Nolo.com: Selling Your Home: Overview
Learn about the home selling process, step by step.
Selling a home brings on a whole slew of questions and, sometimes, anxieties. How much is your house really worth? What if you set the price too high or too low? Are you willing to pay a 5-6% commission for an agent’s help? Should you repaint or remodel before putting the house on the market?
This article will look at the home-selling process step by step and provide links to other sources of information.
Step One: Decide How the Local Market Will Affect Your Sale
Hot or cold? A “hot” market is one in which there are more buyers than sellers, so the buyers are competing with each other and driving up prices. A “cold” market is one with more sellers than buyers, so the buyers can be choosy and bid low. In a hotter market, you can price your house aggressively. In a cooler market, setting the price at or a little below market value is best, so that the house doesn’t stagnate on the market.
Do some research. Don’t rely solely on the national headlines — even in the coldest of national markets, for example, houses in some neighborhoods or cities continue to hold their value and even attract multiple bids. Chatting with your neighbors can teach you a fair amount about the heat of the local market. Also, read your local newspaper’s real estate section and talk to real estate agents you meet at open houses.
Step Two: Use Comparable Houses to Set Your List Price
What is a “comp”? The best source of pricing information comes from houses directly comparable to your own. In the real estate industry, a “comparable,” or “comp,” is a house with similar features, preferably located near yours. When identifying comps, look for houses with the same number of bedrooms, bathrooms, and other amenities.
Check current listings. To get comps, visit open houses, read classified ads (in print and online), and check out websites containing real estate listings. Websites that publish the Multiple Listing Service (MLS) are particularly helpful, such as www.realtor.com, by the National Association of Realtors (NAR).
Review actual selling prices. Of course, list prices don’t tell you how much houses ultimately sold for — that’s the comparable data you really need. In a hot market, houses might go for well over list price, and vice versa. Do some research at websites that collect this data, such as http://realestate.yahoo.com/re/homevalues or www.domania.com. This information will also help you decide which of the incoming purchase offers are realistic.
Do your own homework. Don’t wait for your real estate agent, if you work with one, to put a dollar figure on how much your house is worth. For one thing, less scrupulous agents may inflate their estimates to capture your business. More important, you want to be educated about your house’s real value so you can work intelligently with your agent and make rational decisions when negotiating with buyers. Most agents will suggest a price range for you to work with, and it won’t help if you simply choose the highest number in the range, without having done your own research first.
Step 3: Assemble Your Team of Professionals
Most sellers prefer to work with a real estate agent or a lawyer at some point in the process. (In fact, in a handful of states, a lawyer must act as an integral part of negotiating and closing the sale.) Real estate agents usually charge a commission — on average, about 5-6% — to be split between your agent and the buyer’s agent, if any. Lawyers normally charge by the hour, around $200 per hour.
Despite the costs, experienced, responsible professionals can ultimately save you time, money, and aggravation. Unfortunately, there are plenty of incompetent or unethical ones out there, too. Take the time to get referrals from friends, and meet with a few prospects before you hire anyone.
Or, if you’re organized, good with finance and legal issues, and have some time to spare, you can sell the house on your own, and save the commission. For more on whether and how to get outside help, see Nolo’s article Do You Need a Real Estate Agent to Sell Your House?
Step 4: Make Your House Look Its Best
Before putting your house on the market, make it look as attractive as possible — buyers will pay thousands of dollars more for a house they like the look of. Usually you don’t need to do a major remodel. A fresh coat of paint, however, can brighten your home’s prospects considerably.
For more information on getting your house ready, see Nolo’s article Preparing Your House for Sale.
Step 5: Fill out Any State-Required Forms
The buyer will probably shoulder the main paperwork burden in this transaction — preparing the purchase contract. However, in a few states, the seller prepares the contract after a preliminary offer from the buyer. And, in many states, the seller is responsible for filling out a disclosure form, telling buyers what they know about the property’s physical condition. For more information, see Nolo’s article Required Disclosures When Selling Real Estate.
Step 6: Advertise and Show the House
Advertise and market. If you’re working with a real estate agent, the agent should help put the property into the online Multiple Listing Service and, hopefully, create a website for your house, send out flyers or postcards, and place an ad in the local classifieds. If you don’t have an agent, you can take the same steps yourself (one website, www.iggyshouse.com, allows you to put your house on the MLS for a monthly flat fee). Then interested buyers can make an appointment to see the house in person.
Arrange private showings. Seriously interested buyers might want to see the house before you hold an open house, or just have the place to themselves, along with their agent. The most convenient method all around is to place a lockbox on your house, which agents can access in order to get your key. But a lockbox tends to be inconvenient if you’re actually living in the house. In any case, your agent can help with scheduling and showings. If you’re not working with an agent, you’ll need to arrange and be available for these showings yourself.
Hold an open house. Many home sellers find open houses a useful tool. They’re certainly good for bringing in the crowds. Some of the visitors will merely be curious neighbors. Welcome them, too — they may mention your house to their house-hunting friends. Others will be genuinely interested buyers, including some who were reticent about making an individual appointment. For more information, see Nolo’s article Holding an Open House.
Step 7: Receive and Review Purchase Offers
With any luck, one or more prospective buyers will present a written offer to buy your house. (If you’re in a hot market, you may want to set a deadline for receiving such offers and schedule back-to-back presentations by the buyers’ agents.)
Evaluate the offer or offers. Here’s where your real estate agent can play an important role, meeting with the agents who present offers and helping you decide whether a particular offer is worth accepting. If you’re choosing between more than one offer, don’t assume you’ll want to accept the one for the most money! A high bid with shaky financing, or one made contingent on the buyer selling his or her house first, may actually belong at the bottom of your pile. You don’t want to enter into negotiations only to have them fall through.
“In contract.” After counteroffers have gone back and forth between you and the buyer, and you’ve both signed off to indicate your acceptance, you’re technically “in contract” to sell your house. At that point, you’re legally bound to sell your house, and can’t change your mind without potentially facing a lawsuit. (The exception is if you included conditions or “contingencies” in the contract, such as the buyer furnishing you with proof of his or her financing, and these conditions aren’t met.)
Step 8: Closing the Deal
The signed purchase contract will include a closing date or time limit, usually several weeks in the future. During this time, the buyer will line up financing, inspections, insurance, and more. As the seller, your main duties will include:
- making your house available for inspection
- negotiating with the buyer over repair issues that come up, and
- moving out your possessions.
You probably won’t meet with the buyer on the closing date. Usually the two of you sign various documents separately, in the office of your escrow agent or attorney.
Once the closing occurs, the buyer has the right to full possession of the house. If you can’t be out by that date, you may be able to negotiate a short-term rental agreement with the buyer. For a more detailed discussion of your role during escrow, see Nolo’s article, Escrow and Your Role as Home Seller.
After the Sale: Tax Considerations
Assuming you make a profit on your sale, you might have to pay capital gains tax. The IRS website at www.irs.gov can tell you more. Also see Nolo’s article Tax Breaks for Selling Your Home: Read the Fine Print.
by: Ilona Bray, J.D.