Special Help on transactions
|Excerpted from "The Complete
Idiot's Guide to Buying & Selling a Home."
Selling Your Home Yourself
Approximately one in six home sales close without the work of an
agent. Are you one of the six that can sell practically anything? Do you
know a lot about your house and neighborhood? Do you understand the real
estate market—financing, negotiating, and closing? If so, you may want
to forego signing an agent and sell your home yourself. Why go it alone?
To save money. Agents typically charge a 7% commission. On a $100,000
house, that comes to $7,000! But selling a home by yourself is not easy.
Mapping Out Your Strategy
To begin with, you should understand the entire process of selling a
home; then you will be able to identify your strengths and weaknesses
and see where you need help.
1. Get the house ready: You first inspect your house and then
decide what repairs and improvements you need to make. If you are having
trouble deciding what to do, you may want to hire a professional
inspector to do a thorough inspection. You may also want to hire
contractors to do some of the repair work, if any is needed.
2. Set the list price: Pricing your home yourself is covered
below in the section “Setting the Price.” You may also want to consult
agents or home appraisers in setting your price.
3. Market the home: Before a buyer can be interested in your
home, that buyer is going to have to know it is for sale. If you have
trouble getting the attention of buyers, you may want to consider an
open listing with agents.
4. Help the buyer get financing: Getting an offer from a buyer is
one thing; getting an offer from a buyer who can actually buy the house
is something entirely different. As part of the sales process, you will
want to qualify the buyers so that you are sure they can obtain
financing for the home. Consider visiting several lenders and collecting
information from them on the lending process.
5. Negotiate the sale: Negotiating involves coming to an
agreement with the buyers on price and terms. It also involves drawing
up a binding contract that protects your interests. You will most likely
want to hire a real estate attorney or real estate agent to help you
with the contracts. Hiring an attorney or agent is covered later.
6. Close on the house: The closing is the final process of
signing papers, transferring ownership, and collecting money. To help
you with the closing, you will probably want to use an attorney. You
will also most likely want to hire the services of an escrow company to
conduct the closing.
Hiring an Attorney
Even if you do not hire anyone else, you will definitely want to
hire the services of an attorney. An attorney can advise you on the
disclosure laws in your state, can draw up or look over any contracts,
and can ensure that your interests are protected. The attorney can
ensure that you do everything properly and legally—for instance, that
you do not unwittingly discriminate against any buyers.
When looking for an attorney, ask for recommendations from friends,
relatives, agents, and coworkers. Keep in mind that you will want to
hire an attorney who specializes in real estate. You do not want to use
your sister, the divorce attorney, to handle the transaction.
Using an Escrow Company
In addition to an attorney, another consultant you will most likely
want to use is an escrow holder. An
escrow holder works for an escrow company which, in real estate
transactions, serves as a neutral third party. The escrow holder is the
maestro of the transaction. You can expect the escrow holder to prepare,
obtain, and record documents; handle the mechanics of property transfer;
calculate any prorations; and receive and disburse money.
You may want to ask your attorney or any real estate agents you know for
recommendations on escrow companies. Make sure you know the charges you
will incur for using a particular escrow company. Also, be sure you know
exactly what duties the escrow agent will perform. For example, an
escrow agent cannot offer advice and cannot negotiate with you and the
Setting the Price
The single most important aspect of the sale of a home is the price.
Setting the price is critical to a successful home sale. If you set the
price too high, buyers may avoid your property. When a property sits and
sits, it becomes a target for lowball bids. On the other hand, you do
not want to price the home too low. You want to get the best deal
possible! The best way to set the price of your home is to investigate
sales of similar homes in your area.
Comparable homes are of the same style (brick, frame, bungalow,
two-story), have the same number of bedrooms, bathrooms, have the same
room types (dining room, rec room, living room), and are located in the
same area. You can find the list price for homes by reading the local
paper or by calling agents. You may want to attend open houses of
similar homes to see how yours compares.
If you do not want to do the research yourself, you may want to hire the
services of an agent to do the research for you. You may also consider
having the home appraised.
Figuring your net proceeds. To prepare you for negotiation, you
will want to figure your net proceeds from the sale of your home. You
will want to include the costs you incur for the sale of your home
(advertising fees, attorney costs, and so on). You will also want to
investigate which closing costs may pertain to your sale—which costs you
expect to pay and how much they are.
Defining what financial terms are acceptable. In addition to the
list price, you should decide on the amount of down payment you (and the
lender) will require. You will also want to determine the amount of
earnest money you expect to accompany an offer.
Helping the Buyer with Financing
One of the benefits of using an agent is that the agent can
prequalify a buyer and can help a buyer obtain financing. Without an
agent, you are going to have to do this yourself.
First, you will want to prequalify any buyers serious about making an
offer. Just because Pam and Steve seem like a nice couple does not mean
they have the money to buy your house. You will not want to spend hours
and hours of time working with one buyer only to find out that the buyer
cannot afford the home.
To prequalify a buyer, you may want to purchase a buyer qualification
form from an office supply company. Or you may want to draw up your
own form with your attorney’s help. You will want to know the buyer’s
income, job situation, current debt, and other information. You can use
this information to qualify a buyer yourself. If a buyer gets angry when
you ask for financial information, be sure to explain why you need it.
After you do so, the buyer should understand.
You will want to help the buyer obtain financing once you have accepted
an offer. An offer without financial backing is not going to do you any
good. To do this, you should be familiar with the different types of
financing available. You can talk to local lenders.
Negotiating an Offer
When you have an agent, all offers are delivered to the agent. The
agent serves as a go-between, discussing the offer with the buyers and
their agent and then relaying that information to you.
Without an agent, you will have to negotiate face-to-face with the
buyers and possibly with the buyers’ agent. Put on your poker face and
leave your thin skin at home.
Be prepared. Face-to-face negotiating is tough. You have to be
prepared for any negative comments made about your house. If you take
the comments personally, the offer process is going to be extremely
stressful. If you understand that the comments are probably just part of
the buyer’s strategy to get more favorable terms, you can be prepared to
handle any objections.
You may want to role-play with your spouse or a friend. Have that person
say all the bad things about your house—even if they are not true.
“Well, the roof needs to be repaired. The kitchen tile is the worst. And
who picked the wallpaper in the living room? It is hideous!” You can
then counter with “The roof was replaced last year. The list price takes
into consideration the kitchen tile, and if you do not like the
wallpaper, you can select something that you do like.”
Drawing up offers. If your buyers are working with an agent, the
agent may help them draw up an offer. If not, they may have an attorney
do the work. Or the buyers may come to you with their own purchase
If, on the other hand, the buyers do not have anyone to help them with
an offer, and need help, you can offer to do so. You may want to buy
some contract forms from an office supply store and have them available.
If the standard contract is not to your liking, you can ask your
attorney to draw up a contract.
Reviewing offers. When a buyer has an offer, you should schedule
an appointment—it can be at your house if you like. When you receive an
offer, thank the buyers and ask for time to review it. Usually a sales
contract stipulates a time for a response (24 to 48 hours is typical).
During that response time, you can look over the offer. What price are
the buyers offering? What terms? How does this compare to what you
The offer/counteroffer process can continue until someone withdraws an
offer or until both parties agree to the same offer. When you have both
signed the same agreement you have successfully sold your house!
Closing on the House
The final stage in buying and selling a home is the closing. At the
closing, you exchange money and keys.
To handle the closing, you should probably hire the services of an
escrow company. The escrow agent will prepare a settlement sheet and
will need from you the original purchase contract to start.
Using the contract as a blueprint, the escrow agent draws up the
instructions for you and the buyers. You should be prepared to carry out
all the instructions the agent gives you and to provide any information
the escrow agent needs (deed, title report, mortgage, mortgage note,
property tax statements, survey, and so on).
Note that the escrow agent will not reveal information about escrow to
other parties and will not revise the instructions without authorization
by you and the buyer.
Before the closing, the escrow agent will let you and the buyers know
the closing costs that must be paid and by whom they must be paid. He
will also calculate any prorations. At the closing, the escrow agent
will ensure that all the proper documents have been prepared and are
signed. The agent will arrange for your original loan(s) to be paid off
and for the new deed to be recorded. After the deed has been recorded,
the escrow company will release to you your hard-earned check for any
proceeds on the sale of your home.
Knowing When to Call It Quits
If you have had your home on the market for a while and have not
sold it, take a second look. Why has the house not sold? Some reasons
why a house may not sell: the price, the market, the terms, and the
condition. Review these items and try to pinpoint the problem.
Consider using an agent, especially if it turns out that exposure is the
main problem (getting buyers to the house). Finally, if the market is so
slow, or interest rates are so high, that you are not getting any
acceptable offers, consider taking your house off the market for a
Copyright ª 1998 Shelley O'Hara.
All Rights Reserved.
The Complete Idiot's Guide to Buying & Selling a Home.
Published under license from Macmillan USA, Inc.
This article is a synopsis of legal information written to help
you understand your particular issue. It summarizes current law, but it
is not an exhaustive treatment of all the law on the subject. The law is
constantly changing; it often differs materially state by state, and as
a practical matter, the law is applied differently to facts that vary
from case to case. The information in this article is not legal advice
and is not a substitute for retaining a lawyer.