How Selling a Home Works:
Selling a home is a lot like entering the dating scene. Like the many apps to help hopeful singles find love, there are many apps to help hopeful buyers view your home. Just as you would prepare for a date by showering, and putting on nice clothes, you should plan to prepare your home for ‘dating’ the strangers that may be interested in making a match with your home. Choose how you are going to market your home, and hire a professional Realtor to guide you through it. An excellent Realtor is going to do way more than put a sign in the yard and place the house on the MLS. Once marketed, the interested buyers will begin to tour your home. One or more of them may send you an offer contract spelling out the terms and conditions of the sale. Generally, the house must remain in the same condition (minus normal wear and tear) and be available for inspections. Inspections come in many forms. The buyers may hire a licensed contractor to write a report. They may come to check out the neighborhood in the evenings or weekends, during rain, or early morning commutes. They may schedule an afternoon to spend some time in the house and measure all the walls. Once the buyer has completed their inspections (takes about two weeks), the bank will order an appraiser to come to the house. Then your house is compared to all the houses in the neighborhood to decide if the apparent value of the house matches the terms and conditions of the contract. Over 90% of the time, the value of the home is contract price or higher. Once that hurdle is passed, there is little that stops a home from closing. The closing agent will be looking at the records filed with the clerk of court to make sure all the liens on the house will be cleared before the ownership changes. The surveyor will check public records and put stakes with pink flags at each corner of the property. A survey is often needed for a title warranty. Whether or not a new survey is needed is up to the title agent, if you have the old survey, you can offer it up to see if it helps save some money for the buyer. At least three days before closing (but usually not before), the bank will send the title company their closing package. The title company will take that package and send you the estimated closing proceeds. Check these closely for accuracy since they are difficult to change at the closing table. Seller’s closing costs are generally around 7.5%to 10% depending on the type of sale, negotiated repairs, fees, assessments, etc. The biggest part of that is likely to be the Realtor’s commissions. Most contracts in Tallahassee call for the seller to vacate the home prior to the closing and transfer of ownership. Like all contract negotiations, most aspects of selling your home can be negotiated, including the commissions paid to Realtors.
How Much do Realtors Charge?
This is negotiable from agent to agent and brokerage to brokerage. Usually, we negotiate our commission near 6%, but this amount can increase. Some agents will also take responsibility for moving and storing the contents of the home and staging it. Those will be costs above the commission for finding a buyer for your home. Some agents will work for less, they know their own value, and are telling you their worth. Professional Realtors are professional negotiators, marketers, and salespersons and that 1% or more you save on commission may cost you several percentage points on the sales price of your home. Research has shown the Realtor’s experience makes a difference in outcomes for sellers.
How Much are Closing Costs in Tallahassee?
Usually somewhere between 7.5% to 10% (this includes commission) of the sales price of the home. Closing costs typical for sellers in Tallahassee include:
- Realtor commissions
- Document stamp on the deed
- Payoff demand letter fee and/or pre-payment penalty
- Transfer fees paid to the clerk of court
- Transfer fees and/or estoppel letter paid to the Homeowners Association
- Pro-rated taxes for the year until the day before closing
- Possibly repairs/roof required for loan (or insurance)
What is Selling "as is"?
Most sellers have heard that they want to sell their house ‘as-is.’ This means that the buyer accepts the home without the seller making any repairs. With the lack of inventory in the recent years, most successful offers are ‘as-is’ contracts. If the house has been regularly maintained, it is likely that the seller will make it all the way to closing with no changes in the terms or conditions of the contract. However, if the inspections reveal significant issues then the buyer may attempt to renegotiate the price or repairs. The seller will have to weigh the costs and benefits of the requested repairs against the time and effort to find another buyer.
Some sellers believe an as-is contract means their only responsibility is to pack up their stuff, turn off the utilities and collect the check at closing. Properly prepped, the reality can be close to this. The seller will want to have their home cleaned once it has been emptied of belongings. This is the biggest complaint I have heard from buyers during the final walkthrough. I have worked with buyers that have found food left in the fridge and freezer, empty boxes left discarded in the home and yard, etc. and halted closing until the house was cleaned. In Tallahassee, a professional cleaning costs around $200-$500 depending on the size of the house and the distance traveled, or the seller can clean it themselves and save the money. Many feel that after moving and packing, they just want to be done with the old house and it is money well spent to have someone else on the hook to make it clean enough for the buyer at walk through.
What is Short Selling?
When the bank agrees to accept less on the mortgage than is owed by the seller, it is considered a short sale. During the housing crash, there were some markets with 10-15% of their sales being short sales. This brought down the value of all houses significantly. In 2020, there are still townhome owners in Tallahassee that are considered ‘upside down’ on their mortgages – meaning they owe more than the house is worth from the crash in 2007.
In the early days of the housing correction, banks did not have a process in place to process the number of homes that had to sell short of their loan commitments. Often the bank did not get around to selling the home until the third of fourth buyer and sometimes years after the foreclosure process started. By the end, banks, Realtors, and title companies had worked out the process to transfer the ownership of these homes in six months or so. It takes so long because the bank must agree to accepting less than the mortgage the sellers still owe. Banks have many layers and lawyers that all must agree, so if you are the buyer, please be patient. If you are the seller, you may be given a small amount from the bank to move out and will likely be asked to fill out paperwork about your situations – several times, please be patient.
What to Repair Before Selling?
The biggest thing requested for repairs in Tallahassee is wood rot. Anywhere water bounces up from a hard surface onto wood will likely be rotted over the months of weather and wear here in North Florida. Cleaning up all the damaged wood is required for anyone selling their home to a buyer using a VA loan. If you are uncertain what to look for, you can ask your pest control company if they provide wood destroying inspections. Your pest inspector will take a pointy object (like a screwdriver) and tap on wood outside your house. If the wood is soft, it needs replaced. Many doors and garages with wood framing will have damaged wood in our environment.
The other thing we see a lot of is roofs. Insurance companies have gotten more vigilant about homes in the Big Bend of Florida. After many decades with few storms, the past several years have brought several wind and rain events through our areas. These tropical storms and hurricanes have costs insurance companies millions and devastated families and homes across the panhandle. These storms have caused insurance companies to look harder at roofs with only a few years of life. Some insurance companies will want at least two years of life remaining and some require five years. If your roof is close to the end of its life, you may want to have a roofer come take a look and give you a professional’s opinion of the life remaining.
Many sellers ask about remodeling kitchens and bathrooms, or adding a deck, etc. Most renovations will not provide a dollar per dollar return on the seller’s investment. Depending on the room, the return on investment is approximately 80% of the costs. The exception is landscaping, which remains one of the best returns on updates to your home.
If your house is dated, remodel and enjoy it for a few years before you sell. If you are looking for the biggest impact for your dollar, focus on curb appeal. Landscaping is relatively inexpensive and can have a huge impact for appealing to a buyer.
How Does the Whole Process Work?
Can You Back Out of Selling?
Not generally with most sales contracts used in Tallahassee. Even if a buyer comes along with a higher offer, the sellers cannot cancel the first contract to take another. They can sign a contract agreeing to take the other offer as a backup offer, should the first contract not make it to closing for any reason. The buyer can back out of the offer for most inspection reasons the first two weeks. The seller does not have a similar contingency period. In Florida, a homeowner can be forced to sell (enforcing the sales contract) but a buyer cannot be forced to purchase a home. That does not mean that a buyer would not lose their earnest money deposit should they back out of a sales contract after their contingency period has ended.
When Selling, Who Pays the Closing Costs?
Both the seller and the buyer have their own closing costs. Seller should budget between 7-10% of the listing price as closing costs depending on required and negotiated repairs. Sometimes if sellers do not have cash, but will have sellers’ proceeds, some repairs can come from proceeds at closing and be paid by the closing agent. It is not uncommon for new roofs to be handled this way in Tallahassee.
What Does Contingent Mean?
In most sales contracts in Tallahassee, the home buyer has 10 to 15 days to decide if the house meets their needs and is going to work for them. During this time buyers have their inspections and complete the mortgage application. This period is called the contingency period (closing is contingent on inspections and financing) and the house is marked as contingent on the MLS. During this time, the house will appear in buyer’s active searches and you or your Realtor will continue to receive inquiries from potential buyers. Once the contingency period is over, and the buyers accept the condition of the house and the bank’s financing, the house will move to pending status.
Who Pays for the Appraisal?
The buyer pays for the appraisal on behalf of the bank. The buyer is the only one that will receive a copy of the appraisal. The seller often does not even hear how much the home appraised for on the appraiser’s report unless the house does not appraise. If the amount of the appraisal is lower than the negotiated sales price, the seller will receive a copy of the report (through their Realtor if they have one) prior to it being finalized. The seller is usually given a chance to respond to the value and/or provide other comparable properties for consideration if they feel the value is too low.
Who Pays the Realtor Fees?
The seller generally pays the Realtor’s fee for both the listing (seller’s) and selling (buyer’s) agent. According to the National Association of Realtors, more than 94% of home sales involve a Real Estate agent. Even sellers who sell on their own will likely be asked to pay the buyer’s agent’s commission.
When Selling, How Much Goes to the Realtor?
This is negotiated from brokerage to brokerage and agent to agent. The brokerage will set a recommended rate, based on average returns and successful business plans, for their agents to negotiate with the sellers.
When Selling What Stays With the Home?
Anything that is attached to the house, stays with the house. Most Tallahassee sales include the appliances: stoves/ovens, dishwashers, microwaves (if built into cabinets), and refrigerators. Sometimes sellers will exclude the refrigerator from the sale. There is a handful of builders in the area that do not provide refrigerators with their new homes. Refrigerators are the one appliance that can be excluded and still meet most lending requirements. Washer and dryers are often excluded from sale and less likely to be requested by buyers. Technically, trees and vegetation are considered personal property and can excluded from the sale. In the area, I have seen sellers exclude sabal palms, chandeliers, generators, and fruit trees from the sale of their homes. In Real Estate, there is little that price can not solve. If the seller wants to exclude something from the sale, it is best to be explicit up front with all perspective buyers. These exclusions should be noted in several places the buyer is likely to look – including the sellers’ disclosures. In most sales contracts in Tallahassee, the home buyer has 10 to 15 days to decide if the house meets their needs and is going to work for them. During this time buyers have their inspections and complete the mortgage application. This period is called the contingency period (closing is contingent on inspections and financing) and the house is marked as contingent on the MLS. During this time, the house will appear in buyer’s active searches and you or your Realtor will continue to receive inquiries from potential buyers. Once the contingency period is over, and the buyers accept the condition of the house and the bank’s financing, the house will move to pending status.
When Selling, Who Pays for What?
While anything can be negotiated on sales contracts and often is depending on the personal circumstances of the buyers and sellers, some costs are more common for one side of the transaction. Buyers are responsible for the costs of inspections and loan costs once the sales contract has been negotiated. Sellers can have a preemptive inspection done prior to listing to check for anything regular maintenance may have missed. Sellers pay the Realtors’ commissions and the cost to transfer the deed(unless the seller is Fannie Mae or Freddie Mac). Sellers are also on the hook for any repairs required to close the loan. Sellers are also responsible to clear the title to the property of any liens or ‘clouds’ and the prorated HOA dues and transfer fees.
Which is the Best Month to Sell Your Home in Tallahassee?
There are more homes coming to market in April and May of the year than most other months. Sometimes sellers are at an advantage in the winter when they have no other competition from their neighbors. Basically though, it is the one that works best for you. Every month there are motivated buyers that must find a home to live in and soon!