Do’s and Don’ts of Buying and Selling a Home
Search the Internet and you’ll find many tips on what to do, and what not to do, when purchasing or selling a home. Additionally, the California Association of Realtors recently started a new marketing campaign for Realtors, allowing them to create their own personalized do’s and don’ts marketing material to send out to their clients and social media (examples of these are in the slideshow above). As a result, we’ve scoured what you’re likely to see on the Internet when searching for how to buy and how to sell a home, and expanded on those concepts here.
Here’s a glimpse of what to do, and what not to do, when trying to buy or sell a house.
DO Be Realistic About the Price of Your Home
Markets change. They are seasonal, and they are cyclical. Sometimes your home will increase 20% a year in value, and sometimes those gains are more modest, or worse, negative. A real estate professional can tell you the current state of your local market, and how to price your home if you need or want to sell. All real estate agents will give you a free market report which details the trends in our market and gives a great indication on the current price of your home. You can order one here. Remember, your home is priced by the market, so even if you’re able to get a buyer to pay more, you will both be limited by an appraisal.
DON’T Always Ask for the Highest Price.
There are many pricing strategies and they all work if used correctly. Ive seen agents severely underprice homes to create bidding wars. In one instance, a home was listed for $325,000 but sold for $450,000. That is a pricing strategy that will work in the right market, because ultimately the market will decide the price of your home. It is ok in a strong seller’s market to ask for $10,000 more than the last comp sold for, but that won’t work in a depreciating market, and will severely hurt your chances of selling near your desired price. There is a phrase in negotiating that goes, “your price, my terms,” and that couldn’t be more true in real estate. If you want your price, be willing to sacrifice on your choice of services, length of escrow, deposit amount, contingency time periods, negotiating on requested repairs, etc. Conversely, if you ask for a conservative price, you’ll likely receive offers quickly, and can counter those offers to your liking. Who pays for inspections, warranties, escrow & title, transfer taxes, are all things that can be negotiated to bring you closer to your net, as well as commissions. Don’t hesitate on asking us how you can save on selling your home.
DO Take Pictures – Plenty of Pictures
Internet marketing is huge right now in real estate. Most buyers are doing their own research on homes on websites like Redfin, Zillow, Realtor.com, and Trulia, searching the Internet for pictures. If you want full exposure to your home, you’ll want to hire a professional photographer and take roughly 30 pictures of your home. Companies such as Planomatic will take professional photos, create virtual tours, and even create a floorpan. Hiring a professional photographer will help with arrangements of the items of your home to help create a model-home look. Want more? Italia Realty will even pay for this service.
DON’T Get Emotionally Involved
You’ll come across many types of buyers. Buyers who are just looking for a deal, buyers who are looking for a nice place for your home, stingy buyers, buyers who are head-over-heals for your home and will do anything to get it, etc. For that reason, it’s best not to get involved, emotionally, in your home. There is reason why you’re selling, so focus on big picture and worry about making your home presentable and acceptable for transfer. It is important not to get offended by low offers. Understand that low offers come in certain markets, or from certain buyers, but often times, they can be worked with.
DO Lighten and Brighten in Getting Your Home Ready to Sell
Instead of performing large makeovers (kitchen, bath, flooring remodeling), you can change your home’s appearance for the better by making the home brighter and lighter. Clean windows and open up window coverings, remove clutter, and keep your home clean. Think of your home like a model home, which has very little kitchen appliances on the counters, knick-knacks on the dressers, & toiletries on the bathroom counters. Other ways to get your home ready to list include creating a nice curb appeal. Do fertilize the lawn and plant flowers. If your home is needing a paint job, it may be a good idea to hire painters to give your home a fresh look. While large makeovers are bad ones (you may not recover more than $10,000 in upgrades), pay attention to needed repairs (ac, broken door knobs, busted sprinkler heads, leaks, etc… as these will be picked up during a home inspection and buyers may want you to pay for them, or for the sake of convenience, credit them for the repairs (you’ll usually pay more this way). For more do’s and don’ts in staging, check out this article by HGTV.
Do Create a Game Plan when Buying a Home
Before even getting prequalified, you need to plan on buying a home, especially for first-time homebuyers. Do you know your credit score? Can your credit be cleaned up or improved? Many first-time home buyers I’ve dealt with I’ve talked to over the course a year. Buyers need time to save for a down payment, and/or improve their credit. Talking to a Realtor and a loan agent can prep you for buying and tell you what you and expect if you’re not quite ready. You want to know what your closing costs will be, how much you’ll need in upfront costs (deposit, appraisal, credit, home inspection) and how much you’ll need at the close of escrow.
DON’T Make Big Purchases Before Buying or While in Escrow!
This will kill your real estate deal and disqualify you from your loan. Additionally, you do not want to close credit accounts before buying a home. Even if you have cleared underwriting, often times underwriters will re-run your credit before funding your loan just days ahead of the scheduled close of escrow. You do not want to surprise them with a drop in your FICO score. Make big purchases (furniture, appliances, tv’s) after the close of escrow. If your lender asks for updated bank statements and sees you’ve gone on a spending spree, that may also damper your odds of obtaining a loan. You want to buy a new car? Wait until after you close escrow. A large car payment will limit the size of the home you can purchase. More credit advice for new buyers: Make sure you have at least 3 tradelines of seasoned credit (6 months), and minimum balance on credit card accounts (Credit card balances 33% or less of your credit limits), no 30-60-90 day lates within the past couple of years. Bonus tip: when budgeting for buying a home, add up all your minimum monthly payments that would appear on your credit report (credit cards, car payment, student loans, etc), add that to your new proposed house payment plus taxes and homeowners insurance, and divide by your income. That ratio should below 42% at the most, and ideally around 37%.
Do Be Realistic About the Price of Your New Home
Not everyone can get a deal on home. It depends on the market, the seller’s circumstances, the home’s condition, etc and/or your Realtor’s negotiating skills Be open-minded that the seller wants top dollar, and you want bottom dollar. Have your Realtor pull comps in the area for every home you’re interested in. This is their job and they have easy access to this, as well as neighborhood information, school information, drive times, etc. Do you know how much a prospective home sold for in the market’s height in 2006? Do you know how much you can rent the home out for if you come across rough times? Will that cover the mortgage? These are all good questions to ask, but understand that the home you’re interested in buying is likely to sell around the same price other nearby homes sold for within the past 6 months.
Do Get a Home Inspection, and a Home Warranty
This is a must. Is the AC Working? The Furnace? Is the Water heater about to go out? The one time a buyer elected not to get a home inspection under my watch (he and his wife bought a home before and were planning on extensive rehabbing), they were later surprised that their gas was not working because there was a break in the gas line from the street to the home. The buyer was a handyman and fixed this himself, but if he were not, it would have cost him over $5000 to hire someone to do this for him. A home inspection will run between $300-$400 minimum, but with it you know what you are getting and can then negotiate with sellers to make some worthy repairs. Home Inspectors are diligent in their work. They climb the attic, crawl the basement, check for leaks, run recall information on appliances, give advice on maintenance and what to look out for. It’s a good deal… don’t hesitate to do one.
DON’T Freak Out About the Home Inspection
Home inspections can be scary because many times home inspectors will freak buyers out. I’ve seen home inspectors inspect the same home but have different attitudes in their presentation of their report. Understand that it is the home inspector’s job to point everything out. That doesn’t mean the home has lots of problems. Many of those items noted are due to legislative or coding changes and the inspector has to point them out. Not overreacting also means not to ask the seller to repair everything. Remember the seller is getting ready to move and are emotionally involved in their home. If you ask too much, you may cause hostility in the seller. Often times when negotiating a request for repairs, the sellers may want to just credit you money to fix items yourself, but you do not want to ask unreasonable items.