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Featured Listing:
Peterborough, Ontario, $399,000. Prestigious area close to all highways & amenities. Beautiful, 3 bedroom, 2 baths, clean home for all seasons. Cottage... [more] |
May 17, 2008
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 1. Setting the price 2. Preparing your home 3. Advertising and Marketing 4. Showing your home 5. Negotiating 6. Legal Aspects 7. Dealing with real estate agents The single most important step in selling your home is setting the asking price. Set it too high and your home will not sell. Set it too low and you lose money. The most common error made by homeowners is overpricing their property based on nothing more than wishful thinking. Avoid this mistake by getting a professional appraisal done on your home. To appraise your home means to estimate its value in the current market. Market value is the highest price that a property is likely to fetch at the current time. In addition to their experience and knowledge of the local real estate market, professional appraisers will primarily use a direct sales comparison to value your home. This estimate of value is obtained by comparing your property with recently sold properties in your area. To find an appraiser, check your local yellow pages or better yet get a referral from friends or neighbors. Be sure they are someone you feel comfortable working with. Ask about their experience (the more the better). Ask for references from previous clients and what banks and mortgage companies they are approved to do work for. The appraisal itself usually consists of 2 steps. The first step is the site inspection. The appraiser will come on-site and measure the square footage of your home and take note of its physical features, location etc. Step 2 is the largest portion of work and consists of a market analysis. The appraiser compares your home to others sold recently in your area. Since no 2 real estate properties are exactly alike and market conditions are constantly changing, the appraiser must adjust the value of your home according to a variety of factors when compared to other homes sold in your area. Some important factors in comparing homes are the home's style, size, area, number of bedrooms and bathrooms and amenities such as fireplaces, decks and pools. Make sure the appraiser gives you a formal, written report. Rely heavily on this report when setting the price of your home since it is based on much more than the average homeowner can research on their own. If you have doubts about the estimated value consider getting a second independent appraisal. Your buyer will likely want to know that your price is close to market value. Show them the appraisal to demonstrate that your price is fair. If you have priced your home at a premium be prepared to demonstrate the evidence to convince them. An important step is to demonstrate to the buyer the cost savings they will achieve buying a "by owner" home. An easy way to do this is to take the amount you would have spent on an agent's commission, divide it by 2. The resulting number represents the amount that both the buyer and the seller can save. For example, the average commission on a $175,000 home is $10,000. Split between the buyer and seller, both can save $5,000. Lastly, consider that most buyers expect some downward negotiation. How much "cushion" to add to your bottom line price depends on your situation but a good rule of thumb is to add 2-4% to allow for negotiation. Getting your home into tip top shape is critical to selling it. Your home is in competition with other similar homes for sale in your area…make sure yours comes out on top! Buyers want a home that is in "move in" condition so pay attention to details. The saying "you only have one chance to make a first impression" applies in triplicate when selling a home so fix that broken window and repair that leaky faucet. Before putting your house on the market, take a tour and list all of the flaws you see. Consider brining a friend along to provide an objective opinion. Some of the items may be small and easily fixed (damaged wallboard, fresh coat of paint) while others may be more major (leaky roof, worn carpets). The small items are no brainers….fix them! The major items may require a tougher decision from you. What you consider minor might be a deal-breaker for the buyer. Before making those decisions consider their point of view…why buy a house with worn carpets when you can buy a similar one with new carpets? Also consider that by law you must disclose any defects with your house so "sweeping things under the carpet" is not an option. Your decision may come down to having to conduct some major repairs to your home before it is salable. The outside of your home is critical to the buyers first impression. Many buyers will "drive by" before even contacting you. If they like what they see they will contact you for more information and an appointment to view. If they don't like what they see you have lost any opportunity to convince them. Inspect the outside of your home from a buyers perspective. Is the lawn cut, shrubs trimmed and weeds pulled? A dose of fertilizer can work wonders for lawns and vegetation. Clean away any junk and clutter. Trace the route that the buyer will take when approaching your home. Clean any branches, leaves or moss from the roof and gutters. Does the trim need repainting? What condition is the house siding in? Are all the windows and screens in good shape? Finally, look at your front door. Is it nice looking and in good shape or is it scuff marked and in need of repair. To a buyer your front door indicates what shape the rest of your home is in so make any repairs and give it a fresh coat of paint. Keep lights on during evening hours so that drive bys can see the house. When you are finished with the outside, turn your attention to the inside of your home. Aside from making sure everything is in good repair there are 3 things to concentrate on inside your home: clean, neat and welcoming. Clean your home from top to bottom. A sparkling clean smelling home will invite the buyer to investigate further. On the other hand nothing will make a buyer run faster than a dirty home that smells like cabbage. Consider hiring a professional cleaner to give it the once over to make it easier to maintain. Does the carpet look dirty? Sometimes a good cleaning will bring it back to life. If not consider replacing it. Buyers like neat homes. Walk through your house and put any loose items away. Consider packing away many of your knick-nacks to give a less cluttered appearance. Looking at your home from the buyers eyes, pack away any items likely to make them uncomfortable: religious items, stuffed animals, guns, collections. Remove anything likely to distract the buyer from the room itself, including too much furniture. Make your home as welcoming and cozy as you can. Avoid eating "smelly" foods (like fish) before a showing. Filling your home with the smell of fresh baked bread or boiling cinnamon are 2 ways to make it smell more inviting. Before a showing walk through your home and turn on selected lights to make sure that each room is inviting. Once you have taken care of preparing your home you need to move on to advertising it. Your attractive home may sell itself but only if buyers know that it is for sale. Your objectives for marketing your home should be to get the word out that it is for sale and provide enough information to potential buyers that they will want to investigate further. Determine a marketing budget. Accept the fact that it will cost money to get the word out and plan for it. As a rule of thumb you should plan on spending between $500 and $1000 on advertising depending on how long it takes to sell and what methods of advertising you use. This should be spread out over the time that you expect to be selling your home (this might be 3-6 months). Don't spend your whole budget in the first 3 weeks. Determine the advertising media you have available to you. The more information you can get in front of the greatest number of people the better. Don't put all your eggs in one basket. Use the widest variety of media possible. A yard sign is the single lowest cost and most effective method you can use. Many buyers cruise the neighborhoods they are interested in buying in and a yard sign will alert them that your home is for sale. Yard signs also provide "word of mouth" advertising as friends and neighbors see the sign. Surveys indicate that anywhere from 50-70% of buyers were first introduced to the home by a yard sign so having an effective sign is critical. Your sign will set the tone for the whole buyer's experience so avoid using a cheap black and red sign from the hardware store. A professionally made sign says you are serious about selling. Visit a local sign painter and get an attractive yard sign made up. It should be large enough to be easily read from the street (at least 20" x 24"). It should contains the words "for sale by owner" on the top in big letters. This phrase is an important selling point with buyers because of the potential for saving money on the sale. Your sign should also prominently display your phone number in large easy to read numbers. If you would prefer some time to prepare for showings also include the phrase "by appointment only" to avoid buyers just dropping by. Place the sign in a good location that is visible to traffic going both ways on your street. If your home is in an out of the way place also use small directional "home for sale" signs at strategic locations (e.g. the end of your street) to direct potential buyers to your home. A yard sign is important but it can only offer so much information. Combine the sign with some fact sheets in a covered holder so that potential buyers can have something to take with them listing the home's details. Printing out your HomeSellCanada.com listing makes an excellent fact sheet. One very popular way of providing buyers with more information is to post the address of your home's internet listing on your yard sign. This address (e.g. www.homesellcanada.com/list/3000.cfm) offers drive by's a safe and non-threatening way to view your home's information, including color photos, without committing to a viewing. This offers the buyer a way to sift through the 5 or 10 homes they may have driven past in a day. It is critical that you offer the buyer an easy was to get more information on your home. An internet ad at HomeSellCanada.com is a very low-cost and effective way to do that. To attract buyers who may not drive by your home, consider using classified ads in a local newspaper. Although somewhat expensive, newspaper ads tend to have a wide distribution. You can lower your cost by keeping your ad short and directing buyers to your internet address for photos and more information. Be sure to include these important items in your ad:
In recent years the use of the internet for advertising real estate has skyrocketed. Studies have indicated that well over half of all buyers use internet resources to help them buy a home. Internet ads provide a non-threatening way for buyers to access a wealth of information and photos describing your home. Given the very low cost (a 12 month HomeSellCanada.com ad will cost you less than a single weekend newspaper ad!) and the very large advertising potential of internet ads, they should be a part of every home seller's advertising campaign. The main point to remember about marketing your home is not to rely on any one means of advertising. Use as many as possible. So far you've set your price, cleaned and fixed up your home and prepared your marketing plan. From the time the first advertising goes out you need to be prepared to show your home to potential buyers. Contact with buyers usually starts with the phone. Be prepared to answer your phone. If you are away from it, make sure you have an answering machine on. Check and return messages often. Your message should mention specifically that your home is for sale and that you are actively scheduling appointments. Keep a pad of paper near the phone and log information as you talk to buyers. If they later come to view your home they will be impressed if you remember them and their conversation with them. Be sure to include the buyer's contact information in case you need to phone them back to reschedule an appointment. Also keep a prepared sheet of notes by the phone which will help you stress the selling features of your home. When you talk to buyer's for the first time, ask them where they heard about the home. This will help you track the relative effectiveness of the various means of advertising. Be prepared to answer the most popular question "why are you selling?". Don't get caught off guard with this question. Carefully consider the answer you want to give because it may have a lot of impact on the buyer. A major consideration in showing your home should be security. Be wary of anyone dropping in and wanting to see your home at night. Most buyers want to view the home in the daytime. Be prepared to politely reschedule the viewing for the next day. Never show your home alone, particularly if you might be vulnerable. Have a friend or neighbor in the home during showings. Have all you viewers sign a guest log and supply their contact information. Legitimate buyers should not balk at this. Review your home and move all portable valuables to a safe place. The most important thing to remember during a showing is to let your home sell itself. Be around and prepared to answer questions but don't talk too much. Don't shadow your buyers. Allow them time to dream, envision themselves living there and to talk among themselves. On the other hand be sure to point out the special selling features of your home and neighborhood. Have prepared facts sheets available in a prominent location by the entrance door. These sheets should feature a picture of your home, its price, address, point form description of the home's features as well as a narrative description of the home and neighborhood's selling features (hint: printing off your HomeSellCanada.com listing makes a good fact sheet). If possible its also a good idea to have a photo album showing your home in a variety of seasons available. Take several steps to prepare your home for a showing. Get a neighbor or friend to take care of any pets and children during a showing…they should not be in the home. Clean up any dishes, make the beds and general put the home in pristine condition. Make sure you leave enough time during and after the showing. If you appear rushed and frantic during a showing the buyer will pick this up and perhaps be put off. Make your home an inviting place. If possible fill it with inviting smells like fresh baking and serve refreshments to buyers. In a pinch boiling cinnamon will make your home smell nice. Check the temperature of you home. Is it too warm or too cold? Check the noise levels. Turn of all loud noises such as TVs and dishwashers. Play some suitable soft background music. In winter put the fireplace on. If its hot in the summer turn on your air conditioning. Lighting can have a big impact on the buyer's impression of your house. Before the showing turn on all the lights and open all the curtains. If you don't get a call from people who toured your home, try calling them back. This should occur within 10 days of the tour. Identify yourself and state that you are following up after their tour of your home. Would they like to ask any questions or schedule a 2nd visit? If they are not interested in your home see if you can politely find out the reason. If it's something you can fix then consider doing it. One of the most feared and least understood aspects of selling by owner is negotiating the sales price and conditions. In its most basic form this step is nothing more than a dialog between you and the buyer on the purchase of your home. If you prepare properly and follow some ground rules the negotiation step can go smoothly. Remember the advantage you have over agent brokered deals…with no middleman the negotiations can be more direct. There is less chance for misinterpretation through a third party. Firstly, take some time and prepare for the negotiation. Most buyers expect an inflated asking price and fully expect you to have some room for downward negotiation. If you don't have this room, you will likely not get very far on any negotiations. Conceding somewhat on price makes the buyer feel that they got what they wanted. Decide what your bottom line price is before you start negotiating. Review the items in your home and yard and decide what is negotiable and what is not. Will you consider selling the home with the appliances? What about the window coverings? How about that play set in the back yard? Deciding on these questions before you enter negotiations will leave you more time to focus on the task at hand. Prepare a negotiation worksheet for yourself and the buyer. This is not a legal document but may become the basis from which a lawyer can prepare the proper legal purchase contract. Having all the points decided in the negotiation down in writing is critical to both the seller's and the buyer's understanding of the deal. The worksheet should include the following items:
To recap, when you find an interested buyer sit down and agree to terms. Use your prepared worksheet to guide this discussion and to write down the details that you have decided. The buyers take a copy of this to their lawyer who uses the worksheet to draw up a formal Purchase and Sales Contract. The buyer will present a signed copy of this contract. This is called the offer. After you have had your lawyer review the contract you can either sign it (thus making it a legally binding contract), reject it outright or present a counter-offer back to the buyer (usually compromising on an issue). Several rounds of offer and counter-offer might be required before you get to terms that you and the buyer are both happy with. When you have both signed the contract the buyer should present you with the deposit. Never sign any document before getting your lawyer to review it. Many people avoid selling by owner due to a fear that they won't be able to handle the legal paperwork. This fear is misplaced since whether you sell by owner or sell through an agent you will have a qualified lawyer or Notary Public handle all the legal paperwork. Real estate agents are not qualified to conduct the legal transaction so no matter how you sell you will need this legal expertise. Find a good real estate lawyer when you first decide to sell your home. They can keep you on the right path throughout your sale and give you peace of mind that all legal aspects are covered. The best way to find a good lawyer is to use recommendations from friends and colleagues that have had good experiences. If you can't find any trusted recommendations try talking to your bank or lending institution and see what lawyers they commonly use. A lawyer will perform a number of tasks during the sales transaction. Based on your negotiation worksheet the buyer's lawyer will draft the sales contract. This contract should be reviewed by the seller's lawyer before you sign it. The buyer's lawyer will also conduct a title search. This process involves investigating the town's land records to determine the rightful owner of the property. A review of any easements on the property would also be conducted. An easement is the legal authority for someone else (usually the local municipality) to use a portion of your land for some purpose. Typical examples of an easement are for sewer lines or road allowances. It is important for the buyer to know of any easements on the property they are buying. As the seller, your lawyer will help you make sure that all conditions of the contract have been met to avoid making the sales contract null and void. The most important contributions your lawyer will make is during the closing of the sale. The closing is also known as the settlement and is the period when the buyer gets the title of the property and you get your money. Your lawyer should sit down with you and go over the sequence of events during the closing. When the time actually comes they will carefully monitor all events on your behalf. When selling your home by owner, you will undoubtedly be approached by more than a few real estate agents. Their goal is to get you to list your property with them. The FSBO seller is a major concern to the real estate industry. Every property sold by owner is a property sold without commission and that eats into their business. The usually method to get you to list with an agent is to present the home selling process as very complex and time-consuming. Some will call with "helpful" consultations, books or videos. Don't be fooled…these tools are used to confuse you and get you to list your property with them. Your main defense against these tools is to be a well informed about the home selling process and to prepare your response in advance. Remember, agents are trained specifically on how to convert FSBO listings to agency listings (try searching google.com for "prospecting FSBO's"). They make no money if you sell your home by owner so any offer to "help" is more likely to be a means to get you to list your home with them. Occasionally you may get a real estate agent approaching you with a interested and real buyer. If you are willing to compromise on a commission deal (2-3%) then you might be able to negotiate a sale. Be wary of the agent wanting you to list the home with them. Make sure you get the offer in writing and consult your lawyer before signing anything. |
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