eMortgage Forum Blog

If you’ve never sold your home before, you might think that the process only involves a quick exchange of money for the house and then both parties go on their merry way.  There is much more involved with selling a house than this.  A home seller incurs many costs with selling the house that might not first be realized.  Before you sell a home, make sure to understand these costs and how they will affect you.  If you think you will be making a profit, these costs might change your mind.

 

Most people use a real estate agency to sell their home.  In addition to their salaries, real estate agents make commission on every home that is sold.  Who do you think pays this commission?  The home seller, of course.  The selling price of your home is marked up slightly to include the amount of commission the real estate agent makes from the sale of your home.  This amount can be anywhere from .05% to 4% depending on the agent you use.  Make sure you are aware of the amount of commission your agent takes from the sale of your home.

 

Think you’re going to sell your home by simply placing for sale sign in the yard?  Think again.  Unless you live in a high traffic area, it is not likely that you will be able to sell you home by sticking a sign in the yard with your telephone number.  More advertising than this is needed for selling a home.  Advertising can include placing ads in the newspaper or listing on a for sale by owner website.  These advertising costs add to what it takes to sell your house.

 

Several different kinds of professional fees are required to sell the house.  This includes the attorney and the closing agent.  Of course, these fees will vary from one professional to the next but could wind up being anywhere from a few hundred dollars to a few thousand dollars.

 

Depending on the area you live in, you might be responsible for other fees associated with selling your house.  This includes survey, inspections, and other processes that are required for selling a house.

 

Before you put the house up for sale, you’ll need to have some work done to make the house presentable.  This process is known as home staging.  You can do the work yourself or hire a professional to do it for you.  In either case, an outlay of cash will be required.  If you do the work yourself, you will have to purchase the materials that are needed for cleaning the outside and inside of the house.  Hiring a professional home staging company will vary depending on the agency, the size of your home, and the amount of work that is needed.

 

Now that you are more familiar with the various costs associated with selling your house, no doubt you will think differently about the price at which you sell your house.  Of course you want to be reasonable according to the market, but you also need make sure you don’t lose in the sell.

There’s a first time for everything.  For most real estate investors there will be a first visit to a foreclosure auction and a first purchase from the foreclosure auction.  Sometimes these two events will happen on the same occasion, but more likely they will not.  It is important for investors to get a feel for how the foreclosure auction process works before attempting to make a purchase.  Of course, there is one piece of knowledge that most new investors are not aware of the first time they attend a foreclosure auction and even the first time the attempt to make a purchase.  Cash is a must-have for the auction.

 

Some investors may already be aware of this fact, but many will be surprised.  Hopefully, this is knowledge that you will be equipped with the first time you attempt to purchase property from a foreclosure auction.  It will be extremely unfortunate, not to mention embarrassing, to find out this fact once you have bid on the property.

 

Before you attend the foreclosure auction you need to find out how just how much cash you need to bring to the auction.  You can find this information out from some an official of the auction.  The referee, sheriff, attorney, or trustee can give you information about the amount of cash you need to have.  You might need to bring only a certain percentage of the winning bid price or the entire winning bid price.  This amount will vary from state to state.  This is why you must find out prior to the foreclosure auction.  If you are unable to find out the amount, you should be prepared with the full amount of the winning bid.

 

There is a small exception to the cash rule at a foreclosure auction.  Perhaps officials realized it was unsafe for people to have such a large amount of cash on hand.  Nevertheless, cashier’s checks are accepted as well.  You can make the check out to yourself and then sign it over to the trustee once you place the winning bid.

 

Even if you use a cashier’s check rather than carrying cash, there is still the need to have the money available as if it were cash.  In the instance that you only pay a percentage of the winning bid price, it is imperative that you have the means to come up with the remainder of the price so you don’t lose your down payment.  It is in your best interest to be pre-qualified for a loan because you only have thirty days after the foreclosure auction to pay the remainder of the winning bid price.

 

Unless you have become extremely familiar with the foreclosure auction process, you might not have been aware that cash is needed to pay the winning bid price.  Having this knowledge will save you a lot of trouble at your first auction.  To make sure you are prepared to purchase a property from a foreclosure auction you should have cash or a cashier’s check handy.

The purpose of the escrow agreement is to record the earnest money as a deposit made by the serious buyer.  Usually the serious buyer will have $500 to $2000 in earnest money.  The check for this money should be made out as the seller as the payee, but will be held by a third party.  You can use your real estate attorney or the buyer’s agent, if there is one.  In California, the state demands an Escrow Agent perform the duties of the closing attorney.  Being a neutral third party the Escrow Agent handles all earnest money deposits.  In California, there is no need for the Escrow agreement.  Some states demand the use of Escrow Agents or Title Company officers to handle closings.  Check with your state as to the stipulations required by the state regarding the sale of a home.

 

The third party holding the check will turn the check over to the seller or returns it to the buyer based on the terms of the Escrow Agreement.  The real estate agents is usually the neutral third party with the responsibility of providing the Escrow Agreement, filling it out with themselves as the third party.  This is one of the duties you pay for when you pay the commission to the real estate agent.

 

The Escrow Agreement is a useful document to have when you are selling your “for sale by owner” home without a real estate agent involved.  You can purchase Escrow Agreement along with the additional necessary document to complete your sale at any major office supply store, such as Office Max.

 

A home warranty is a form of insurance intended to cover the major appliances included in the sale of the home and the systems of the home such as electrical, plumbing, and heating and cooling.  A home warranty is recommended if you are selling a less than brand new home.  The builders of new homes always offer home warranties with their homes.

 

The Seller’s Warranty is purchased and paid for by the seller.  The average cost is $300 to $400.  The coverage is for the time period the house is for sale.  When the seller purchases a warranty on his home, it is typical for him to include the cost in the sales price.  Also the seller should use this when advertising their “for sale by owner” home.

 

The Buyer’s Warranty is purchased and paid for by the buyer.  The average cost is $300 to $400.  This short term insurance policy covers the same items as the seller’s warranty, but it does not take effect until the day of closing and will continue for a year.  This warranty can be renewed every year as the buyer requires.

You have finished all the prep work needed for your home to look its best and now it is ready to be viewed by potential buyers.  If you have listed your home with a realtor, the realtor will provide you with For Sale signs.  Since you are the “For Sale By Owner” seller, it will be your responsibility to find or make the perfect sign to adorn your lawn.

 

To find a sign you can go to the nearest Lowe’s or Home Depot to find a “for sale” sign for about $3.  You will get a lightweight 15 X 19 inch sign.  If you want a heavier sign, which will be 18 X 24 inches, you will probably pay around $8 for this sign.  If you really want a good-looking sign, Home Depot carries a metal-framed plastic sign for around $27.

 

Searching the Internet for “for sale” signs a 16 X 23 inch “For Sale By Owner” sign with a box for flyers for about $24.95 at the Victory Store.  Another location is the Logo Sign, which sells an 18 X 24 inch “For Sale By Owner” Sign with a metal stand for $29.95.

 

For those of you who like to be creative you can make your own sign.  Office Depot and the other major office supply store will have everything from the sturdier sign boards and stick on letter you will need to make your own sign.

 

When adding information to your “For Sale By Owner” sign, do not use magic markers, they can be difficult to see from a car at night.  The reflective, stick-in letter and number work the best, but they can be a little pricey at 50 cents per letter. You can add “Agents Welcome” to your sign if you are prepared to pay the commission on the sale.  If you have a web site you are using with a virtual photo tour of your home, you will want to include the web address on your sign.  The main information you will want to include is how to reach you and your web address.  Save the additional information such as feature for the flyers you will have attached to the sign in the waterproof envelope.  You will also need to invest in a waterproof envelope for your flyers.

 

You will want an attractive looking sign for you front lawn.  The sign will attract interested buyers into looking at your home.

This is a “For Sale By Owner” home and you are wondering why you would need to talk to a real estate agent.  A good real estate agent can help you in many ways.  One way is by helping you prepare a free Comparable Market Analysis.  This analysis will give you a list of the prices of similar homes sold recently in your neighborhood.  Similar information is available on the Internet, but Comparable Market Analysis is often a better basis for you to set your price on.

 

The agent can also give you some tips on touch-ups and repairs to be made before a prospective buyer comes to look at your house.  The agent can also give you a recommendation on mortgage brokers and home inspectors.  He or she can help organize the closing, and could be extremely helpful in negotiating a price for your home.

 

You will want to get referrals for a couple of good agents.  Check with friends, family, or even new neighbors who have recently bought a home.  If you like the agent who sold you your current home, you might want to check with them.  You can even check with Realtor.com for agent referrals, if you don’t like the choices you have.

 

The agent will want a commitment to make them exclusive in the selling of your home, but the getting the Comparable Market Analysis is not a commitment.

 

Talking to a Real Estate Attorney will also be helpful in certain situations.  Most states will allow you to sell your home with an attorney, but you will want the services of an attorney to hold a down payment, a binder, or earnest money deposit.  You will also want an attorney to represent you at closing should the buyer’s lending institution send a lawyer to deal with the closing.  The attorney can also host and handle the closing proceedings.

 

You may want an attorney to calculate complicated offers from buyers, and to file your financed mortgages or Lease with Option to Purchase Agreements.  An attorney will also handle all other documents, which need to be filed with the County or Courts.

 

Some states will require you as the “For Sale By Owner” seller to use the services of an Escrow Agent or Title Company to make the transfer of real estate.  In these states the Escrow Agent will perform the duties of the closing attorney.  This will mean you will still want an attorney to perform the other duties described above.

 

When hiring an attorney, do not hire a criminal or corporate attorney who probably has never handled a closing of a real estate deal.  Get referrals by asking anyone who has ever hired one themselves.  Your real estate agent may even be able to refer you to a good real estate attorney.

For tips on important little details you need to know about selling a “for sale by owner” home, you might want to visit a builder’s model home.  You will want to note some of the things they do to make the home look appealing and inviting to the buyer, such as the light, airy, and serene atmosphere of the home.  With a new home you might think would be easy, but it can be done in your home also.  One of the complications will be your own taste in décor.  If you love the look of heavy drapes, dark colors and walls of family photos you run the risk of turning off a buyer.  Here are some tips, which will help give your home that model home look and feel.

 

First you want to make the home look spacious and light.  Open the drapes and the blinds to all the windows and turn on the all the lights in the house.   Since buyers have a hard time seeing themselves in a house filled with too many family photos, you will want to remove them all from the walls, shelves, and mantles.  Have the walls decorated with sparse paintings or decorations to give the home a spacious look.  You can replace the pictures with plenty of live plants or fresh flowers.  Fresh flowers have an appealing look on the counter or table.

 

The smell of the home is an important detail to remember.  You can bake bread or cookies, which is a wonderful aroma to walk into.  If you prefer something simpler, boil cinnamon sticks on the stove keeping the fire very low.  For the bedrooms and bathrooms, set out dishes of potpourri in each room.  Make sure to hang fresh towel and put out new soap in the bathroom.  Make sure all pet areas are especially clean and odor free.  It is usually a good idea to arrange to have the pets out of the house when you are showing the home.  Some people might be allergic to your dog, cat or any other household pet.

 

You want the home to have an atmosphere of serene quiet.  If you have children, you will want to make arrangements for them to be a friend’s house, or have your spouse take them for ice cream or to the park.  Children can be an unwanted distraction when showing a home.  I know that sounds mean, but some people are not accustom to having children.  You don’t need to questions children always seem to need an answer to when you are busy. 

 

Make sure the television is off when showing your home this is another unwanted distraction.  If you are using an agent, make arrangements to be out of the home so potential buyers will feel free to open closets and cabinets.  If you are showing the house yourself, never apologize for your home; this might draw the buyer’s attention to some detail they might have missed.

 

Only show your home on the weekends and possibly one other day during the week.  It is much easier to ensure your home looks it’s best for the potential buyers.

 

Always have plenty of flyer, and blank contracts on hand when doing a showing.  It is also a good idea to have your guest book on hand for their contact information and your notes.

As the “For Sale By Owner” seller, you will want to set the right price for your home. First you will want to estimate the true market value of your home.  This is where the Comparable Market Analysis will be of use.  The Comparable Market Analysis will show houses listed by address and the number of square feet in the home.  It will also have the asking price of the home and the actually price the home was sold for along with the date of the sale.  This will give you an idea of the true market value of your home.

 

You will look at the houses closest to the same size and number of rooms.  You might even want to look at the houses in your neighborhood listed on the Comparable Market Analysis.  You will want to look at the size of the lots to determine if they are larger or smaller than your lot.  You also want to judge the general condition of the home compared to your own.  Then set your price according to your observations.  You can make it higher or lower than the price of the homes in your neighborhood already sold.

 

You might find it simpler to have your home appraised by a real estate appraiser.  He or she will place a value on your home based on its condition, plus the sale prices of similar homes in your neighborhood.

 

You will need to consider the closing cost, which is the amount of money you will receive after the sale.  The closing cost includes expenses incurred by the seller, which does not go into the price of the home.  These expenses are attorney fees, title search, recording fees, surveyor’s fee, or any other costs accompanying the sale and purchase of the home.

 

If you accept a buyer brought to you by a real estate agent, you will pay half of the closing costs, which will run approximately 3% to 3.5% of the selling price.  If you list your home with a real estate agent you can expect to pay 6% or 7% of the selling price.

 

The ideal situation since you are selling your own home, is for you the “For Sale By Owner” to advertise your own home, and get your own buyer.  You will then pay nothing to the real estate agents.

 

As the seller for the “For Sale By Owner” home you can limit your costs by putting specific instructions in the sales contract as to the maximum amount he will pay towards the buyer’s mortgage costs and other closing fees.  If a real estate agent is involved, the fees are subject to a separate contract with the agent and are not limited in the sales contract.

 

Since their a fewer buyers in the market for new homes in cooler weather like the fall and the winter, a “For Sale By Owner” seller might have to lower the price of the home to get a buyer.  Families with children prefer to move when the children are out of school, which is typically during the spring and summer months.  The only exception to this trend is in warm weather parts of the country.  Buyers will not look to purchase a house in the extremely hot weather and will typically wait until spring and fall when the weather is cooler.

As a “for sale by owner” seller you can have difficulty selling your home.  If you have a “hard to sell” home, you still have some options making it easier to sell your home.  There is a saying “even ugly home have buyers”.  I am not saying you have an ugly home, but when you are having a hard time selling your home, there could be one of several different reasons your home is “hard to sell”.  Location or the neighborhood could be just one of many.

 

One option you have is to lower the asking price of your home.  You find this option hard to take.  Just keep in mind, your home won’t sell if it priced above the comparable homes in your neighborhood.  If you want the same price the house down the street sold for, your home must be in the same condition.

 

A better option would be an “assumable mortgage”.  The buyer would be able to assume your current mortgage without having to quality with another mortgage company.  Your house could feasibly sell for a higher price than a similar house without an “assumable mortgage”.  This could be a definite plus should the interest rate on your mortgage be lower than the current rate.  This is a matter you would need to discuss with your mortgage company to see if this option is available to you.

 

Another option is “Owner Financing”.  You may have a good buyer who is unable to get a large enough mortgage to purchase your home at this time.  If the buyer has funds tied up in an IRA, or has children in their final year of college, they may be willing to pay a higher price, or may find it easier to purchase your “for sale by owner” home with help from a seller’s mortgage.  A seller’s mortgage can be a regular mortgage or a balloon mortgage.

 

With a balloon mortgage, the buyer will make monthly payments, but must pay the balance of the mortgage at the end of a certain time period.  The time period can last from six months to about 3 years.  By doing this as the seller, you are allowing the buyer more time to arrange a bank mortgage of his own to repay you.  The form used for this type of transaction is called the Balloon Note.

 

A regular mortgage is usually a second mortgage, which covers the portion of the price of the home the amount the buyer receive financing for.  With this type of mortgage, the buyer pays the monthly payments until the mortgage is paid off.   This type of transaction requires a Mortgage Bond.  The form used to certify the regular mortgage or the balloon mortgage has been paid is called the Discharge of Mortgage.

 

 Another method of owner financing is the “lease with the option to purchase”.  This will work for the buyer who does not qualify for a mortgage loan.  The buyer will rent the property with the option to purchase within six months to two years.  If the buyer chooses to utilize this option, he pays a lump sum of 3 to 5% of the selling price to you, the seller.  Along with this down payment, the buyer pays an additional monthly sum of $50 to $300 included with the monthly rental payment.  This additional money goes toward the purchase price of the home and is non-refundable.  A “lease with option to purchase” agreement form is needed for this transaction.

 

All of the forms mentioned above can be located at any of the major office supply stores or you can download them off the web at audrie.com.

 

The other options you have would be to consider using a real estate agent or a multiple listing service.

Foreclosure homes are perhaps among the most lucrative investment for real estate investors.  There are several different ways that investors can make a profit from foreclosure homes.  Some investors choose to purchase foreclosure homes from an auction for a price that is lower than the market value for the home.  This allows the investor to sell the home for a price that is within a few percentages of the market value and still make a profit.

 

Other investors choose to work with pre-foreclosure homes.  These investors work with homeowners to keep their home from being foreclosed.  Usually an investor pays the remainder of the balance owed on the home and takes place of the bank.  The investor, in turn, extends the homeowner the ability to pay lower payments on the home for a period of time.

 

No matter which strategy an investor chooses to use when dealing with foreclosed and pre-foreclosed homes, the vast majority of the work comes with finding the homes.  There are some general methods that can be used to find these homes.

 

During the foreclosure process, there are notices recorded with various government agencies.  These include the country clerk and the county recorder.  Most people are not aware that this information is public record and is available to the general public.  If you want to find foreclosure information, you can simply visit the county’s office and look for foreclosure notices of homes within your area.  By searching the county’s office, you don’t have to pay a fee for the information.  In many cases, you can find information about foreclosures before other data providers have the chance to find it.

 

The internet is another good place that you can search for foreclosure listings.  The good thing about using the internet is that you can find foreclosure locations in places other than your immediate county.  There are various websites that offer this information.  Some of these websites offer the information for a fee while others offer the information for free.  You can find various websites offering foreclosure information by using a search engine.

 

Local newspapers are another source of foreclosure information.  In most cases, the newspaper does not have listings of pre-foreclosure homes.  For investors those investors that deal primarily with foreclosure homes, the newspaper is a good source of listings.  One of the requirements for a foreclosure to be filed is that a Sale Notice must be filed with the local newspaper.  Perusing the newspaper at least once a week for these notices will yield several listings for foreclosure homes.

 

The government agencies Fannie Mae and the Department of Housing and Urban Development are also sources of listings for foreclosed homes.  The websites to these agencies are www.fanniemae.com and www.hud.gov, respectively.  Both sites have local listings for homes that have been foreclosed.

 

It takes work to find foreclosed homes.  The information is readily available, but you have to look for it to find it.  As long as you know where you can find foreclosed and pre-foreclosed home listings, you are well on your way to investing in these kinds of properties.

There are hundreds of houses up for sale right now.  An investor can choose among any of these houses for their next investment deal.  Of course, working with just any seller can be just as difficult as pulling teeth.  If you are working with a seller that doesn’t have a compelling reason to sell his home chances are you aren’t getting the best deal possible.  Sellers that aren’t motivated often aren’t willing to negotiate a price that will allow you to make a substantial amount of profit.  When you are looking for investment properties, undoubtedly, you want to sift through all the different sellers to find only those motivated sellers that have a need to sell their home.

 

Most sellers aren’t going to come right out and tell you that they have some compelling reason for selling their home immediately.  This is because the seller realizes that if you have this information, you will offer the lower price that he is willing to take.  Rest assured the first offer price usually isn’t the lowest price a motivated seller will take.

 

One of the first ways you can recognize a motivated seller is by the seller’s location in relation to the location of the home that is for sale.  If the seller is in a different location than the property chances are the seller has some reason that he needs to sell the home quickly.  Perhaps the seller has just relocated due to a job transfer.  Maybe the seller has recently inherited the property and would rather sell it than deal with it.  These are just a couple of reasons that a seller is not co-located with the home that is for sale.  Any time sellers aren’t located in the same place as the home it is a clue the owner is a motivated seller.

 

Properties that appear to have been neglected for an extended period of time indicate that the owner could very well be a motivated seller.  A property that isn’t maintained provides several clues that indicate a motivated seller.  When the property has been neglected it is usually because the owner is either tired of the property or isn’t located close enough to the property to give it the care it needs.  Both of these are clues that the seller is motivated to sell the home.  Even if the property isn’t up for sale, you might be able to turn the owner into a motivated seller by offering to take it off his hands.

 

Property tax rolls provide you with information about the located of a property owner.  In most places, county records containing tax information are open to the public.  Use these tax records to find out if the owner has an address that is located far away from the property that is for sale.  Should the owner have an address that is far away from the property, this is a very good indication that you have found a motivated seller.

 

It is much better to work with a motivated seller than it is to work with a seller that is not motivated to sell a property.  In these cases, you can negotiate a lower price than other situations.