How Not to Lose Money When Selling Your Home
Many sellers don't know how much their homes are worth or even how much they owe. Without these two fundamental facts, it's difficult to know how to save money when selling. There are many ways to not lose money when selling a home.
Hire an Experienced Listing Agent
It is important to hire a listing agent to help you squeeze every dime possible out of selling your home. Sellers sometimes want to hire agents who charge lower commissions to save money, but that's the wrong approach. If an experienced agent who offers you more marketing and better service charges 1% 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.
Hire a listing agent with detailed knowledge of your neighborhood. It should be someone intimately familiar with the homes on the market now and in the recent past—including the features of those homes and their selling prices.
One of the first things an experienced agent can tell you is if it is even worth it to try and sell your home in the current market, taking into account your equity and recent, comparable sales. If it's the wrong time, avoid clogging the inventory with an overpriced home that won't sell. Instead, follow your agent's advice and wait for the market to catch up to your dreams before putting your home on the market.
Price Your Home Right
The longer your home sits on the market, the less it is worth in buyers' eyes. Listing the home at the right price helps to shorten its time on the market and avoid such a perception problem. Trying to test the market by overpricing the home could end up losing money. An experienced listing agent familiar with your neighborhood should be able to help you identify the right price. Other tips to follow include:
- Price comparisons: Research 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.
- A beneficiary demand: Asking your bank for 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: Look for trends at other homes for sale in your neighborhood. 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. That can result in more money for you.
Prepare Your Home
It might cost a little bit of money to get your home ready for the market, but the return should far outweigh the expense. Things such as cosmetic repairs, painting, and landscaping can upgrade many of a home's features. The expense can be worth it if the homes sells over list price in a short period of time.
- Set 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.
- Skip the bathroom: Most buyers poke their heads in and don't spend any time in the bathroom, so don't invest too much on yours unless there are major issues. Keep the room extremely clean, buy new hand towels, and tie ribbons around them. If the room is a dark color, paint it white.
- Do research: 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 of your 10- to 20-page offer will be a list of fees the buyers and sellers will pay. In addition, a buyer might ask for additional inspection reports or even a seller concession toward closing costs. All of these costs are negotiable. If a buyer asks for 3% toward closing costs, consider increasing the sales price to compensate.
- Negotiate: When it comes time to respond to an offer, negotiate the fees. Even if it's customary for a seller to pay certain fees in your area, you can always ask the buyer to pay them in a counteroffer.
- Home warranty: 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.
- Timing: Close near the beginning of the month rather than the end of the month to save money on interest charges. FHA loans are excluded from this practice.