Determining Your Priorities As a Home Seller
By Ted Ricasa
If you are considering selling your home for whatever reason, it is important that you understand all of the options available to you and the advantages and disadvantages of each. When it comes to selling your home, education truly is your greatest ally.
Before you can properly evaluate your options, however, you must first have a clear sense of your priorities. What are you hoping to accomplish by selling your home? How much time and effort are you willing to devote to the home-selling process? Realistically, what would represent your best- and worst-case scenarios?
Once you have established your priorities, then you can investigate the possible ways to meet your goals. You should be flexible and open-minded in assessing your options; however, never lose sight of your own best interests. If you are unsure as to what your best interests are, the following questions will help you to define them.
Do I really need to sell my home?
On its surface, this may seem like an obvious question, yet many people rush into selling their homes without examining whether they actually need to. Have you thoroughly investigated the alternatives to selling your home? For example, you may be able to:
- Rent or lease your home - This may be a viable alternative to selling your home, at least in the short term. If you are considering the possibility of renting or leasing your home, be sure that you understand the responsibilities associated with becoming a landlord. Are you prepared to handle a possible eviction? To make timely and potentially expensive repairs as they become necessary?
- Refinance your mortgage - If you have sufficient equity in your home and are in good standing with your lender, you may be able to lower your monthly payments by refinancing your mortgage. If you do not qualify for mortgage refinancing through your lender, you may still qualify for refinancing through the Home Affordable Refinance Program (HARP).
- Request a forbearance - It may be possible to request a "time out" on making mortgage payments to your lender if you are facing a temporary hardship such as unemployment. If you are confident in your future ability to make mortgage payments regularly, a forbearance may allow you to get back on your feet and keep your house.
- Work out a repayment plan with your lender - In many cases, lenders will work with homeowners to create a realistic repayment plan in lieu of foreclosure. If you do negotiate a repayment plan with your lender, however, you should be extremely confident in your ability to follow the terms of that plan. The chances of being shown further leniency if you default on your repayment plan are extremely slim.
- Modify your loan - Loan modification is a good option if you have recently fallen behind in your mortgage payments or expect to in the near future due to your current circumstances. If you have historically made your mortgage payments on time and in full, there is a good chance that your lender will work with you to modify the terms of your loan.
Keep in mind that some of these options may affect your credit rating to varying degrees. Be sure that you know exactly what you are getting into before you decide on any of these alternatives to selling your home.
What is my realistic timeline?
If you have determined that you truly want to - or that you must - sell your home, the next step is to establish a realistic timeline and adjust your expectations accordingly. Ideally, you will be able to sell your home quickly for its market value or higher, but it is not realistic to expect such an outcome.
I want to sell my home for its fair market value or higher
In general, if you wish to sell your home for the maximum amount that the market will bear, you must be willing to exercise considerable patience. You must also be willing to invest some elbow grease into your home, not only in making necessary repairs and upgrades, but also in improving your home's curb appeal and staging it to make it more attractive to prospective buyers. You will also need to weigh the advantages and disadvantages of hiring a full-time listing agent and prepare yourself for the headaches of deals that fall through, often at the last minute.
Ultimately, patience and hard work are usually rewarded. If you are willing to do what it takes to sell your home for top dollar, and are equally willing to wait months or even years to close a deal, then you will almost certainly maximize your return.
I want to sell my home quickly
If, however, you are in a "must-sell" situation, you should probably set your sights much lower than "fair market value." That's not to say that an eager buyer won't come along and make a good offer on your home within a period of months; however, that's not usually how things work out. If you find yourself in the position of having - or wanting - to sell your home urgently, it is fine to hope for the best, of course, but you should be prepared to make significant compromises.
The most common situations that force homeowners into a "must-sell" position include:
- Inheritance of an unwanted or undesirable property
- Relocation for work purposes
- Moving to be closer to an ailing loved one
- Illness or death
In some of these cases, such as foreclosure or court-ordered sale of a home after a divorce, time is truly of the essence. In other cases, homeowners may have the luxury of time, but prefer to sell the home as quickly possible anyway. Of course, some of the above scenarios - inheritance and relocation being notable examples - carry potentially significant financial burdens. Many homeowners find themselves facing the possibility of owning multiple properties and, therefore, the possibility of having to make multiple mortgage payments or additional taxes.
It is possible to sell a home quickly through traditional channels, especially if you are willing to set your price points at below market value or offer financial incentives to your agent and your prospective buyers. You may also be able to arrange a short sale with the approval of your lender or sell your home immediately for cash.
What are my long-term financial goals?
In determining your priorities, you must consider not only your current financial state but also your long-term financial goals. Where do you want to be financially in five years? Ten years? What will it take for you to get there? How will the choices you make regarding your home affect your ability to reach your financial goals?
If you are currently unstable financially, it may be in your best interests in the long term to sell your house as quickly as possible and free yourself from any associated debts and obligations. On the other hand, if selling your house for its market value is part of your long-term financial strategy, and you can afford to wait for the highest possible offer, then it may be in your best interests to invest in making improvements to your home and hiring a qualified selling agent.
What will it cost to make my home "sellable"?
In order to sell your home for anywhere near its optimal value, it has to be in good condition for the next owner to inhabit. Remember that even if you ultimately sell your home for more than its estimated market value, you will have to deduct the costs necessary to making it "sellable." These costs may include:
- Hiring a professional inspector to determine whether structural repairs must be made to the home
- Making repairs to known flaws in the home, from minor cracks to plumbing and other major problems
- Landscaping, painting, and window washing to improve curb appeal
- Utility and insurance payments while the home is unoccupied but being shown to prospective buyers
Depending on the state of your home, cleaning and repair costs alone could consume a substantial portion of whatever profit you would stand to make - and that does not account for the time and effort you would have to expend.
What costs will result from the sale of my home?
Depending on which method you choose for selling your home, you may be faced with a variety of expenses resulting from its sale. These include:
- The commission owed to both your selling agent and the buyer's agent, typically 5 to 6 percent of the selling price
- Whatever closing costs you agreed to pay upon sale of the home, usually representing between 2 and 4 percent of the selling price
- Capital gains tax , or the tax you will owe if you make a substantial profit on the sale of your home
- Any transfer tax assessed by your city or state
Ultimately, when you sale your home through traditional channels, you should expect to pay roughly 10 percent of the selling price out of your own pocket in order to "seal the deal."
Whether you contact Fast Home Help for guidance or seek counsel from a real estate attorney or other knowledgeable professional, you need to have trustworthy, accurate information about your rights, obligations, and options as a homeowner in order to make the best possible decisions regarding your home. Consult multiple sources if you can; don't rely on the advice of friends or Internet research alone. The more you know, the more likely you are to make the decision that is right for you and your future.