your home, such as to pay for an extensive remodel, a lender will ask for an appraisal.
For the most part, the appraiser will be looking at those macro factors in the valuation of your home, but there are a few small things you can do to increase your home’s value:
- Signs of Age: If your home is showing signs of its age, think about ways to make it more contemporary. Carpet, fixtures, and cabinetry should be as new looking as possible.
- Curb Appeal: In a similar way, keep the yard as fresh and welcoming as you can; anything you can do to reduce the overall impression of age will give your home its best chance at a high value.
- Make Improvements and Keep Records: Make sure there is a paper trail of all the home improvements you make; for instance, any fixes on the faucets or the building’s electrical should be recorded.
Finding an appraiser in your area should be easy. If you are selling your home, then the lender will provide a list of approved appraisers for the buyer to hire; if you are looking to appraise your property value for other reasons, then your lender or local real estate agent will have recommendations.
For the most part, appraisers provide a neutral, objective assessment of the value of a home. If you feel something is off, however, it is possible to challenge the appraisal. If you wish to challenge the appraisal, then you must contact the lender who the appraisal report was sent to. The process to get the property re-appraised is lengthy, but if the estimate was off by enough, it may be worth the effort.
Understanding Your Home’s Equity
Your home’s equity is the difference between your home’s value and the debt you owe on it. Knowing your home’s equity can mean knowing if you will make a profit on selling your home or not. If the value of your home’s possible sale is lower than your mortgage, this is called being “underwater.” This may be a reason to reconsider selling the home at the moment, or, if market values are continuing to slide, it may be smart to sell now and get out. If you are still paying off the mortgage on your home, it’s important to consider your home’s equity before selling. Even if your home isn’t underwater, waiting to sell and paying off a bit more of the mortgage could end up making for a much larger profit on the sale of your home.
Value vs. Equity
While connected, your home’s value is not the same as your home’s equity. Equity is the difference between your home’s value and the debt you owe on the property. It is simple enough to think of it as a math equation: Value-Debt=Equity. Knowing the equity of your home is an important part of deciding whether or not to sell it, and your home’s equity will tell you if you are going to make a profit or not when you sell. Homes that are worth less than the amount of their mortgage are considered to have negative equity, and are referred to as being “underwater.” In this case, it might be smart to wait to sell the home or to sell it at a loss if a foreclosure is looming.
To find out how much equity you have in your home, you have to find out both the home’s debt and its value. Knowing how much debt is as easy as reading your last mortgage statement. Knowing your home’s value is more variable. There are tools online that will give you an estimate of your home’s value, which might be enough to give you an idea of what the home is worth. Estimates are useful tools, but they are not absolute. If you need to know the true value of your home, then you have to go to an appraiser, and depending on your situation, paying for the professional appraisal might be worth the cost.
- Find a Good Agent
While some homeowners decide to go the “for-sale-by-owner” route, having a good agent can transform your home-selling experience. Interview at least three agents before you settle on one, and make sure you ask them a lot of questions.
Ask them about their track record selling homes, what makes them different from other agents, and how they would market your home. You’re going to want to find an agent that not only is knowledgeable but also listens to you – someone with whom you feel you have good communication. Most agents are specialists in either a neighborhood or a type of property, so find one that has a specialty that covers your home.
Selling a home is like a business, and every business needs good marketing. Clean and de-clutter your home, tidy up the lawn, and spring for a new coat of paint. Hire a professional photographer so your home sparkles online. A professional stager knows how to make your home look good in photos and in person. You’ll want to strike the right balance of making your home neutral enough to appeal to anyone, while highlighting the home’s personality so that it stands out. Finally, make sure the pets have somewhere else to stay before and after the open house.
- Set a Reasonable Price
Real estate agents say that time and again, homeowners, whether they are first-time sellers or not, overprice their home. Set a reasonable price from the beginning, based on Comparables – homes in the same market with same features as yours. An overpriced home may languish for a long time on the market, and you’ll have to drop the sale price lower than you would have if you had set a more moderate price to begin with. Pay attention to those Comparables and be competitive, remembering that they say the most expensive home in the neighborhood sells last.