As a first-time buyer in the real estate market you had plenty of optimism when reviewing all the potential homes that had great curb appeal. However, monthly housing payments, ongoing plumbing issues, and all the time spent tending to the yard makes you a hardened and experienced homeowner. Now you have that desire to sell your home, but you have no idea where to start.
Whether or not you have regrets as a buyer, there is also the possibility of having regrets as a seller. Asking yourself those dreaded “What if…?” questions after you have completed a sale can happen. Just like with buying property for the first time, selling a property for the first time will be a learning experience that you can take with you for any selling process.
If you truly ready to sell your property, then you must have some form of confirmation. There will be emotional baggage involved if this property happens to be your home, but it is key to remember that in the real estate market there is no place for emotional investments. Just as you bought the home as a financial investment, you will also be selling the home as a financial investment going forward.
Before you officially put your home on the market, walk through your home and discuss old memories. Reflect on how the house has served its purpose for the time you spent living in it, and think about what life after the sale will be. Get the emotional baggage out of the way first before you can begin putting in the actual work.
In real estate there is more than one particular market to account for. If you are selling an investment rental property, for example, then that is not in the same market as selling a home. Different markets will have different buyers that will be looking at properties differently. The most experienced buyers don’t care about curb appeal as much as they would like to know the details of current lease agreements and cash flow history.
Knowing the specific real estate market takes more than telling the differences between New York and Los Angeles from Charlotte and Seattle. Are you selling in the investment rental market? Are you selling in the home market? Is it specifically a commercial property you are trying to sell?
If you decide to sell your property, then you have to make sure that you will be in a strong financial position to sell. The proceeds from your sale will need to cover all the fees that are associated with selling it, or else you will have bring money out of pocket right to the table. One of the main objectives in real estate sales is to make a profit.
If you list a property but refuse to carefully go over the numbers, then when you get to escrow, you will realize just how expensive it really is to sell a property. It is better to know financial statistics ahead of time. Start with a general estimation of your home’s value, and then subtract your remaining mortgage balance (which is also known as home equity). Then you will subtract closing costs, which include fees, taxes, agent commissions, and those costs may amount to a range from 6% to 10% of your home’s sale price.
Ultimately, you have to know where you stand financially if you are going to be successful in selling real estate. If you fail to make a profit from your sale, and if many things go wrong during the selling process that involve financial oversights, then you will be left in a more unfavorable financial position.
It takes proper positioning of the price that you want for your property so that the right buyers get to see it and think about it. One selling strategy that works is to price a home slightly below its expected value and place the property on the market. However, the catch here is to not accept bids right away. Don’t take any offers for around seven days, group show the property, and then do a couple open houses. If you wait, a successful purchase will not be dependent on who is able to bid first, but rather who is serious about buying the property and able to come up with the most reasonable bid. Such bids can include a flexible timeline or an all-cash offer alongside the right price.
Chances are good that your real estate agent will have a strategic plan in place for the sale of your property based on what is currently working best in your respective market. To achieve that top dollar, you need to have an idea of what is happening in the current market. Depending on the price range for your property, it could mean various things such as hosting multiple open houses and presenting it as a pocket listing. Real estate markets are always changing, and some of these changes are caused by additional inventory or a decrease in the amount of active buyers. These changes make agents and brokerage firms adjust their strategy to fit whatever the demands and buyer preferences are.
If you become a seller, never put aside any potential tax implications. By selling your property, you will owe a great amount of capital gains taxes on whatever profits you make. If you claimed yearly depreciation against a rental property, then you will have to pay capital gains taxes on that.
Here is one illustration of paying property taxes. You bought a rental property for $180,000, and later you decide to sell that property for $240,000. You will owe capital gains taxes on that $60,000 profit. In terms of claiming depreciation, if you claim $30,000 over the time you owned the property, you subtract that from the original purchase price when assessing capital gains. As a result, the capital gains taxes you owe is on a difference between $150,000 (which is the original buying price minus the $30,000 depreciation) and the sale price of $240,000. Along with depreciation, you owe capital gains on $90,000 instead of $60,000.
If you want to avoid capital gains taxes altogether, then consider what the 1031 exchange can do for you. The 1031 exchange allows you to essentially trade your rental property for a property that is better and more valuable. The 1031 exchange is a tax provision that allows you as an investor to take the proceeds from the sale of a property, and then immediately flip whatever profits you make into the purchase of a new property while also deferring capital gains. However, there are some restrictions; both the initial and replacement properties must be “like-kind”, meaning they must be similar to each other in type. You can’t use the 1031 exchange to trade a commercial office building for a single family home, but you can trade an office for an office or a family home for a family home.
No matter how hot the seller’s market is, if your asking price is set too high, then buyers will most likely stay away from your property, and they won’t even look at it. You may feel confident about the value of your property, but there is a certain line that you can’t cross as a seller. If your property is overpriced in the beginning, then it will cause the property to lose momentum. A property that loses momentum can hinder real estate sales success.
Asking prices that are set too high give buyers reason to hesitate, which is something you don’t want to see happen. Depending on your situation, if you are in urgent need to sell or you are just casually testing the market, the idea of conceding to a lower asking price for your property than the one you wanted may be unsettling. However, by setting the asking price low enough you encourage buyers to at least look at your property for a lengthy review. If there is a chance to raise the asking price later in negotiations, then keep that in consideration, but when starting out, make a reasonable, friendly asking price.
Systems and appliances in a home whenever they need to be repaired or replaced can be covered by a home warranty. Those who don’t have the funds to make expensive repairs to systems and appliances use home warranties all the time. Home warranty companies offer customized home warranty coverage, allowing you to choose which systems and appliances you want to be covered.
Including a home warranty as part of the deal for buying your property can have a positive impact on your sale. Buyers typically find home warranties appealing, so it could help you to sell your property in a shorter period of time. If the homes in your area stay on the market some time longer than you would prefer, then including a home warranty as part of your property’s deal makes even more sense.
Oftentimes it is the home warranty that serves as the tipping point or bridge that helps both the buyer and seller come to agreeable terms for the sale of a home. Knowing that they have some form of protection in a home warranty is what sets buyers at ease. It doesn’t matter whether your home has newer or older appliances as long as you have a home warranty attached to them in the deal. It is often the case that home warranties save you a lot of money, and much like car insurance, there is the hope you never have to use home warranties but you will be relieved when you do.
Although this is not a requirement, it is highly recommended for you as a first-time seller to have a prelisting home inspection before putting it on the market. This is done to avoid sudden surprises during the course of a transaction. A wide variety of unknown issues in the house may rise to the surface and sabotage a sale if you don’t discover them and address them.
The typical cost of a prelisting inspection ranges anywhere from $250 to $700, depending on what part of the country you live in and how small or large your home is. What this kind of inspection covers is a general checkup of major systems, mechanicals, windows, and doors and locks along with detection of water damage, mold and cracks. Radon testing, well-water testing, lead paint testing and internal mold testing can also be covered by a prelisting inspection if you so choose.
Some of the benefits that you will receive from having a prelisting inspection include (but are not limited to) better marketing leverage, valuable advice for improvements, and more negotiating power. As well as discovering the negatives about your property, inspectors can give you great details about the positives, like your old furnace is still sturdy enough, or you have a perfect sewer connection. These positives can give the marketing leverage you need when promoting your listing.
Whatever advice your inspector gives you regarding improvements, take it seriously because such improvements can make or break your listing. By updating the parts of your home that need updating, such as replacing your roof, upgrading your HVAC system or installing new energy-efficient windows, you can put yourself in a better position to sell. If you already know the issues your property has during the inspection, you can price accordingly, which will give you more negotiating power. For example, if you have already factored the need for new gutters around your home into your listing price, and that is made clear upon receiving the initial offer, buyers will be less likely to try to drive the price lower.
As is the case with buying a property for the first time, there is also a learning curve to go through if you are a first-time seller in real estate. You will need to carefully crunch the numbers first before you settle on an asking price, and once you do the selling process will straighten itself out. As a seller in your respective market, you need to make the transaction comfortable not only for yourself, but also for the buyer you are handing the property over to.
Selling property is much like creating works of art. It takes time and patience to paint the picture you want, and then behold the beauty of what you have accomplished. In other words, don’t be in too much of a rush to close on a real estate deal, and see the entire process through.