Welcome to Installment II of The Journey of Owning and Selling a Home: Pacific Northwest Edition
In Installment II, “A Seller’s Journey” we’re going to cover the process of preparing your home to enter the market and why it’s important to carefully choose your Listing Agent/Real Estate Broker. I’ll explain some of the key services you’ll encounter during a transaction and what they actually do within the transaction. Finally, we’ll touch on market-driven strategies involved in maximizing how much your home ultimately sells for.
Installment II: A Seller’s Journey
Representation vs. the FSBO
It’s time to sell, now what? Your first step in the process should be to enlist a Realtor, or real estate broker as a listing agent to market, manage and complete the process. Owners will occasionally decide to sell their property on their own, normally referred to as a “For Sale by Owner”, or FSBO. The determining factor is often the commissions saved when bypassing a Realtor. However, a real estate transaction should never be undertaken without some form of representation, in part due to the extensive legal ramifications. If you choose not to use a Realtor, then you most certainly will need an attorney’s council to help guide you, ensuring documents are legal, complete and that the process moves forward smoothly. Another sometimes fatal missing piece to a FSBO sale is marketing. According to the National Association of Realtors, real estate searches via Google grew over 250% in the years from 2008 through 2012. Google reports that 90% of all real estate buyers now search online for their next home. Websites like KellerWilliams.com, Redfin, Trulia, and many others have become staple searches for home buyers. If a Seller isn’t online in a comprehensive way, that home is limited to as low as 10% of the existing market. In a Seller’s Market, that may seem OK given the low competition, but the instance of multiple offers that drive the price up decreases dramatically. So, we’ve paid an attorney, limited our marketing – and have likely taken a lesser sale amount in the end, even with considering a seller’s market. On top of that, you are a one person show, presenting, negotiating and selling the property on your own. Yes, there a cost to Realtor representation, but choosing a broker wisely and you will ultimately save time, probably net more cash in the end and be much, much happier.
With your broker, you’ll carefully determine levels of preparation and determine timing. If you’ve been following the suggestions in Installment I, “A Homeowner’s Journey”, it’s very possible all you need to do is some minor tweaking before the home is ready to sell. If not, there might be a few things that you could do to bump up your chances at a faster, higher offer amount. There are two things to now consider with two different impacts.
The first is the ever familiar “curb appeal”. It’s in your best interest to make it as easy as possible for a buyer agent to present your property to their client in a positive light. The buyer agent can easily look past minor yard needs and cosmetic issues like dirty windows, but those first impression stumbling blocks can lock into their buyer’s mind and make their agent’s job an uphill climb before they even enter the home. Addressing outside cosmetic issues might not yield hard dollars in return, but it most certainly increases your market size by putting the buyer focus where it belongs, the real features of the home. It can mean the difference between three weeks on the market and three months.
The second consideration is “building condition”. Depending on the potential value of the home, updating a kitchen or bath can be a good way to attract better offers when compared to the same space needing a lot of work. By looking at comparable homes for sale or recent “solds” in the area, your broker can help you get a sense for the expected return on your improvement investments. Every neighborhood is different and a remodeled kitchen may have a lot of impact in one area and price range, while the same project in another area might be best left for the buyer to take on themselves. Your broker will be an invaluable resource for deciding what to do and how to go about it. Hopefully, he or she will even have contractor contacts to share for work that needs to be done. There are also some good websites these days that can not only give an approximation of cost, but even provide professional contacts for bids.
The “listing” is a collection of all the information relating to the home, including a collection of photography and area amenities that is entered into the Multiple Listing Service and fed to the rest of the world. To understand the importance of the listing requires understanding what happens behind the scenes. Typically, a buyer will have their own representation to help them whittle down property choices to look at. In an attempt to narrow the search and help maximize time efficiency for their client, the Buyer’s agent will scan the Multiple Listing Service, or MLS, for up to the minute properties for sale and pull together a list of perhaps the top ten candidates. From that list, they’ll go out and take a look, hoping to find “the one”. A listing agent must create a library of top notch photography, researched and included information all the way down to bus routes, local amenities and even school assignments. The most comprehensive listing has a much better chance of making that buyer agent’s “top ten list” and can vital to driving traffic to the house.
The Proactive Broker, Title and Escrow and What it Means to You
There are a myriad of reasons for the need to sell a property. While those reasons will certainly affect your broker’s overall strategy, the question of who actually can legally sign documents and sell the property is an often overlooked piece of the puzzle. Here’s just one scenario where assumptions made by a broker can cause real headaches as you draw near to the closing of a sale. An elderly parent, let’s call her “Mom”, still owns and lives in the family home, but reaches a point where long term care is necessary. A few years ago, she and you arranged for you to become her power of attorney, just in case. Her health is failing and she feels it would be better for you to manage the sale of the home so that funds are liquid and available for her new costs. You contact a broker, meet him or her, provide the Power of Attorney documents and proceed with a listing. An offer comes in, a contract is born and everyone is excited because things are rolling along super smooth. About two weeks into the contract of a thirty day contract closing, the broker remembers that Title and Escrow will probably need a copy of the Power of Attorney documents and the Title and Escrow company didn’t prompt the broker to get that over right after the original contract signing.
Title and escrow are two functions that are most often provided by the same company. Typically, that vendor will be arranged by your listing agent. The function of a title company is to review everything that has to do with the legality of selling the property and making sure that, in the end, the contract is enforceable and valid. The title process includes looking at a historical chain of sales, making sure there are no missing pieces to the records, and verifying that all documents are in harmony with each other so that the contract is complete and actually has a leg to stand on. They will also be looking for past property disputes and resulting easements, making sure anything that could create a challenge to the sale, or “cloud on the title” is resolved prior to closing. Once Title has done their job, things move to Escrow, where the settling of financing and other funds, as well as final signatures are dispensed and recorded so that the sale can close.
We’re fourteen days into the contract for Mom’s house, with a closing date just two weeks away and the Buyer is now asking if it might be possible to close earlier. You love that idea because you’ll get the proceeds that much sooner and can get some additional furniture for Mom’s new place a week ahead of time. Here’s the problem. The broker missed the fact that, while the Power of Attorney documents very clearly spell you out as the Power of Attorney, the broker missed a small but important part of that language that says “in the event of incapacitation”. Mom’s not incapacitated; she’d just rather you deal with it. Big difference. Upon receiving the broker’s copy of the Power of Attorney the title company quickly contacts your broker to ask for the official declaration of incapacitation, signed by Mom’s doctor. Now things just went from super smooth to “You need what???” You’re probably not closing on time, let alone early. That should’ve been called out even before the listing went in and certainly prior to offers coming in – and could just kill this purchase and sale agreement.
Granted, that scenario reflects a small percentage of the transactions that occur, but it illustrates a very important component in shopping for a broker. Think of the process as a sidewalk with the potential of patchy ice spots. You might not always spot the ice, but your broker should be able steer you around those. The broker you choose must, at that very first meeting, demonstrate more than just “I’m going to get you the very most for your house faster than anyone else”. Let’s face it, every broker knows that’s at the top of your list, but you also need to be comfortable that your broker will proactively ensure a smooth transaction and anticipate any contract pitfalls as well.
The School of Hard NOCs (the Negotiator, the Offers and the Process To Closing)
This is ultimately where the payday is born. With everything we’ve covered thus far managed well, the big task remaining is the tough job of making sure your home sells for as much as the market will possibly bear. A good Buyer’s Agent will make sure their client is not over paying for a house by presenting data that argues their offer price. A good Listing Agent may work to counter that argument with separate data. Ask your broker what his or her multiple offer strategy is as well. After the price and initial terms are agreed to by both parties, there can be a second and even third layer of negotiations based on inspections and appraisals that you’ll need your broker to help you navigate.
From a selling perspective, the ideal situation is to have more than one offer on the table at the same time. A multiple offer situation is fairly common in the Seattle area right now, as we covered in my May 9th article, “Caution: High List Price Ahead”. When you have a few offers to look at, the price is just one component to the overall offer that includes other conditions or addendums that might include financing or other contingencies. Your broker will help you evaluate the offers so you can decide what the most meaningful attributes are of each. How much earnest money is included in the offer and what does that actually mean and why should the type of buyer financing matter to a seller? Is it a cash buyer and is that really better for your situation? It’s important to truly understand the impact of all the components of any offer.
You did an excellent job getting your house ready for the market, the listing was stellar and you got multiple offers to boot! Now, with “Mutual Acceptance”, or the signing of a full purchase and sale agreement, with all contingencies and resulting negotiations satisfied, we can move to closing. Upon Mutual Acceptance, it often takes 21 to 45 days for the transaction to close and possession transferred to the buyer. Your Listing Agent will be working behind the scenes during that process to make sure buyer financing is on schedule and Title and Escrow is ready for closing things out. You can count on your broker to keep you abreast of any paperwork deadlines, with plenty of time to spare. There will be a signing appointment at the Escrow office, usually a day or two before closing where the buyer(s) and seller(s) typically come in for separate appointments. Finally, the really cool part; the title and deed are recorded with the County, the buyer gets keys, you get the money and congratulations! Your transaction is closed.
Now you have a very good overview of why broker representation is critical, how your broker helps in deciding the best preparation strategy prior to the listing of your home and just how important that listing is. There are a lot of ways a sale can go sideways during the process and how your broker should be able and ready to anticipate challenges so that they never become an issue jeopardizing the sale. You’ve been introduced to some of the behind the scenes players like Title and escrow and hopefully learned more about the importance of your broker’s negotiating skills, offer analysis and what’s involved in moving a transaction to its closing. It’s quite possible all this information has led you to more questions. Email me or give me a call and let’s go over them, one on one.
You may be at least considering the process. You’ll first want to know what your home is worth. That’s not the Zillow value, assessed value, or even appraised value, but the best selling value. So let’s talk. I want to be your broker. Let’s make a plan. If you’re not in the greater Seattle Metro area and Eastside, that’s OK. If I can’t get to your area, let’s talk anyway and I’ll help you find the perfect broker for you wherever you are.
Real Estate Broker