So, you’re ready to sell your home but you’re not exactly sure where to start. Don’t worry, we’ve got you covered with our guide that includes everything you need on finding the perfect agent, listing your property and more.
Deciding How to Sell Your Home
After you’ve settled on the decision to sell your home, you’ll need to make the equally important choice of what kind of partner you want for your selling journey. These days you have several options: hire a traditional real estate agent, use an iBuyer or select a tech-enabled brokerage.
An iBuyer is a company that will make a quick offer on your home sight unseen based on a proprietary algorithm. Sellers who need to move quickly for a job or want to get into a new home fast are examples of cases in which an iBuyer might make sense, but it’s important to remember that the iBuyer company will usually charge a full commission, and a discount to fair value may be built in to make up for the risk of quick liquidity.
A good real estate agent will act as your partner through the entire selling process, including getting your home on the market, marketing your home and negotiating the best deal. Traditional agents make their living solely off commissions and typically charge around 6% of the sale price of your home. That percentage is then split between the seller’s agent and the buyer’s agent.
Tech-enabled brokerages, such as Door.com, are beneficial for sellers interested in a new take on real estate that includes capabilities such as online client portals and an agent whose job is enhanced by technology, not replaced. Brokerages such as this often pay their agents a salary, meaning they’re more focused on your satisfaction, and Door.com takes it a step further by charging sellers a flat $5,000 fee instead of a 3% seller’s agent commission.
Regardless of the direction you choose to go, it’s important to make sure you have the right agent for the job.
Ask your potential agent these questions before making your decision:
What is your experience in my area?
Focus on how many actual transactions the agent has closed. Traditional real estate agents only close around three to five homes per year, so if you’re going that direction you need to make sure they’ve got enough market knowledge.
How will you market my home?
Online marketing is essential when it comes to selling a house because that’s where most people are looking these days. Make sure your agent is utilizing the best technology and focusing on the right audiences to get your home in front of buyers.
How much will the commission cost?
Some traditional agents will agree to a discussion about reducing their fees but be prepared for the fact that other agents will not.
Listing Your Home
After you’ve decided what kind of agent you’re going to use, it’s time to get your house on the market. First you need to decide when you should put your house up for sale. Late spring is considered by experts to be the best time to sell a home, but if you’re in a seller’s market (when the demand for homes is larger than the amount of homes available in your area) you may be able to prioritize your personal needs over the months on the calendar.
The next step is most likely very important to you: figure out the sale price of your home. Your agent should use comparable market transactions and your home’s specific condition and features to give you an accurate evaluation, and it’s crucial that they get it right the first time because 50% of people that will ever see your home online will see it on the first seven days on market. Door.com’s price valuation model uses proprietary algorithms that consider sales trends over the past 10 years and is 98% accurate.
After you’ve got your price down, it’s time to get your home ready for its closeup.
Some companies (like Door.com) offer free staging and photography, but here are a few things you can do to make your home really stand out:
- De-clutter. Remove all personal belongings from surfaces and keep closets roomy.
- Do a deep clean and air out your home to get rid of any pet odors.
- Aim for a light and bright look by pulling curtains open and opening blinds.
- Remove some furniture to make your home look bigger.
- Add curb appeal by power washing your house and walkways, making sure your lawn is in great condition and adding outdoor furniture if you have a patio.
You should also consider minor renovations to your bathroom or kitchen if they look a little outdated, as these are the rooms that are most important to buyers when touring your home.
If you are not using a company that offers professional photography, it’s highly recommended to go with a high-quality photographer as the photos will be the very first impression that potential buyers get of your house online.
Considering Your Offers
Congratulations, you’ve got a bite! If it’s a competitive market, you may even face a bidding war with multiple offers which could result in a purchase price well above asking.
Don’t be afraid to counter if you receive a competitive offer that is below the listing price, but if the home has been on the market for a while and has not seen much activity it might be a good idea to go lower.
You may notice the contract has a few contingencies once you accept an offer. These vary from state to state and are put in place to protect the buyer.
The Most Common Contingencies Included by Home Buyers
Buyers get an “out” if the home inspection results come back unsatisfactory with items such as a major foundation crack that aren’t as easy to fix as something minor like a leaky faucet.
If the mortgage being used to purchase the home falls through, the buyer would be able to get out of the contract.
Sale of Current Home
If the buyer is unable to sell their current property, they have a legal way out of the contract. Sellers typically only accept an offer with this type of contingency as a last resort, and will often use a kick-back clause, which states that the seller can continue marketing their home during this time. If another offer is received, the buyer has 72 hours after notification to provide the funds for the home of the seller can back out of the deal.
Sometimes the home appraises for less than the purchase price, in which case the buyer can renegotiate the price or back out entirely. If the buyer is OK with the price, they will have to provide the difference in cash.
A title company will check the title of the home, which shows current and previous ownership, and will make sure it is “clear” of any issues. The buyer will be able to get out of the contract if anything arises that is unresolvable.
Negotiating A Real Estate Offer
Working with a Door Agent means you’ll have an expert negotiator on your side who will review every offer received and provide guidance to help you make the best decision. All you’ll have to worry about it signing your closing documents, which Door Title can also make easier for you by sending someone to your home or office to finalize the transaction with the “no-cost mobile close” option.
What is a Seller Concession (or Seller Contribution)?
A seller concession (also referred to as seller contribution) is an agreement to pay certain costs for the buyer.
You may decide to do this to sweeten the deal by reducing the buyer’s cost of purchasing your home. It’s more commonly used in a buyer’s market, when buyers have the upper hand because there are many houses available.
For example, you can concede to cover the buyer’s closing costs, which are fees the buyer must pay at closing including lender fees, insurance fees and title company fees. Closing costs typically run about 2% to 5% of the purchase price. You can also agree to pay for repairs if something comes up broken during an inspection.
However, experts suggest not paying for an enhancement that a prospective buyer wishes to make, such as a major remodel.
How to Maximize Your Net Proceeds from Sale
You might not realize just how much selling your home can cost you (hint: it will probably cost thousands). We just discussed seller concessions, but several other factors come into play that can add up to a hefty amount, including:
Agent commissions make up the largest portion of the money you spend as a seller. As mentioned before, commissions can cost you around 6% of the purchase price. This means that if you sell your home for $500,000 you could end up paying $30,000 in commissions. However, if you sell your home with Door.com, your $500,000 purchase price would only result in about $20,000 spent thanks to our $5,000 flat fee.
You may have made some changes while enhancing the appearance of your home to attract buyers, such as paint jobs, minor renovations and repairing that squeaky staircase.
Again, many real estate brokerages cover the cost of staging, but if you’re going another route you may have to pay professionals to make your home look its best.
You’ll use your home sale proceeds to pay off your mortgage, but you’ll most likely owe a little more than what you see on your statement due to prorated interest. Your lender may even penalize you if your mortgage has a prepayment penalty associated with it.
Taxes when Selling Your Home
You may also face a capital gains tax. While Door.com is not a tax consulting firm, it generally works like this: A capital gain is the difference between what you paid for your home and what you sell it for. The IRS allows you to exclude up to $250,000 of real estate capital gains if you’re single and $500,000 if you’re married and filing jointly. So, if you bought a $200,000 home 10 years ago and sold it for $700,000 today, you’d make $500,000. If you’re married and filing jointly, that amount might not be subject to capital gains tax.
However, it’s the IRS, which means there are a few caveats. You may have to pay tax on the entire capital gain if:
- You owned the home for less than two years in the five year period before you sold it.
- You already claimed the exclusion on another home within two years of selling this home.
- The home was not your principal residence.
- You did not live in the home for at least two years in the five-year period before you sold it.
- You bought the house as a part of a like-kind exchange(which means you swapped one investment property for another) in the past five years.
- You are subject to expatriate tax.
If a portion or the entirety of your gain is in fact taxable, one of two tax rates will apply:
Short-term capital gains tax rate: This will apply if you’ve owned the property for less than a year and is the same as your ordinary income tax rate.
Long-term capital gains tax rate: If you owned the property longer than a year, this rate will apply. You may qualify for a 0% tax rate, but if not you’ll pay 15% or 20% depending on your filing status and income.
If you’ve made investments in the home such as renovations and improvements, the price of that is included in your cost basis and can reduce your risk of capital gains tax. You may also be able to avoid the tax if you sold the home because of work, health or unforeseeable circumstances.