The most conventional way to sell a home is to list it with a real estate agent. Listing will often get you top dollar, but usually at a cost. You must have the time, patience, money for repairs, and be willing to pay the commission and closing costs. A good agent can market the house well and make the sales transaction easy for you. The problem can be finding a qualified agent with a high level of expertise to sell a house.
When choosing an agent make sure they will put forth the effort to sell a house. Ask the agent how they plan on marketing your house. The common agent has a folio of houses he or she is trying to sell. As a result, your house often gets very little attention. Many real estate agents list a house hoping the listing itself will sell the house, but this is not enough. Don’t settle for this! Make sure they will devote their efforts to marketing your house and have a plan.
Listing contracts are negotiable. Work this to your advantage. Don’t try and lower the commission rate and the real estate agents desire to sell your house, but instead provide incentives. Start with an above average commission rate and make it tiered, so that every subsequent month it is on the market the agent makes less commission. The first month the agent would make above average commission if the house sold, the next month lower, and so on. Do not commit to a contract longer than 90 days. In most cases the agent’s desire is gone by this point, and the house is losing its marketability on the multiple listing service. Also, if you happen to find your own buyer, you should have a reduced commission arrangement put in your contract.
Be prepared to bend over backwards to sell a house. Buyers can be very picky and expect a lot for their money. You might have to pay all closing costs, which can be as high as 7%. Repairs and updates are often demanded and may cost in the thousands of dollars, unless you have a house that is new or is already updated (within 5-10 years). Buyers want a nice, new looking house, and don’t want to deal with fixing it up. They will very readily go down the street to another house where they won’t have to work on it. Your house should look better than any house on the market in your area. If your house will not be updated and repaired, then set your price well below the “as is” value. Buyers expect to get a deal for all the work, money, and effort they will have to put in the house.
Try working with only prequalified buyers. Even though someone may be prequalified doesn’t mean the mortgage company will approve the loan though. Unfortunately, various circumstances prevent loans going through, but working with prequalified buyers will lessen those chances.
Even though listing a property may bring top dollar, it can also result in disappointment. Often houses are overpriced due to inaccurate market analysis, wishful thinking, or to cover the cost of the real estate agent’s commission. This then leads to a slow sale and ultimately a price well below what was expected. Let me explain. When a house is overpriced it will be passed over, because buyers will compare a similar house for less money and buy it instead. As your house’s days on the market grows, buyers will start avoiding your house because they suspect something is wrong with it. They think it is either over priced, needs work, or some other hidden issue. You may even come down to a price that other similar houses are selling for, but, because your house has been on the market too long buyers are leery. They will stay away and buy the one that just came on the market. If this happens to you, be ready to be in your listing for the long haul. You should then consider removing your listing after 90 days due to your house losing its marketability and effectiveness on the listing service and then relist at a later date.
Even if you list a house at the right price, comparable to others, you will be amazed at how much profit is eaten away by expenses. Standard expenses are: real estate commission 6-7%, closing costs as high as 7%, holding costs (insurance, taxes, utilities etc.) 3%, all totaling about 16% of sale price. This does not include your monthly mortgage payment, which you will have to continue paying for months until the house sells. Also, this does not include any updates or repairs, which can easily cost thousands of dollars. Let’s do an example. Say your house sells for $100,000 and you did $15,000 dollars in fix up, by putting down new floors, painting, updating the kitchen and baths, and so forth. As we said standard expenses are about 16% so that would be $16,000 for our $100,000 house. Subtract $16,000 in expenses and $15,000 in fix up, and this would net you $69,000. And this does include an underlying loan payoff or monthly mortgage you had to pay until it sold. Most people don’t realize how expensive it is to sell a house. Keep these numbers in mind if you’re considering listing.
We have just briefly reviewed the main points to the most conventional way to sell a house. In no way, is this intended to give you all the specifics of listing a house with an agent. But it does give you a basic understanding of it. Just keep in mind if you decide to use an agent, find a good one.