Home Seller's guide
(house, condominum and co-operative).
- Before you put your home up for sale:
- After you find a buyer:
Should I sell in this market?This is still a pretty bad market to sell a home in, however, it may make sense depending on why you want to sell.
- While you may not get as much for the house you are selling in this market, you are not likely to pay as much for another house you might be buying.
- If you are selling because you cannot afford to keep the home and want to protect your credit so that you can buy a home later on, then price is less important. In fact, if you bought your home in the last few years your mortgage may be higher than the value of the home. A Short Sale may get you out of a losing home.
- No one can predict when the market will turn around. If you are looking to move to another area, take a different job, get a bigger house for an expanding family, those factors may be more important to you then the current dip in the market.
How much can I expect to get for my home?Before you put your home up for sale you should look at what homes like yours have sold for in the same neighborhood. These are called "comparables" or "comps." Most brokers/agents are very willing to get you this information, or do a market analysis for you because they want your listing. While that will save you time, you should still double check yourself.
To check the comps yourself, go to the Trulia Real Estate Search tool. Click on the "Recently Sold" tab on the top. You can search for your address or a zip code. If your address doesn't come up with enough results, try the zip code.
Look at the results to see what homes seem most like yours. There can be a big difference in prices since the condition of the homes may be different and even a 1 block difference in location can affect price significantly. Use these results, and a broker recommendation as a guide for what you might be able to get.
Next, check how much is still owed on your mortgage(s). This will be on your monthly statement(s). Add the customary expenses for selling your home to the amount owed on your mortgage. Typical expenses include:
- Real Estate Broker Commission: 5%-7% of the selling price.
- NYC Transfer Tax: 1% of the selling price.
- NYS Transfer Tax: $4.00 for every $1,000.00 of the selling price (0.4%).
- Attorney fees: $1,100.00-$1,500.00 on average.
- Home Condition questionaire waiver: $500.00. You are required to either complete a completed three page questionnaire about the condition of the home or provide the buyer a $500.00 credit at closing. Its solely your choice. Most lawyers will instruct you to give the $500.00 credit instead of completing the form to avoid potential responsibility after the closing.
- Co-op fees; If you are selling a co-op the following fees may apply:
- Agent fees: Fees to the co-op corporation for the preparation of a new stock and lease which usually amounts to under $1,000.00.
- Flip Tax: Typically 2% of the selling price, paid to the co-op corporation. This information will be in your co-op book or you can ask the management company for this amount. Some co-ops have no flip tax and some (in the Bronx) have flip taxes that can equal 9%-10%.
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Dealing with a Real Estate Broker/Agent.Most people sell their homes by listing it with a Real Estate Broker. With fees of 5%-7% of the selling price, you may think that you're better off selling the home yourself. Most studies show, however, that you will do better with a broker than without. You can, of course, try to sell it yourself first and then get a broker if you don't have any luck.
The biggest advantage of using a Real Estate Broker is that they know the market and have the resources to attract buyers. The biggest resource at their disposal is to list your home on the Multiple Listing Service (MLS). By listing it on the MLS your broker is essentially having every broker who subscribes to MLS (which is most brokers) working to sell your home.
The trade off, however, is that to list your home on the MLS, almost all brokers will require you to sign an "exclusive sale" agreement. If you decide to list your home with a broker, you should know about the different types of agreements so that you, and not the broker, can choose which one is right for you:
- Exclusive sale: Under this agreement the Broker gets the fee no matter what - even if you find the buyer yourself, within the time of the agreement (usually 3-6 months). You can exclude potential buyers that you've already shown the house to. This is what most brokers will want to list your home on the MLS. You may, however, be able to get the broker to agree to an "exclusive agency" agreement. Only one Broker at a time can have an exclusive sale agreement or you might end up paying multiple commissions.
- Exclusive agency: Under this agreement the Broker gets the fee if any broker or agent finds the buyer within the time of the agreement (usually 3-6 months). Any other broker or agent who wants to show your home must go through your listing broker and split the fee with the listing broker. This is the agreement you want to try for if you want the home listed on the MLS. Only one Broker at a time can have an exclusive agency agreement or you might end up paying multiple commissions.
- Open listing: Under this agreement the Broker only gets the fee if he/she finds the buyer. You can list the home with as many brokers as you want under this type of agreement. Because there is little protection for the broker's fee, most brokers/agents will not list your home on the MLS or spend much money advertising your home under this form of agreement. You may want to start out with this type of agreement while you try to sell the home yourself with the understanding that you will give an "exclusive agency" or "exclusive sale" if you cannot sell the home yourself. If you do upgrade the agreement to an exclusive, make sure to exclude any potential buyer you found before giving them the exclusive contract.
Because brokers/agents try to be very friendly and helpful to sellers and buyers, it is easy to think that they are looking out for your interests. DO NOT RELY ON THIS! The broker/agent's main goal is to make a sale – your goal is to sell your home for the best price. Look out for your own interests! Take the time to review the NYS Real Estate Guide.
You may also see the term "Realtor." That simply means that the Broker is a member of the Association of Realtors and is required to live up to their standards in doing business. It is not an addition or extra license.
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What to do when you get an offer.
- Do not get insulted by a low offer: There will always be people who will make an extremely low offer just to see how desperate you are, especially in this market. Do not take it personal, it's just business. You can choose to either ignore the offer or simply tell the potential buyer that it's too low for you to make a counter-offer. If you get no other offers and need to sell the home, you can come back to this offer later.
- Determine if the offer is high enough for you to negotiate: You should have a pretty good idea of what your bottom line is - what is the least you can accept to sell your home. As a general rule, if the halfway point between your asking price and the offer is at or above your bottom line, it's a good signal to negotiate. For example, if you're asking $500,000.00 and the offer is $450,000.00, the halfway point would be $475,000.00 (500,000 + 450,000 ÷ 2 = 475,000). If your bottom line was $470,000.00, this is a good indication that you can negotiate to your bottom line or above.
- Figure out how likely the buyer is to be be able to close: An offer means nothing if the buyer cannot get approved for the mortgage they will need to close. In fact, signing a contract with a buyer who does not get mortgage approval will waste a great deal of time and keep your home from other potential buyers until the mortgage is denied. To avoid this situation, look carefully at the buyer's potential to get a mortgage and close. A broker/agent can be very helpful with this as it is in both of your interests to get to closing. Factors you should look at include:
- Does the buyer have a mortgage pre-approval: While a pre-approval does not guarantee that the buyer's mortgage will be approved for your home, it is a good signal that they meet the bank's credit and cash requirements. Make sure that the pre-approval is for an amount at least as much as they will be applying for to buy your home.
- How much cash will the buyer be putting down: In this time of credit crisis, banks are much more likely to approve "conventional mortgages" which usually require that the buyer put at least 20% down. If the offer is for $500,000.00 the buyer would have to pay $100,000.00 in cash and get a morgage for $400,000.00 to qualify for a conventional mortgage. While convential mortgages are most likely to close, and close quickly, most buyers cannot afford to put 20% down. There are many programs to help buyers with a down payment and low interest. Each of these programs may delay the closing and carry a higher risk that the buyer will not be approved. If you're considering a buyer who will rely on these programs, look at how likely they are to quality. Again, a broker/agent can be very helpful in making this determination.
- Does the buyer have to sell their home to buy yours: This is pretty common. In fact, you may have to do the same. If the buyer has to sell their home, you may not want to enter into a contract to sell your home to them until they have a contract to sell their home. Ideally, their buyer will already be approved for their mortgage. You can consider offers where the buyer does not yet have a buyer for their home as "back up" offers that you may accept when they find a buyer.
- Make sure that all conditions of the sale are agreed to: This should cover what personal property (appliances, light fixtures, rugs, window treatments) are included, whether you will need to stay in the home after the closing for any period of time, how much mortgage financing the buyer is going to apply for, etc.