A Guide to Selling Your Home
From the moment you decide to sell to the day you hand over the keys, selling a home is often unpredictable and time-consuming. Being prepared with the right tools and information will help you keep the process moving forward and achieve the optimal price in the current market.
Deciding when to sell
Deciding when to sell can be hard when you may not have flexibility on timing, for example, you need to buy another home to make room for a new baby, or if your employer is transferring you out of state. If you do have the flexibility, however, you’ll want to try to sell your house at the ideal time. When you put your home on the market can make a difference. Typically, homes sell quicker and at higher prices when the real estate market favors sellers (i.e., when homebuyers are plentiful, and homes are scarce). Sales also usually heat up in late winter and early spring because many homebuyers prefer to move in the spring and summer.
However, thanks to COVID-19, the worst piece of real estate to have for sale during spring 2020 was a high-end apartment in downtown Washington DC, which is unfortunately what we had. Since we had permanently relocated to Florida, we no longer needed a DC residence, so we put it up for sale in May 2020. There was little to no traffic in the summer as the market was certainly not in our favor. Since influxes of people were moving to the suburbs and rightfully, no one wanted to get in an elevator in a condominium! On top of that, our condo fee was higher than the nearby newly built competition.
At the same time, we were moving from our apartment in Florida to a retirement community. Thankfully, that was a much better story. It sold in two weeks near the asking price, and they allowed us to settle in five months when our new apartment would be ready. So as always, the old adage in real estate is still true. – “Location, Location, Location”! And what made our apartment in DC a good location when we bought it (six blocks from the office) became a less desirable one due to circumstances beyond our control. Who knew?!
Declutter and spruce up!
It’s important to take the time to get your home in top condition before trying to sell it—but don’t get carried away. You’ll want to hold off on any major home improvements (e.g., renovating the kitchen) because you might not be able to regain the money and prospective buyers might not share your taste. Focus instead on minor, cosmetic improvements, such as applying a fresh coat of paint, trimming back overgrowth in your landscape, and repairing issues that wouldn’t pass inspection, such as fixing a leaky kitchen faucet or replacing loose bathroom tiles. You should also undertake a thorough cleaning of the place— although you may want to hire a professional cleaning service to do it for you. For our apartment situation, we decided to move out the furniture, paint the entire place white, refinish the floors, and lower the price.
Weigh the pros and cons of using a real estate broker
Most people hire a real estate broker to help them sell their home, which can be particularly helpful if you don’t have the time or expertise to correctly price your home, market it, and bring in potential buyers. More importantly, a broker will focus on buyers who have prequalified for a mortgage, which can save time and money.
However, this expertise does come at a price — on average, six percent of a home’s sale amount, but it can be negotiated with the broker. If you do decide to hire a broker to help you sell your home, here are some suggestions on how to find one:
- Ask friends and relatives who have recently sold homes for recommendations.
- Find out which brokers and agents work in your area by searching on social media, homebuyers’ magazines, and the internet.
- Ask other types of real estate professionals (e.g., lawyers and mortgage brokers) for the names of brokers they recommend.
Although doing it yourself (commonly referred to as a FSBO, or “for sale by owner”) saves you from broker fees and commissions, it requires more legwork. You will need to advertise your home for sale (e.g., lawn signs and online listings), show it to prospective buyers (e.g., hold an open house and make appointments for showings), and deal with the buyer during negotiations. You’ll also need to supply the necessary forms and/or contracts, although you can hire a real estate attorney to draw these up. Our advice is to use an experienced realtor who specializes in your area—in both of my transactions they were invaluable.
Factor in your financial situation before signing anything
Accommodations can be made if you’re buying another home and need to come up with a down payment before receiving the proceeds from the sale of your current home. Ask your lender about a bridge loan, which is a short-term mortgage that is paid off once the sale of your home is complete. If necessary, include a closing-on-sale contingency clause in your contract, which allows you to delay the closing of your new home for a certain period while you find a buyer for your current home. If you can’t find a buyer within the allotted time frame, the purchase contract is canceled, and any deposits are returned to you unless you and the seller agree to extend the contract.
In addition, be sure to consider the tax implications of selling your home. Most sellers can exclude from taxation some or all the capital gains they realize (up to $250,000 for single filers and up to $500,000 for married couples filing jointly) upon selling their primary residence. See IRS Publication 523, Selling Your Home for details.
In our instance, despite having one of the best realtors in town, there was a month where we had no traffic. Eventually, out of the blue, we had an all-cash offer settling mid-January. Fortunately, we had a mortgage on it which allowed us to keep money invested in the stock market, which made up for the loss we took on the apartment sale.
Finalizing the Deal
After agreeing to terms with the buyer and deciding how to handle the proceeds, closing is the final step. Your main responsibility will be to make sure that any agreed-upon repairs have been made and that the buyer is getting a clear title to the home. Make sure that all the paperwork is in order—your attorney can handle this for you. With the onset of COVID-19 the buyer, seller, and closing attorney/title agent usually do not meet in person to conduct the signing ceremony, but rather the signing ceremony can occur through electronic means. Then, it’s time to celebrate a done deal!
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go through great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.
Adapted with permission from Broadridge Advisor Solutions.
Presented by Alexandra Armstrong