First time sellers: 6 things you need to know.
A lot of the real estate industry focuses proving information for first time home buyers. I recently had a conversation with a customer who was looking to sell her house and realized that there were some common misconceptions in the selling process. Many people thing that homeowners are experienced in buying and selling, they are after all a homeowner. But if you are thinking of selling for the first time you might be surprised that the process looks quite different now sitting on the other side of the table than it did 5-10 years ago when you were an emotional excited first time home buyer.
Here are six things first time sellers might be surprised about as they start to go through the process of selling the home that made them a homeowner.
1) As a seller, you don’t care and don’t need to know what your house will appraise for. You don’t need to order or pay for an appraisal and doing so would give you no benefit at all. Your house will sell for the exact point in the equilibrium between supply and demand. A buyer will pay only as much for your house that they could get a suitable replacement for. Appraisals look at comparable sales in addition to things such as replacement value minus depreciation and possibly even the income that your property could produce. Then they weigh the different approaches into a merged value. In a depressed market, a house will often appraise higher than it will go under contact for, because the replacement value might be higher than the market demand. Appraisals protect banks from making a bad investment in a mortgage. That is really all they are good for. If the buyer defaults, the bank has some assurance that they can claim an asset that is worth what they gave in financing. Appraisals and sale prices don’t need to match.
2) You don’t want to get a pre-listing inspection. As a seller you are obligated to disclose anything that you know that materially affects the value of a property. You don’t want to cover anything up, but when you are about to sell it isn’t the time to start looking for problems that you will need to disclose. Disclose what you know, and then let the buyer do their do diligence and address issues as they come up. About 20% off all sales in our market are paid fully in cash one inspection or appraisal is going to differ from the next. It isn’t important for you to dig into those things before having a buyer and seeing what their requests are.
3) It may take a little longer to close on a house now than when you bought several years ago. Last year there were new consumer protection laws enacted that require lenders to give closing disclosure statements (formally called HUD statements) to buyers at least 3 business days before closing. Previously this statement was often not provided until the day of closing and caused confusion when buyers showed up to closing without knowing exactly what they are expected to pay. Now buyers have 3 full business days to read over all of the closing documents before coming to sign. No longer do people show up to closings with huge stacks of documents that they have never seen before. This is good for everyone involved but it means closings aren’t as fast as they use to be. While we use to be able to close a transaction with conventional financing in 2-3 weeks, the average now is more like 4 to 6 weeks. Cash deals can still happen in 2 weeks or less but the average closing now takes more like 45 days.
4) You don’t need to make a bunch of improvements right before you sell. While updated kitchens and bathrooms are on the top of every buyers wish list now, selling your home doesn’t have to be the time to go crazy on the home depot charge card. The average homeowner often doesn’t recover the full cost of a remodel and part of the reason they do it is for their own enjoyment. People who flip houses often do so because they have connections to be able to source the materials and labor for less than the rest of us and that is where they make the profit. If you are making updates to sell, focus on things that are functionally obsolete or near the end of their useful life.
5) Most of home staging is simply cleaning de-cluttering and maybe a fresh coat of neutral paint. The best way to make a home look well cared for is to make it look clean enough to be brand new. Remove clutter, pack away the family photos and collectibles and clear out over crowded closets. You want a buyer to see all of the room you have for their stuff, not all the pretty things you have. Consider getting a pod or storage unit if you have a lot of stuff, it will make packing and moving a lot easier and help your home to show better. A fresh coat of paint on baseboards and doorways in an expensive way to make your place look clean and new. Pressure washing the outside of the house, driveway, and garage and planting a few fresh plants will increase your curb appeal and make your house look new without breaking the bank.
6) Buyers expect to pay at or near full price. They don’t want to waste their time looking at a property that seems over priced. They don’t want to insult you with a low offer if their opinion of value is different from yours, so they won’t make an offer at all. Don’t over price your home expecting buyers to haggle. Overpriced homes don’t get showings or offers. Appropriately priced homes get a lot of showings and often times multiple competitive offers.