If you WANT to sell your house, you will want to understand some of the challenges and what I like to call, the realities of selling.
The challenges with selling a house include the following; Getting the house ready for sale, listing the house or otherwise putting the house on the market, showing the house and keeping the house in show ready condition, the uncertainty of when the house will sell, finding a buyer, especially one that can qualify for a loan and, not knowing what you will actually Net from the sale of the house.
Getting the house ready for sale. What are you going to need to do to get the house ready for sale? Do you know what a potential buyer is going to see? Or do you have the funds to spend to get the house ready for sale?
I have heard numerous times from sellers that they have been told by agents that they would need to paint, put new floor coverings in, possibly update the kitchen and bathrooms, etc. if they want to put their house on the market. Do you want to be living in the house while all this is happening? Do you have or want to spend the money for these items?
Real estate agents typically want to list houses that are in nice condition, which will generally make their job easier.
The question for yourself is, do you want the expense and potential hassle of this?
If your expectations are to get “top dollar” when selling your house, the house better be in better condition than the completion. As mentioned earlier, if it has been several years without updating items, most buyers are going to expect the item to be updated or will discount the house if it is not.
And most buyers will typically think they need to spend more money than what is really needed to update a house. Most buyers do not have the experience of what it takes to update a house if needed, or the imagination of what they could do with a house.
Listing and putting the house on the market. To start, a real estate agent may be a little more optimistic about the selling price than is realistic.
If you decide to list, one of the things you need to do is to have the agent show you the statistics of the market for your area. Not just some, but all of the stats.
You want to know what your competition is, if you list your house. You want to know what houses were on the market but didn’t sell. And, you want to know what sold, at what price it sold, how long it took to sell, if the seller provided any financial incentives to the buyer, and the condition and finish quality of the house that sold.
You will also want to compare your house to similar houses, such as a ranch, raised ranch, split entry, etc. It is generally not accurate to compare a ranch to a two story or split entry house, for example.
The condition of the houses that sold is very important. Did the “top price” comparables have new kitchens with granite countertops and new cabinets, new bathrooms with tiled baths and showers, etc.?
Showing your house. Are you prepared to get your house into show ready condition and keep it that way until your house is sold?
One of the frustrating items to deal with when listing a house are calls from agents at inconvenient times, that just happen to be in the area and would like to show your house. Do you work with that inconvenience, and let them show the house, or do you say no, but possibly lose the potential buyer for your house?
One of the other concerns I hear from sellers is the thought of not knowing who may be walking through the house. Is the person that is looking at and walking through the house a real buyer or someone that is checking the house out for what valuables might be in the house.
Not knowing when the house will sell. One of the most common concerns I hear is, when will the house sell?
I talk with people often that say, I would like to sell my house and move, but I don’t know when I’ll be able to move into the house or apartment that I’m looking at. Or, I can move, but I don’t want to have a vacant house that I would be worried about taking care of.
With a vacant house, you still need, or should keep utilities on. You still need to keep it clean and in showing condition if its on the market. And you will need to get insurance for a vacant house, which is much more expensive due to the increased risk of a vacant house.
Finding a buyer that can qualify for a loan. If you list your house, you are also most likely looking for a buyer that will need to get a loan to buy your house. If you’re able to find a buyer, there are other “hurdles” to get over before actually selling the house.
You have a buyer and a signed agreement to sell your house. Now what?
First, the buyer will most likely want a whole house inspection. You can’t blame the buyer for wanting this inspection. After all, buyers typically aren’t house experts and want to make sure they are not buying a house with defects. However, depending on the buyer and the market conditions, the inspection can turn into another negotiating opportunity for the buyer at the expense of you, the seller.
Depending on the house inspector, this can be a smooth process or it can turn into the buyer nickel and diming you for any item they can identify. I encountered one inspection that even identified a light bulb not working as a “deficiency” that the buyer wanted corrected.
The inspector, in an effort to be as thorough as possible, may find any and all items, no matter how small, as deficiencies. What you, the seller, and the buyer ultimately do about those deficiencies are up to your negotiations.
Since most buyers will be getting a loan to purchase your house, the lender will most likely get an appraisal on the house. The appraiser’s job, as the inspector, is to make sure there are no known deficiencies with the house. The lender wants to know that they will not be loaning money on a house where there would be a risk to their loan.
If there are deficiencies, the lender will typically want those corrected before making the loan. Again, this may lead to a negotiation between buyer and seller, as to who will pay for those.
Depending on the current credit markets, how quickly or easily a loan will close, can vary greatly. I’ve worked with lenders that have performed as expected, and I have had the misfortune to work with lenders that seemed to invent excuses as to why they could not fund a loan.
Until the loan is funded and the sale is “closed” you will have the concern of, will the house actually sell and close. Unfortunately, in a situation where the buyer is getting a loan, the sale of your house is essentially held hostage to the buyer’s lender and their ability to fund the loan.
An important tip here for you…… if you do List your house, always ensure that your Listing agent has the authorization to speak to your Buyer’s lender. This will allow your agent to communicate with the lender, and have a better understanding of the status of getting the loan closed.
What will your NET proceeds be from the sale of your house. This is the big unknown when it comes to selling your house traditionally. When you put your house “on the market” there is typically no way of knowing what you will actually Net from the sale of your house.
First, understand that when an agent tells you that they can sell your house for $100,000 for example, this is a gross number, not the Net amount you will put in your pocket.
After the transaction costs to sell the house are taken into account, a seller will typically receive 80% to 90% of their asking price, and that’s assuming the house is priced correctly to start with.
What are transaction costs? These are items like the discount of the actual selling price vs. the listing price, seller closing costs, buyer closing costs that may be paid by the seller, and real estate agent commissions or marketing expenses to sell the house.
The “discount” just mentioned, refers to the difference in price between the asking price at the time of sale, and the final sales price. Depending on the market, there can be a 1 or 2, to 10% discount from the asking price. In slower markets, this can be even larger.
Seller’s closing costs. These are items such as title insurance, the closing costs for the title company to close the transaction, recording fees, etc., which usually end up costing 1 to 3% of the ales amount, depending on your local costs.
Closing costs for the Buyer. Although as the name would imply – Buyers closing costs, it is very common for Buyers to ask the Seller to pay for some or all of their closing costs. These costs are certainly negotiable, and you have the option of saying no, but again depending on the market environment, you may have just lost your buyer.
For the more than 20 years that I have been involved in real estate, it has become very common for buyers to not have more than the 2% to 5% down payment needed to secure a loan to purchase a house, much less funds for their closing costs. Therefore, this becomes another area for negotiation. And, if a buyer does have additional funds, they seem to use them for “things” to furnish a house instead of paying for the actual costs associated with purchasing the house.
And lastly, commissions or marketing costs. You certainly do not need to utilize a real estate agent to sell your house, but you still need to do the things it will take to attract a buyer, to buy your house. No matter how its done, again depending on the market environment, there is a cost to finding a buyer.
When you add up these “transaction costs,” you can hopefully see how its realistic to only net 80 to 90%, at best, of the asking price, when selling a house.
This may seem overwhelming and frustrating at times, but with the right real estate professional assisting you, it can be a rewarding experience to sell your house, and move on to a better living arrangement and lifestyle.
If you’d like to discuss how we can assist you with selling your house and downsizing, just contact us through the form on this page or call us!
We help home owners sell their house and downsize in the following geographic areas, and are adding areas all the time;
Kansas City metro area