The latest home sales price statistics from the National Association of Realtors (NAR), published in the August 30, 2002 USA TODAY newspaper show the average U.S. home appreciated 7.4% in market value during the last 12 months. That’s fantastic! When I bought my first home about 35 years ago, I remember a local Realtor bragging that home values appreciated 2% the previous year. He thought that was fantastic. But that was before Americans began viewing their homes as both (1) places to live, and (2) outstanding investments.

According to NAR, homes in the New York, San Diego, Washington/Baltimore and Providence areas appreciated over 20% in the last 12 months. Areas with 10% to 19% home appreciation rates are Los Angeles/Orange County, Miami/Fort Lauderdale, Sacramento, Chicago, San Francisco, Boston, Milwaukee and Orlando. The only areas with modest home price declines are Nashville (0.8%), Greensboro/Winston-Salem (0.3%), Indianapolis (0.7%), Rochester, NY (1.0%), and Buffalo (2.1%). However, data for Detroit, Cleveland, Kansas City, West Palm Beach, and Louisville were, for some unexplained reason, not included in NAR’s statistics.

IT’S A GREAT TIME TO BE A HOME SELLER. Just in case you’re wondering where I’m heading with these home sales appreciation rate statistics, my purpose is to show it’s a great time to sell your house or condo to take advantage of the current home sales market. Fall is the second best time of the year (in most communities) to sell your home. Spring is usually the best time because that’s when homebuyers come out of their winter hibernation (except in winter resort areas, such as Florida, of course).

Be sure to have a Good reason for selling. Before proceeding on our quest to sell quickly for top dollar, let’s stop to think about reasons for selling a home.

EXAMPLE: About a year ago, my friends Gerry and Cathy sold their home. Their reason? Take advantage of the high market value of their home, which had greatly appreciated since purchase about 10 years ago. Their plan was to rent a house for a year or so, anticipating home prices would then decline and they would then be able to buy a larger home for about the sales price of their old home. Wrong! They sold their old home for top dollar. But home prices haven’t declined and show little sign of doing so (although the high end of the market in many cities is showing some “softness”). Gerry and Cathy eventually moved to a less expensive community where, I presume (haven’t seen it yet), they bought their dream home. In my humble opinion, Gerry and Cathy would have been better off staying in their old home.

Long ago I learned nobody can predict with accuracy what is going to happen to the U.S. housing market. Who could have imagined 12 months ago that today we would have record-low home mortgage interest rates? None of the high-paid economists for the National Association of Home Builders, the National Association of Realtors, Fannie Mae, and Freddie Mac predicted these ultra-low home mortgage interest rates. Because of today’s very affordable interest rates, it’s a great time to be a homebuyer — and a home seller! Prospective buyers are out looking for homes in droves — to the dismay of their apartment landlords who are seeing rising vacancy rates and falling rents.

Good reasons for selling your house or condo include job transfer, divorce, illness or death of a family member, unemployment, moving up to a better home, moving down to a smaller home, and taking your $250,000/$500.000 tax-free profit. To qualify, be sure you meet the “aggregate” two out of five years before the sale ownership and occupancy tests. However, if your motivation is to claim these tax-free principal residence sale profits of Internal Revenue Code § 121, be certain you have a solid plan where you’ll move after selling your home.

EXAMPLE: I could easily sell my home quickly for top dollar because I own one of the least expensive homes in a highly desirable community with excellent public schools where families want to move. But I can’t think of a better place where I would want to relocate and where I could live as comfortably. Profit motive is a great reason for selling, but be sure to have a plan for after the home sale.

In their great book "House Selling for Dummies," Second Edition, authors Eric Tyson and Ray Brown made a subtle distinction, which is very important. If you’re a buyer, you’re called a home buyer. But if you’re a seller, you’re called a house seller. That’s why Tyson and Brown’s other best selling book is called "Home Buying for Dummies," Second Edition.

TEN STEPS TO A SUCCESSFUL HOME SALE. After you’ve firmly and irrevocably committed to sell your residence, it should become a house sale business transaction, rather than an emotional home sale. Let’s move on to the key steps for quickly selling your house or condo for top dollar. Some of the steps are obvious and expected. Others, which have worked for me, and many others, are designed to earn top dollar and get your residence sold quickly with a minimum hassle.

1 — Have your residence professionally inspected. That might sound strange to get your house or condo inspected before putting it up for sale. But it’s a sound business tactic for residence selling today. If you’re selling a condo, the inspector will check both the individual condo and the common areas, which might have deferred maintenance.

The types of inspections you’ll want will vary depending on where you live. To illustrate, if you live in Alaska, you won’t need a termite inspection because there aren’t any termites in Alaska. I wonder why! In my area, most homebuyers usually have (a) a termite or pest control inspection, and (b) a professional house or condo inspection. You n4ht also need additional inspections such as for radon, building code compliance, energy efficiency, or other locally required inspections.

House inspectors and termite inspectors in my community tell me that over 50% of their business now comes from sellers who are preparing for sale. That’s very smart. The reason is the seller then knows the condition of the property and there probably won’t be any surprises later. Repairs can either be made before putting the house on the market for sale, as part of your fix-up plan, or the seller can disclose the defect and sell “as is” (meaning the seller won’t pay for any repairs).

EXAMPLE: I recall selling a rental house where my buyers had a termite inspection report, which revealed thousands of dollars of unanticipated but very necessary termite damage repairs. I had purchased that house about 15 months earlier. My buyer’s termite inspector said the termite infestation had been there for a long time. He suggested I contact my termite inspection company from 15 months earlier, politely point out they missed this old termite damage, and ask them to make and pay for the repairs. That’s what I did. The prior termite inspector admitted his error and took care of all the necessary repairs at his expense. But this unexpected surprise delayed the home sale closing about three weeks. After that, I learned to have customary inspections before putting the property on the market for sale.

EXAMPLE: In another situation, where I was selling a rental house which wasn’t exactly level, my superb realty agent (Larry Emerson, now with RE/MAX in Colorado Springs) suggested hiring a contractor to inspect the house and recommend repairs to solve the problem. It cost me about $3,000 to fix the foundation with necessary permits and a city building inspection. That was money well spent because the buyers were informed the condition had been repaired and they accepted my professional inspector’s report with no further problem. As far as I know, they still enjoy living in that home about 15 years later.

I recommend hiring a professional house inspector who is a member of the American Society of Home Inspectors (ASHI). The reason is ASHI members have extensive experience and they have passed a comprehensive test to become members. You’ll find them at www.ashi.com, (800) 743-2744, and in the phone book yellow pages under “home inspectors” or a similar heading.

Be sure to accompany your professional home inspector, termite inspector, or any other inspector you hire. Homebuyers should also accompany the inspectors they hire. The buyer’s and seller’s realty agents should also be there for the inspections. The reason you want to accompany your inspectors is to discuss any defects, which are discovered. What might sound serious in the inspector’s written report often isn’t so bad if you have discussed it previously with the inspector to determine if you should make the repair or just disclose it to your buyer.

The inspector might, for example, point out the roof doesn’t appear to be leaking but a roof inspector should be consulted to determine how long the roof might last before it needs replacement. Incidentally, when a roof looks bad but it isn’t leaking yet, it is probably a wise investment to replace it before putting the house on the market for sale. Although a new roof doesn’t add discernible market value to a home, it makes the home much more saleable than a house with an old roof which gives a negative first impression to prospective buyers.

Before leaving this important inspection tonic, it’s best to remember the goal of every residence seller who wants a quick sale for top dollar should be to make the sale hassle-free for the buyer. Most homebuyers want to buy a home, turn the key in the door, and move in. Such a home is called a “red ribbon deal.” They don’t want to have to deal with painters, remodelers, and others. Of course, many buyers will do that, especially if they decide to remodel before moving in. But your goal, as a seller, should be to present your home in its best possible “move in condition” by taking care of things home buyers don’t want to handle. That’s why having the inspections done by the seller usually makes the residence sell faster and easier than when the buyer has doubts about the home’s physical condition.

2 — Prepare your residence for sale. After completing the customary professional inspections, it’s time to decide whether to fix up the property or sell “as is.” My suggestion is to paint the interior and exterior, even if it really isn’t necessary. Paint is the cheapest, most profitable improvement you can make!

Other profitable but inexpensive improvements include new wall-to-wall neutral beige color carpets which go well with all furniture (or refinishing the hardwood floors), new light fixtures, modest landscaping, and thorough clean-up and repairs. Of course, clean the closets and haul away the junk.

EXAMPLE: My neighbor recently put his house up for sale. But the driveway was still filled with junk, which didn’t sell at his “estate sale” the previous week. A driveway littered with junk doesn’t make a very good impression on potential homebuyers. However, since it is a “fixer upper house,” perhaps the junk-filled driveway sets the mood for buyers.

However, I do not recommend renovating the kitchen or bathrooms. Clean up and painting is usually all that is needed to make these important rooms attractive. The buyers probably won’t like your remodeling tastes. More important, kitchen and bathroom renovation rarely adds as much value to a residence as the work costs. Yes, updated kitchens do increase the salability, but it’s best to leave major renovation to your buyer.

3 — Learn your home’s market value. Only after completing the customary professional inspections for your area, and physically preparing your home sale, is it time to determine your home’s market value. There are several ways to go about this:

A — Hire a professional appraiser, at a cost of around $300. If you plan to sell your home alone, without a professional realty agent, this is your best choice. However, please be aware appraisers use only details of closed sales of comparable nearby residences to evaluate your residence’s market value. In a rising or falling market, appraisers are often months behind in gathering sales statistics. That’s why, if you insist on hiring a professional appraiser, you should show the appraiser written details of recent neighborhood home sales like yours because the appraiser might not be aware of those sales closed within the last few months.

B — Use a computer online service, such as www.homegain.com. Just for fun, when you’re ready to sell your home, go to a free online home selling service to check recent comparable nearby sales. Although this method is just an approximation, it will tell you of recent neighborhood home sales prices. Also, you can anonymously search for successful real estate agents who sell homes in your vicinity. Homegain.com never gives your name or address, just the general vicinity to their nearby registered realty agents who will make you written listing proposals. Then it’s up to you, if you wish, to contact one or more of those agents for interviews.

C — Interview at least three successful local realty agents. Even if you plan to sell “for sale by owner” (called “fizzbo”) without a professional agent, the best method to determine your residence’s current market value is to interview at least three realty agents who sell homes near yours. The reason agents don’t mind giving their listing presentations to fizzbos is they know that within 30 to 60 days, most fizzbos give up and decide to list with a professional agent. An agent who has already been interviewed by the seller is most likely to eventually get the listing from a fizzbo. Unfortunately, most fizzbo sellers don’t realize delayed selling time costs money when it comes to home sales — the longer it takes to sell a house or condo, the higher the seller’s total carrying costs.

Each of the three (or more) realty agents you interview should prepare a written comparative market analysis (CMA) for you. This form shows recent sales (not asking) prices of nearby houses or condos, which sold within the last six months. Any sales prices older than six months are considered irrelevant. The more recent the sale, the more weight should be given to its sales price. The CMA will also show current listings of nearby residences like yours. That’s your competition. Finally, each agent’s CMA will show the asking prices of recently expired listings, which didn’t sell. Each agent should be able to tell you about the residences on the CMA and tell you which are most comparable to yours.

Lastly, each agent should provide as part of their listing presentation a suggested asking price and the probable selling price for your residence. Of course, until a buyer makes an actual offer which you accept, and the sale closes successfully, nobody can be certain the exact market value of your home.

A bonus advantage of interviewing at least three realty agents is they should show you the forms you should anticipate signing as part of the home sales process in your community. To illustrate, in my area there is the listing contact, sales contract (also called a deposit receipt), a defect disclosure form, lead-based paint disclosure, hazardous conditions disclosure (such as a nearby high fire area, earthquake seismic area, or an adjacent toxic waste dump), and others. After you sign your listing with an agent, that agent should give you blank customary forms to study so you won’t be surprised when a purchase offer is presented to you and you’ll be asked to sign several other unfamiliar sales forms.

4 — Ask agents you interview for their written marketing plan for your home. Truly professional realty agents will, without your asking, present you with a marketing plan for your home. These plans vary widely, depending on the anticipated sales price of your home, the experience of the realty agent as to what works best for homes like yours, and the brokerage office policies about spending marketing money to make sales.

EXAMPLE: If your house is worth about $100,000, don’t expect a realty agent to spend lots of money on full color brochures and virtual tour photos for the Internet. However, if your home will sell for around $1 million, expect your listing agent to spend lavishly to properly market your home on the Internet, with color brochures, at least weekly newspaper ads, virtual tour, and other marketing expenditures.

5 — Consider the listing term and realty agent’s commission rate. In most communities, it takes 30 to 90 days to sell a correctly priced residence. If it is overpriced, it will take longer, including the time wasted until the asking price is reduced to the property’s true market value. My suggestion is to sign a realty agent’s listing for no longer than 90 days. Just in case you selected a “bad agent,” then you won’t be stuck with that agent for a long time period.

Many agents ask for 120 or 180-day listings. If that happens to you, ask the agent “Don’t you have confidence you can get my home sold quickly?” The only time to sign a long 120 or 180 day listing is if the agent writes on the listing “This listing may be cancelled by seller at any time without cause or cost after 90 days.” Any agent who insists on a 180-day listing (unless yours is a very expensive home which will take a long time to sell because of limited buyer demand in that price range) should be dismissed. There are lots of superb agents who welcome 90-day listings. I recall, for example, Colorado Springs RE/MAX agent Larry Emerson telling me “If I can’t get a home sold within 90 days, I want to get rid of that probably-overpriced listing and work on selling another more productive listing.”

Why it’s best not to cut the commission when signing the listing. Most house and condo realty agent listings are placed in the local multiple listing service (MLS) for all the local member agents to show to their prospective buyers. Equally important, virtually all MLS listings are now posted on the Internet at the www.realtor.com website. Today, about 50% of homebuyers begin their shopping at this website and at other Internet websites. Only after narrowing their focus to a specific price range and community do they contact either the listing agent or their own buyer’s agent. That’s why it is so important for your listing to be on the local MLS and at www.realtor.com through your listing agent. The MLS is the most powerful sales tool listing agents have.

If your listing agent agrees to list the property for less than the customary sales commission of 6% to 7%, depending on the price range, ask the listing agent what percentage the selling agent (who represents the buyer) will receive. If it’s less than 3%, many agents won’t even show your listed residence, unless there is nothing else to show their buyers. For this reason, it’s usually best not to cut the listing commission because you don’t want your property to be at a competitive disadvantage with other listings, especially if it’s a local buyer’s market (meaning there are more homes for sale than there are qualified home buyers).

However, in some communities there are very successful “discount brokers” you might want to consider. In the town where I live, the most successful realty agent lists homes for 3% to 5% sales commission. My friend Lyle Martin’s Assist-2-Sell discount realty brokerage in Reno, Nevada is the top selling firm in town. Last time I checked, he has around 200 franchised Assist-2-Sell offices around the nation.

Unless your town has a very successful discount brokerage like these, I suggest listing with the most successful full service agent for your type of property. Don’t cut their commission at the time of listing. However, if the listing agent fails to obtain an acceptable purchase offer within 90 days close to the asking price suggested by the agent, when a lower-price offer is presented for your acceptance, that’s the time to talk about reducing the agent’s commission.

6 — Ask each agent you interview lots of questions. Before you begin interviewing agents, write down a list of important questions to ask each one. Of course, many of those questions will be answered during each agent’s listing presentation to you. Here are some suggestions: (a) how long have you been selling homes in this vicinity? (b) What are the names, addresses and phone numbers of your 10 most recent home sellers? (c) What is your written marketing plan for my home? (d) Do you sell real estate full-time (dismiss any part-time agent)? (e) How many listings do you currently have (beware of agents with too many listings who won’t be able to devote time to your home sale)? (f) Do you have any assistants (if so, will I be dealing with you or an assistant)? (g) What day of the week do you take off, and who covers for you when you are gone? (h) Do you plan any vacation during my listing period? And (i) will you be able to sell my home within a 90-day listing period?

7 — Don’t Overprice or Under-price Your House or Condo — You Only Have One Chance to Make a Good First Impression. Whether you’ve decided to sell your home alone without a professional realty agent, or you selected one of the agents interviewed, aimed with all the information gathered from the agents interviewed, the Internet, and other sources, it’s up to you to set the asking price.

If you set the asking price too high, prospective buyers and their realty agents won’t even consider your property. Many home sellers set their asking price above that recommended by local realty agents. These sellers reason (a) maybe an out-of-town buyer will be in a hurry to purchase and will overpay for my property, (b) I need to leave room to negotiate with the buyer on price and terms, and (c) I can always reduce my asking price if my residence doesn’t sell within 30 to 60 days. But the drawback of this faulty thinking is once you discourage a buyer and/or their realty agent from even inspecting your home, you’ll have to make a large price reduction to get that first group of prospects interested in considering your home again.

If you set your asking price too low, you could be leaving profit dollars on the table. Some home sellers, especially long-time owners who have a huge potential sale profit set their asking prices below true market value. Fizzbos sometimes do this — but more often, fizzbos overprice their homes because they are greedy and/or out of touch with reality. To avoid under-pricing your residence, it’s very important to interview at least three local realty agents so you won’t be influenced by one agent who might deliberately (or unintentionally) mislead you as to your home’s correct market value.

Beware of the intentionally under-priced home sale scam. In the last few years, a questionable sales technique of intentionally under-pricing a home for sale has arisen. I think it is dishonest toward homebuyers. Some home sellers, usually upon their listing agent’s recommendations, intentionally under-price listed homes in hopes of creating a buyer frenzy which will result in overbidding far above the abnormally-low asking price.

But homebuyers and their buyer’s agents have caught on to this dirty trick. The result is many prospective buyers won’t even look at intentionally under-priced homes because they know the seller has no intent of accepting even a full price all-cash purchase offer. Legally, the seller need not accept such a full asking price purchase offer. However, if the house doesn’t sell, and the seller rejected a full asking price cash offer, the listing agent is entitled to their full commission. But I have not heard of any agent suing their seller for a commission in such a situation where the listing agent suggested intentionally under-pricing the home. In summary, I do not recommend this “dirty trick” sales technique.

8 — Be prepared to “stage” your home for sale. If you want to make a quick sale for the dollar, your home needs to be in “model home” condition. That might mean moving out your furniture and moving in rented furniture. The most successful realty agents work with professional home “stagers” who know how to make a residence look its best while it is being marketed for sale. Be sure you discuss with the agent how the cost of staging or decorating your home will be paid. Spending money on staging your home can be a very profitable investment. Paying a few hundred or even a few thousand dollars to earn thousands of tax-free qualifying principal residence sale dollars is money well spent.

If you’ll be living in your house or condo while it is listed for sale, be prepared for inconvenience. Most realty agents will phone in advance for an appointment to show your property to serious prospects. It’s best to keep a lock-box near the front door so MLS agents can easily show your home when you’re not home. When you know an agent will be showing your residence, be sure you are not there! Get out! Go shopping. Take a long walk. The reasons are (a) you might say something that will kill a potential sale, and (b) most buyers won’t criticize the property if the seller is hovering around. Until buyers start discussing the pros and cons of a specific residence, they are not yet serious buyers.

Your listing agent should want to conduct a Saturday or Sunday open house at least once a month — if your listing agent is opposed to open houses, ask why. Although open houses often don’t sell the house being held open, they do obtain new clients for the listing agent and those buyers might purchase another house from your agent. If your listing agent holds at least one open house every weekend, he or she is meeting lots of new potential buyers for your home as well as for other listed residences.

9 — Consider purchase offers carefully before accepting. If you’ve done everything right, especially setting a reasonable asking price close to your home’s true market value, you should receive one or more written purchase offers within 30 to 90 days. Unless the local economy is in bad condition, if you don’t have any offers within this time, something is seriously wrong. Perhaps your home is overpriced. Perhaps your listing agent is disliked by other local MLS agents who refuse to show his or her listings unless there is nothing else to show to prospective buyers. Perhaps your home has an incurable defect, such as being located next to a noisy freeway.

With the exception of an incurable defect (called functional obsolescence by appraisers), most home sales problems can be solved. Often all it takes is dumping your realty agent after 90 days and listing with a more successful agent. Or, if you can offer selling financing by carrying back a first or second mortgage for your buyer, that makes your home listing stand out from the crowd of other listings where the sellers won’t help finance the sales.

However, when a written purchase offer is received, even if it isn’t close to the price you know your house or condo is worth, consider it carefully. Be sure the offer is accompanied by a written mortgage pre-approval letter, from an actual lender, such as a bank or mortgage banker, plus a substantial good faith earnest money deposit. Disregard any offer without a reasonable deposit and/or a letter from a mortgage broker, which says the buyer is “pre-qualified.” Pre-qualification means absolutely nothing because the mortgage broker isn’t committing to make a loan. Pre-qualified just means “It looks like this applicant can get a mortgage but we haven’t obtained a loan commitment from any lender yet.”

But if the offer includes an attached mortgage pre-approval letter or certificate from an actual lender, consider that offer very carefully because that’s a serious buyer. Discuss its pros and cons with your listing agent. If more than one offer is presented at about the same time, don’t necessarily accept the highest offer if the lower offer comes from a better-qualified buyer.

If an offer is too low, but the buyer is otherwise qualified to buy, don’t hesitate to make a counteroffer. When more than one offer comes in at about the same time, many realty agents recommend making non-binding verbal counteroffers at a price the seller will accept. Although verbal offers are not binding, your agent can communicate to all buyers who made offers that the seller will accept the first offer which is made at the acceptable counteroffer price.

The reason for not making two (or more) written counteroffers is, just in case both buyers accept at the same time, then you don’t get into an argument over who accepted which counteroffer first. If not handled carefully, it’s possible to sell the same house to two different buyers — thus leading to possible messy lawsuits for specific performance of the counteroffers. Be sure to check each acceptable purchase offer to make certain there is a reasonable time limit for removing any contingencies, such as for the lender’s appraisal or a professional inspection. Five to ten business days is usually reasonable.

10 — Wait to buy your next home — if you’ll need cash from your home sale to pay for it — until your current residence is sold. It’s always best to sell a current residence before committing to buy another house or condo. The reason is if you have a deadline looming for closing the purchase of another home, you’ll be under pressure to get a quick sale of your old home. As the purchase deadline gets closer, if you don’t have a firm sale of your old home, you’ll be tempted to drop the asking price of your old home. Buyers and other realty agents can sense when a seller is desperate — they love to take advantage of vulnerable sellers who must sell fast.

Even when a purchase offer has been accepted, it’s best to wait until the sale closes before signing a contact to buy another home. The reason is some home sales never close. There can be many reasons such as the buyer getting “buyer’s remorse” and refusing to complete the purchase, a lender’s appraisal didn’t come in at the full asking price, or perhaps the buyer’s professional inspections discovered hidden defects, which the seller refuses to have repaired at the seller’s expense.

CONCLUSION: Selling a house or condo quickly for top dollar really isn’t so complicated if you understand the 10 key steps to a quick sale for top dollar. Considering such a sale is probably the most profitable lifetime transaction most of us make, it is worth careful planning and implementation. By knowing how to create a successful home sale, you can take advantage of today’s excellent home sale conditions to maximize net profit — it’s all tax-free if your principal residence sale profit is below $250,000 (up to $500,000 if you’re married filing a joint tax return) and if you meet the two out of last five year ownership and occupancy tests.  

 

COPYRIGHT 2003 BY ROBERT J. BRUSS

This publication is intended to provide scant and authoritative information. It is sold with the understanding the publisher is not engaged in rendering legal services to readers. If legal or other expert assistance is required, services of a real estate attorney or other professional should be obtained.