1. Repairs & Renovations
Sellers spend a lot of money on unnecessary repairs and renovations that will NOT provide a greater return than the money you spent in this seller’s market where home prices increase by the hour. In this market, your home should be in “selling condition” which means all major functions of the property need to be in working condition. “Working condition” does not mean to waste $8,000 on a new HVAC when you’re still going to receive multiple offers from buyers either way. Most buyers are turned on by what they see first with their eyes which is definitely not a HVAC unless the buyer is smart.
This means anything and everything visual should appeal first to all five senses. Buyers go off of first impressions as this is human nature. The front and back yards need to be well kept and maintained. The tiles and carpet should be cleaned or renovated. A fresh new coat of paint, adding baseboards, replacing bathroom fixtures, door knobs and deep cleaning the bathrooms and kitchens go a long way. If the blinds are old and dirty, they should be replaced as well. The house needs to be decluttered of all personal items and junk. This is no longer your house anymore and you need to accept that and start decluttering fast. You should also hide all expensive items such as jewelry and guns as buyers will be walking around your home.
If you cannot afford to make any minor repairs and renovations, you can take out a Home Equity Line of Credit on your home to make repairs and minor renovations to sell your home for top dollar. If you decide not to do anything at all, you can always sell as is but it will not yield the highest and best offer which you as the seller need to be okay with.
2. Choosing an Agent
- Choose an agent in the local area. Do you want to deal with an agent who has to drive 40 minutes any time something comes up?
- Choose an agent with local market knowledge who understands daily trends and statistics in your area. Ask them specific questions on the market such as the number of listings in the area, average under contract time frame, average number of days to close, number of current listings compared to 1-2 years ago, list to sales percentage and days of inventory. If they start fumbling their words and have no clue what you’re talking about, do not hire them.
- Choose a full time agent. A part time agent with a 9-5 job will not have time to answer 100s of phone calls causing your home to NOT sell for the highest price possible. Did you think about this when you chose Uncle Brad as your agent? You had no clue Uncle Brad rejected the 50th phone call for the day from a buyer because he’s too busy working his other job. Well thanks to Uncle Brad, you just lost an extra $50,000 on your home.
- Do not choose a cheap agent. Many agents whip out their cell phones to take pictures and videos of a house. They should lose their license and never be allowed to sell again. This is pathetic on many levels when you’re attempting to sell a person’s highest valued asset in their entire life. Do you want buyers viewing ugly pictures of your home and deciding not to view your property? Thanks to part time agent Uncle Brad taking pictures with his phone, you just lost another $25,000 on your home. Now you’re up to a $75,000 loss but you have no clue. You think Uncle Brad is doing an amazing job. Great photography and videography can make the ugliest house look like a million bucks. Photos lie and that’s the point.
- Choose an agent with local trustworthy contractors so in the event you decide to make repairs or receive repair requests from a buyer, you can save thousands of dollars.
- Choose an agent that isn’t afraid to ask for the highest and best offer in a multiple offer scenario and pin buyers against one another. There are usually a hundred sob stories from buyers to convince you to sell your house to them. Are you in the therapist business or the making money business? If you want to listen to sob stories and choose a buyer with this strategy, then I have no problem sharing all the stories with you from buyers and their agents. Ultimately, it’s your house and you can do as you please. My advice is to take your emotions out of it and choose the best offer. The best offer is not always the highest price. Terms of contracts go a lot deeper than price.
- Don’t choose an agent who offers to list your home as a “coming soon” listing on Zillow. These are snakes in the grass that manipulate ignorant sellers for their own gain. Their goal is to double end the deal to receive commission on both sides of the deal. These snakes will cause you to lose 10s of thousands of dollars in better offers. By marking your home as coming soon on Zillow before listing it on the MLS, these agents are hoping to receive calls from buyers who are not represented by other agents which in turn gives the snakes a chance to double end the deal before it goes on the MLS. By going under contract before it goes on the MLS, these agents are severely limiting the amount of offers you may receive. For example, one of these snakes may say they brought you an offer from an unrepresented buyer for $400,000 which was the full list price but what they fail to tell you is if you listed it on the MLS, you could have received an offer for $425,000.
- Don’t choose agents with hidden “transaction fees” to cover team costs. These hidden fees are prevalent with teams.
- Don’t choose agents that force you into long term contracts with no exit clauses. All of my contracts allow sellers to cancel the listing agreement any time before the house is under contract with no penalties or fees. This gives sellers a peace of mind to not be trapped into 12 month contracts.
3. Complete Listing Paperwork
- Listing contract that spells out commission amount for the listing side and buyer side along with the duration of the contract.
- HOA addendum going over monthly HOA fees and transfer costs.
- Seller property disclosure statement going over material facts of the property that may dissuade a buyer from purchasing the property. Not disclosing material facts you are aware of may lead to lawsuits from buyers if they discover the issue after they purchase.
- Insurance claims history for buyers to review possible claims that may dissuade them from purchasing the property.
- Wire fraud advisory warning sellers of possible fake emails requesting banking information and details requesting money.
- MLS listing sheet going over the facts and description of the home to post on the MLS.
4. Pricing Analysis
Comparable home sales in your neighborhood mean absolutely nothing in this market. Just because your neighbor sold his home for 250k does not mean your home cannot sell for 300k given no appraisal issues. Conventionally, I would recommend listing the home slightly below market value to create a bidding war, however in this market with such low inventory, I would take the opposite strategy and list it above market value. You want to weed out buyers who are time wasters and cannot afford to be in a bidding war either way. They key indicators to look at when pricing is the number of days it took for a comparable home to go under contract and the amount of active listings. Active listings are your competition. Agents who focus heavily on sold listings rather than active listings AKA your competition are taking the wrong approach and will undervalue your home and will be out negotiated by every single buyer’s agent.
5. Promotional Efforts
Agents should request buyers to declutter, remove personal and expensive items and make minor repairs/renovations for the most optimal staging in order to garner the most professional photography and videography. Some agents post 100 photos on the MLS for a house that does not require that many photos. The goal of the photos is to provide something for the buyers to look forward to. Posting dozens of redundant photos is not affective and will take away from your listing. Less is more and usually 15-25 photos is enough to entice buyers to view the property. If they don’t view the home, they won’t make an offer.
The listing should also include a 3D video, video walkthrough and possible drone footage if the home or lot is big enough for it to be worth it. All of these expenses should be paid for by the agent and not passed onto you. In this market, staging is not needed and virtual staging is the route to go in most circumstances.
The description of the listing is another key component of marketing. No one wants to read a two word description or an essay filled with repetitive adjectives that have absolutely nothing to do with the house. The description should highlight unique features of the home and location. An essay with excessive adjectives like many agents like to do is a turn off. No, your house is not an “Oasis” or a “Paradise.” It’s probably not even someone’s “dream house.” It’s most likely just another house unless you live in a multimillion dollar home. The “dream house” phrase is really overused and played out in this industry.
An open house is a great way to attract all prospective buyers at once. It makes buyer agents thrilled because they finally get a break from showing 100 houses. Prospective buyers seeing other buyers at the open house causes a psychological competitive reaction. It’s a trap you set for them that they didn’t see coming. Now you have them right where you want them…..ready to check mate. Remember Uncle Brad? Yeah, he won’t be able to host an open house. He has to be at his other job. There goes another $25,000. Wow, you’ve already lost $100,000 from your part time agent Uncle Brad. Hopefully Uncle Brad buys you a $50 closing gift to make up for it. Well that’s if he shows up at closing. He has to be at his other job.
6. First Round of Negotiations
This is where the fun begins as a seller when you have dozens of buyers salivating to put an offer on your property in this current market as of April 13th 2021. Once the offers start pouring in, your agent should go back and request the highest and best offer or counter all offers with a higher price until one accepts. You should not offer any seller concessions, home warranty or any other incentive. There is no need to in this market when you have all the leverage. In fact, you should request buyers to waive inspection and appraisal contingencies if they would like their offer to really stand out along with offering nonrefundable earnest money and faster closing dates. You should also give priority to conventional loans as FHA loans have a more stringent process and tend to fall out more often and cause the entire deal to collapse.
7. Second Round of Negotiations
After you decide on an offer, the buyer typically has a 10 day inspection period where they pay an inspector $400-$600 to inspect the home unless the buyer elected to waive inspection. The buyer’s agent will typically write a list of repair requests if there are any. You as the seller can refuse to make any repairs, offer closing cost credit or decide to make some or all of the repairs. Remember, you have 100% of the leverage. The buyer has already looked at 100s of homes and is THRILLED to finally have an offer accepted. You can refuse to make any repairs and the ball goes to the buyer’s side of the court where they can either agree to proceed with the transaction or cancel the contract and receive their earnest money deposit back.
I guess after winning all aspects of the negotiation, you might be kind enough to make a few repairs for these lovely new homeowners. It really is up to you.
8. Third Round of Negotiations
Once the inspection period is completed, the lender will order an appraisal unless the deal is hard cash. An appraisal is completed by the lender to protect themselves from offering too large of a loan. The lender is mitigating and analyzing risk. If the contract price is $400,000 and the appraisal comes back at $380,000, then you as the seller can accept the appraised price or request the buyer to increase their down payment to make up for the difference. If the buyer refuses or does not have the money to make up for the difference, they will cancel the contract and receive their earnest money back due to the appraisal contingency unless they waived it which means you would receive their earnest money. The appraisal should have been discussed in the first round of negotiations.
9. Loan Approval
Once the inspection and appraisal period are completed, the last contingency is the buyer’s loan which is the longest part of the transaction. It typically takes a loan 30-60 days to be approved and in the mean time, many things can and will go wrong. Many deals fall apart during loan processing for many reasons such as a bad loan officer, the buyer purchasing assets on credit such as furniture or a car causing the loan to be flagged, not having a paper trail for down payment gifts (You can’t use your brother’s drug money hidden under his mattress) as a down payment unless you deposited the money many months ago into your account and many other reasons a loan may not get approved. It really boils down to having good credit, cash in the bank, a well paying job and not having excessive debt.
A few weeks before closing, you should call the city and schedule your utilities be transferred on the day after closing. An overlap is better than the buyer having to move in the dark with no electricity. You should also place a change of address with the post office and all subscriptions such as Amazon and financial institutions. You should place the house keys, mailbox keys and garage opener on the table for the buyers. The buyer’s agent will open the door through the lockbox on the door. On closing day, the title company will give the green light when the deed is recorded by the county. That’s when all funds will be transferred to the proper bank accounts and the loan will be funded for the buyer. You should expect to receive your funds the same day or the next business day. It’s also best to schedule closing days between Tuesdays-Thursdays. Congratulations, you have finally sold you house. Walk around and say your final goodbyes to your house and your neighbors. It’s time to let a new family create new memories…..and remember, don’t hire part time Uncle Brad and the “coming soon” agents.
If you want an honest agent, call me 480-779-8579. S.L Taxes & Real Estate is the best real estate, tax preparation and accounting business in the Laveen, Tolleson, South Phoenix Arizona area.