How to Not Lose Money When Selling a Home
Home selling tips: Don't be penny wise and pound foolish
A seller asked me to visit her home late one evening after she got home from work. She asked if I would list her home as a short sale. I sensed her trepidation, which was understandable, but her reasoning confused me. I asked why she thought she had to do a short sale. "Because I don't have any equity," she answered. But she did. She had plenty of equity, and we sold it as a regular sale.
This incident tells me that many sellers don't know how much their home is worth or even how much they owe.
If they don't know these two fundamental facts, they might not know how to save money when selling. There are many ways to not lose money when selling a home.
Hire an Experienced Listing Agent
I can't stress enough how important it is to hire the right listing agent to help you squeeze every dime possible out of selling that home. Sometimes sellers want to hire agents who charge lower commissions to save money, and that's often the wrong approach. Say the difference between two agents is one percent of the sales price. If an experienced agent who offers you more marketing and better service charges one percent more than a competitor but brings you 10 percent more in profit, you're further ahead. You might even lose money if you hire a cheaper agent who offers you less.
Price Your Home Right
The longer your home sits on the market, the less it is worth in a buyer's eyes. Don't try to test the market or you could end up losing money.
If you price the home in line with the comparable sales, you will get buyers interested enough to see it. Here are few things to help you to not lose money:
- Compare the prices of sold homes within the past three months with homes presently on the market. Are prices going up or down? Who is your competition? If you were a buyer, which home would you buy? Consider prices buyers see and price your home accordingly, but keep the price in line with the sold sales.
- Ask your bank for a beneficiary demand. This will give you an accurate payoff figure. You can't use the unpaid balance from your mortgage statement because it does not include per diem interest nor a reconveyance fee, wire charges or prepayment penalties. Subtract this amount plus 30 days of interest to determine gross equity.
- Tour open houses in your neighborhood. Look for trends. Note what makes one home more appealing than another. If you can drive desire in a buyer, a buyer will make an emotional decision, not necessarily a practical nor affordable decision. And that can result in more money for you.
It might cost a little bit of money to get your home ready for market, but the return should far outweigh the expense. A recent client of mine hired professional landscapers and upgraded many of the home's features. It was spotless from top to bottom and sold over list price in one day.
- You can prepare your home for sale on a budget. Set aside an amount you can afford for repairs and for sprucing up the place. Ask your agent to help you determine which home improvement items to tackle.
- Don't spend a lot of money in the bathroom. Most buyers poke their heads in and don't spend any time in the bathroom. But keep the room extremely clean. Buy new hand towels and tie ribbons around them. If the room is a dark color, paint it white.
- If you can't afford to hire a home stager, buy books on staging a house for tips. Again, your real estate agent can help you with home staging. The most practical advice is to clear out about 50 percent of the furniture in every room.
Examine Fees in the Sales Contract
Buried in the paperwork in your 10- to 20-page offer will be a list of fees the buyers and sellers will pay. In addition, the buyer might ask for additional inspection reports or even a seller concession toward closing costs. All of these costs are negotiable. If the buyer asks for 3 percent toward closing costs, consider increasing the sales price to compensate.
- When it comes time to respond to an offer, negotiate the fees. Even if it's customary for the seller to pay certain fees in your area, you can always the ask buyer to pay them in a counter offer.
- If you can get away with it, don't automatically agree to pay for a buyer's home warranty. If a buyer asks for certain reports such as a pest report or a roof inspection, put a cap on the repair costs such a report might obligate you to pay.
- Close near the beginning the month rather than the end of the month to save money on interest charges. FHA loans are excluded from this practice.
Finally, if you can't afford to sell your home, don't. Avoid clogging the inventory with an overpriced home that won't sell. Instead, wait for the market to catch up to your dreams before putting your home on the market.
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.