This is part 1 in a 2 part series on getting yourself ready for real estate transactions. There are so many parts to the process. Often times as agents, we only tell you what you need to do to physically prepare the home or what you need to do to get ready to buy. In this post we are going to address the things that are rarely discussed but make you a qualified seller.
Simply put equity is what your home is worth minus what you owe. The remainder is known as equity. Equity is often overlooked when we consider selling a home. (See our video and blog post on Equity for more info) When you sell a home it is common for sellers to look at what they can get for the home on the market, subtract what is owed and think thats the amount they will pocket at closing. The seller often forgets to factor in the commission, closing cost Home Equity Loans, Second Mortgages and other taxes and fees. Those add up and if there’s not enough equity in your home to cover those cost, then the seller has to bring money to the table in order to sell the home.
Equity is also something all current buyers should be considering if you are going to be sellers in 3-5 years. The market has been HOT and prices on homes are much higher right now than they were just a year or two ago. The prices can not continue to climb and at some point there will be a market correction or adjustment. When that happens prices are going to relax. If you are buying right now, and know you are going to sell in a few years, you need to consider if there will be enough equity in your home to cover the cost of selling.
As part of my listing presentation, I give all potential sellers a “Sellers Estimated Net Sheet” that breaks down the likely cost of selling a home and what an offer looks like at different prices. I think this is a good way for sellers to see and feel the cost associated with the listing.
If a deal falls apart its almost always due to an issue with the home that surprised or spooked a buyer. Pest. Home and Septic inspections can cost you up front but will more than pay for itself in peace of mind and smoothness of transaction if done up front. When we complete these inspections prior to listing the home, we know the concerns possible buyers will discover in their own inspections and get a chance to fix or at least determine how we are going to address a buyer when they request repairs. I believe in this process so much that I offer a discount to all of my sellers that complete these prior to listing.There’s an earlier blog post that breaks this down in much more detail.
Money for repairs
The likelihood a buyer is going to request repairs is inevitable. There will be something they find and the potential buyer is going to want the repairs to be completed by a professional. Deals can fall apart over $1000 for a simple repair. If the seller doesn’t have the funds to complete the repairs, the deal can stall pretty quickly and the seller may end up with a termination and have to start the process all over. It could be far less costly (and heartbreaking) to be able to make a simple repair if you have the funds to do so.
Another item that sellers may not consider is if they have the funds to make the next move. Setting up a new home is expensive. Deposits, moving cost, storage and other items can be a hit on your wallet. Funds from the sell of your home are not available until after the deed is recorded and as much as we try to avoid it, a deal can fall apart at the last minute. Planning ahead can insure you have the funds to move forward if your selling doesn’t go quite as planned.
Next week we are going to talk about being a qualified buyer. Its more than just qualifying for the loan. There are many more videos and blogs on my web site as well YouTube Channel. I am always standing by when you are ready to get moving!
Berkshire Hathaway RW Towne
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