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The Process of Selling a Home in Today's Market
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For many people, particularly those in the over-55 generation, the decision to sell a home can create an enormous sense of relief, an extremely emotional situation, or both. Many people have lived in the same home for many years. Their home contains the history of their family. Because they have not been in the real estate market for many years, they are unfamiliar with the changes that have occurred since they purchased their home. Because of this, we have documented the process that will unfold in the coming weeks. This information is designed to help those placing a house on the market to understand the process of selling a home. Knowing what to expect can relieve some of the stress one may experience as a result of the decision to sell. We believe that an educated decision is always the best decision.
The fact that you are reading this indicates that your first decision in the process of selling was a good one – you have consulted a licensed Realtor to assist you. Through the years, the business of buying and selling a home has become extremely complicated. The necessary forms, real estate laws, and potential pitfalls can make the process overwhelming, especially if you have not bought or sold a property for twenty, thirty, or even forty years. Having a Realtor work hand in hand with you and for you can make the process much less stressful and remove much of the burden from your shoulders. Realtors are professionals and must adhere to a strict code of ethics. They will work for you with your best interest in mind.
No two transactions are the same in the real estate business. Some transactions flow from beginning to end without a hitch. Others seem doomed to failure. There are many factors in the process that can potentially cause a seemingly smooth process to become unhinged. This is where the experience and skill of a Realtor become invaluable. Much of the information you are about to read will explain the process of selling a home on today’s market and the role that each stakeholder has. We want your experience to be a positive one. When you leave your home for the last time, we want all your memories to reflect the good experiences you had while living there. A bad experience selling your home can be extremely hurtful and costly. We want to avoid this at all cost.
Mandatory Licensee - Consumer Relationship Disclosure
In the first step of the process, your Realtor will present you with a mandatory licensee - consumer relationship disclosure. This is not a contract. Rather, it is a form that explains the type of relationship you and your realtor have. Because you are the seller, your realtor will be working as a seller’s agent. What that means will be spelled out on the form. It is not mandatory for you to sign this paper. It is mandatory for the realtor to present it to you and explain your relationship.
The Comparative Market Analysis
The second step in the process of selling your home is to determine what your home is worth on today’s market. To do this, your Realtor will perform a Comparative Market Analysis (CMA) that will ultimately provide you with an estimate of your home’s value. You can expect your Realtor to visit your home to see the general condition of the property and to look for those things that may set your home ahead of or behind the competition. He or she will also conduct research on homes similar to yours that have recently sold and those that are currently for sale to help arrive at a price that the market will substantiate. It is important for sellers to see the houses currently for sale so they can see their competition. Although sellers would like to get top dollar, they must remember that realtors and sellers don’t set the prices – the market does. In a seller’s market, the seller usually is able to negotiate a more favorable price. In a buyer’s market, the buyer has the advantage. There are times when a condition tacked on to the price of the house comes into play. For example, a seller may be willing to accept less money for a house if the buyer is willing to wait a few months to move while the seller’s children finish the current school year. Depending on the market, one party to the transaction may be forced to be more flexible. The true value of your property is the price a buyer is willing to pay for it. Pricing a property unrealistically high will probably mean that it will sit without much activity resulting in what is known as a "stale listing." Remember, the reason for initiating all of this is to sell the house.
This is a good time to clarify a very important point. Realtors are not appraisers, lawyers, accountants, lenders, bankers, or home inspectors. We encourage you to enlist the services of these professionals if the necessity arises or if you feel their assistance is in your best interest.
The Listing Contract
The next step involves the first contract. It is a legal document that spells out the price at which the house will be listed, the commission to be earned by the realtor, the length of time the agreement will be in force, the duties of the seller, the duties of the realtor and any additional terms that have been agreed upon. The realtor will also ask the homeowner to complete a questionnaire about the condition of the property and to fill out and sign a lead paint form if the house was built before 1978. It is very important to be truthful in filling out these forms. Caveat Emptor (let the buyer beware) is no longer acceptable. Homeowners and realtors are required to give full disclosure about the property. In filling out these forms, it is totally acceptable to say, “I don’t know” if indeed you don’t know. It is impossible to know about a problem that existed years before you owned the property and has never reappeared or one that is lurking around the corner. Being untruthful, however, can cause you problems that may have to be settled through costly litigation.
Showing the Property
Once the house is on the market, there are certain things you as a seller can expect. One is that people will be walking through your house from time to time. It is always a good idea to keep your home in top condition in terms of repairs and cleanliness at all times. This doesn’t mean that just because it is on the market 24 hours a day that you have to have people running through the house at all hours. Work out the details of showings with the realtor. How much notice do you want before the house is shown? Do you want showings by appointment only? Are there times during the day or evening or certain days of the week that you would prefer not to show the house? Keep in mind that creating too many restrictions on showings could negatively impact the number of visits from potential buyers.
Should you be in the house when it is being shown? Generally, the answer is no. As potential buyers meander through the house, it is always a good idea to let them go with the realtor who may already know the property. If you must be there, try to be as inconspicuous as possible. You don’t have to hide in the basement or attic, but try to stay out of earshot. If buyers are coming through for a second time, and it is obvious they really like the house, it is probably better if the seller is not there. If they have questions, they can bring them up before they leave or at a later date. It is important to give serious buyers the opportunity to talk and discuss personal issues unobserved.
Open houses are a good way to get potential buyers into your home. If nothing else, it will give these buyers an idea of what your home has to offer. Fresh flowers, lighted rooms, soft, dim lights when appropriate, and a fire in the fireplace during cold weather can add just the right touch. Don’t save these ideas just for an open house. These are appropriate whenever your house is being shown. Your realtor should also be able to provide you with other tips that enhance the looks and appeal of your home.
One other thing to consider – don’t tempt fate. If you have valuables, lock them up or take them with you. Even though a realtor is in the house during an open house, not every visitor can be accompanied or watched, particularly if there is a big crowd. People will be poking in areas one doesn’t usually consider acceptable under normal circumstances.
Advertising
Another thing you can also expect is that the real estate company will market your property. One way of doing this is to place the property on the Multiple Listing Service that provides all realtors in the state and region with the facts about your property. You should also see your home advertised in local papers and real estate publications. One caveat here – real estate companies have more houses for sale than room to advertise all of them at once. Every attempt is made to market and advertise property equitably, but please don’t expect to see your property in every publication every week.
The Offer to Purchase
Eventually, the day will arrive when an offer to purchase your house is made. Sometimes it is sooner than you may expect, but selling a home can take time, months in fact. Your realtor is required to present every offer from potential buyers. It is up to you to decide whether the offer is acceptable. Generally the person making the offer will expect an answer in as little as 24 hours but can make the offer good for a certain number of days. If you do not respond within the time frame indicated, the offer is considered void. Once you receive an offer, you have a number of choices to make. You can accept the offer and move on to the next step. You can reject the offer outright. You also can counter offer and put the ball back in the buyer’s court. It is at this time that items in the house can be included in the offer or that the buyers will offer x dollars for the house subject to x dollars being returned to them at closing or certain conditions being made. Again, this is where your realtor is important. Negotiating is an important role the realtor plays. He or she can provide valuable advice at this time. His or her skill and expertise is very often the difference between progressing toward closing or calling a halt to the proceedings. The realtor can put the offer in perspective and try to keep the parties focused.
The Offer is Accepted. Now What?
In reality, this is just the beginning of another big part of the process. No deal is completed until all signatures are on the papers at closing. Now, the focus turns to the relationship between the buyer and seller. If the negotiations have been easy, great! If they were difficult, it is good to separate the people and personalities from the issues and discussions. It is important for buyers, sellers, and realtors to work together from now to the end of the process.
The Offer to Purchase probably indicated that the buyer has a specific number of days to have a home inspector come in to evaluate your home. In fact, there are a number of inspections that could occur, but let's focus on the home inspection that is most common. Usually buyers have approximately 10 days to schedule a home inspection. This is an option for which many buyers are willing to pay. A licensed inspector hired by the buyer will examine the outside and inside of your home thoroughly, commenting on the positive aspects as well as what he perceives as problem areas. He will inspect the foundation, exterior surfaces of the house, attic, roof, garage, and sheds. He will then focus on the inside of the house, inspecting all systems and services including electrical, plumbing, heating, and air conditioning. He will inspect from the basement to the attic for signs of any or all of the following: structural damage or weakness, water damage, insect infestation, mold, mildew, lead paint, asbestos, radon, underground fuel storage tanks, and wood rot. When the inspection is finished, the buyer will know the good and the bad. Some sellers actually hire a home inspector before the house goes on the market so they can accentuate the positive aspects of the inspection to potential buyers.
Buyers have to make a decision about purchasing the property based on the inspection report. They may decide to go ahead with the purchase, back out of the offer, or modity the offer and continue with the transaction. A negative inspection may not necessarily void a deal. Some buyers will require a seller to fix any number of deficiencies before continuing with the offer to purchase. Some are willing to split the cost with the seller. Others are willing to bear the entire cost of repairs themselves.
Working together, realtors, buyers, and sellers are usually able to come to an agreement acceptable to both sides.
The Purchase and Sale Agreement
If we have reached this point successfully, the next step is to sign the purchase and sale agreement heretofore known as the P & S. This is another contract. The P & S spells out the entire time schedule and financial basis of the agreement leading to the closing and is usually signed approximately two weeks after the offer has been accepted. It indicates the time and place of the closing and essentially sets up the rules by which everyone has to play. It is advisable to have the P & S reveiwed by an attorney specializing in real estate law, if you so choose. All the items that are to convey will be listed in this document. It spells out the fact that smoke detectors have to be inspected and approved by the city or town. Fitchburg requires all homes sold, including mobile homes, be equipped with hardwired smoke detectors. Other cities and towns only require battery-operated devices. The fire department has to come to the home to inspect and approve the detectors and issue a certificate. If the seller does not have acceptable smoke detectors in the house, it is extremely important that they be installed. It is equally important that the certificate is issued in a timely fashion. One cannot expect the fire department to send out an inspector at the drop of a hat. It might be days or weeks before an inspection can take place, particularly in the summer during vacation times. This document must be available at closing. Effedtive March 31, 2006 Massachusetts new law requires that carbon monoxide (CO) alarms be installed in all residences that contain fossil-fuel burning equipment or incorporate enclosed parking in its structure. This new ordinance is known as Nicole's Law.
The Bank Commitment
Generally, the last hurdle to overcome is the bank commitment. It is always good to have the commitment as early as possible but one week before the scheduled closing is not unusual. The mortgage underwriters have to gather all the information about the purchase and take a close look at the applicant’s ability to pay. They will also send a licensed appraiser to the property to determine the actual value. If the appraisal for the property is approximately the same as the price the buyer has offered, there is no problem. However, if the appraised value is significantly lower than the price offered, the bank will most likely decide not to commit to that price. The buyers themselves will most likely have to increase their down payment by the difference in order to continue with the transaction. Again, this is where the negotiating process comes into play. Many factors too numerous to mention also come into play here. Suffice it to say that lenders will not move hastily at this time. They want to be sure the mortgage will be paid. Once the bank commits to the mortgage, the closing can take place.
The Closing
The actual closing can take place anywhere and at just about any time as long as all parties mutually agree. The lawyer for the lender will be the closing attorney. This attorney will prepare the closing documents and conduct the title search. You may opt to have the closing attorney prepare the deed for the transfer or an attorney of your choice. It is important that the title is clean. If there are problems, it is more than likely that if they cannot be resolved quickly, the closing will not take place. Otherwise, if everything is clear, the entire process should take about 45 minutes to an hour.
The time frame put forth here is generally accurate, but extensions on dates can be made provided both parties agree. The point is to come to a successful conclusion for both buyer and seller. Everyone should try to be as flexible as possible. There are times when one party just cannot be as cooperative as it would like. Job restrictions may make certain time constraints mandatory.
The entire process from accepted offer to closing should take approximately four weeks.
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