Deciding to sell your home is a major life decision and the finer details involved in putting your home on the market can be overwhelming.
Many homeowners are very unprepared for the challenges that lay ahead and the potential to lose significant amounts of time and money is real. Of course, it is always possible to point out mistakes that were made in hindsight, but it is preferable to avoid making any mistakes when selling your home, considering that a house is a major asset. The financial impact certain mistakes can have on a homeowner can last years.
However, equipped with the right information and some careful planning, it is possible to sell your home for an excellent price without the roller coaster of stress. Many people new to the housing market struggle for months on end with difficult decisions while they wait for their home to sell and attempt to increase its value.
Before we begin, I want to quickly introduce myself. My name is Devyn Earls. I am a local Jacksonville, FL off-market investor. As of October 18th, 2020, I am looking to add one more house to my inventory and can provide a full cash offer in most cases. I provide free no-obligation offers within 24-48 hours. Get your free offer here.
Now that you know who I am, let’s dive into some of the challenges you may face when selling your house and how you can overcome them.
Costs Associated with Selling
At first glance, selling your home may not seem to be a costly affair.
Of course, agent commissions are to be expected and generally fall within a range of 5 and 6% of the sale value of the property. The buyers agent and sellers agent almost always take 3%, unless the agent who lists your house also finds the buyer, in which case it can be a total of 5%.
Many homeowners are stunned to discover that the true cost of selling their home can be close to double this range. The percentage difference is due to the costs associated with closing, which are separate from the agents commissions.
9% or 10% of the sale value is significant and can cut into overall profit to the point where the property is sold for less than you would otherwise be willing to accept.
Of course, it is possible to price the home higher to compensate, but the market tends to dictate what a home is worth and raising the price to cover hidden expenses is rarely a strong strategy. Your home must also have better features than the homes sold nearby, and if it’s higher than those, typically a bank will require an appraisal and that could cause issues if it doesn’t hit the mark, but we will get more into that below.
Additional costs to the sale of your home can include closing costs, repairs, concessions, allowances, and more.
Closing costs are unavoidable and can include fees for lawyers and notaries when contracts are required. Land surveys can also be included in closing costs, as surveys are often requested by the buyer. In addition, the seller will be required to pay off all loans against the property at closing, which is a process that often requires the assistance of a lawyer.
If there is equity in the home, closing costs can be deducted from this equity. However, if the property is heavily leveraged, the seller often has to pay some of these loans back out of pocket. Not to mention the fact that some loans have penalties for early payment, even loans such as mortgages.
Other closing costs can include an appraisal of the home, title search, and tax payments. When repairs are necessary, providing the buyer with a concession for an amount deemed sufficient to cover repairs can make a home more attractive to sell, but this concession takes away from the profit earned on the home.
When putting a home on the market, commissions are generally an accepted cost of selling your home. The agent handles visits to the property and is familiar with how to present your property to buyers and how to move paperwork along should the buyer wish to make a legally binding offer.
Of course, this is a service that some homeowners are willing to pay for, especially if they are selling a home for the first time or feel unprepared to manage the many aspects involved in selling a home. Since commissions to an agent can take 6% of your total profit, choosing to hire an agent, or multiple agents, if allowed, is not always the best choice.
When the profit margin on your property is already tight due to market fluctuations or outstanding loans, the choice to hire a realtor can destroy one’s chances at earning a profit from the sale.
A realtor may even suggest that you make substantial repairs to your home in order to make it more attractive, even though these repairs might not be covered by the sale price of your home after commissions to the agent and other closing costs.
A viable option is to accept a direct cash offer for your home, without having to work with an agent and without having to parade non-committed potential buyers through your home every weekend.
The hassle of trying to impress buyers through an agent is certainly not for everyone, and the time, stress and costs associated are not always worth it.
At the beginning of your real estate journey, it is possible to be overly enthusiastic about how much your home can sell for. A common mistake for sellers is to set the initial price as high as possible, regardless of prices for similar homes in the area, in order to cover costs associated with moving as well as the costs linked directly to the sale of the home, as mentioned earlier.
Setting a price high in this manner will usually cause potential buyers to deem that your home is simply outside of their price range and they will find a comparable home at a price they can afford.
Every lost buyer means that you will be on the market for a longer period of time. With each passing month, potential buyers will begin to wonder why no one else has purchased your home during the time that it has been on the market. People may begin to suspect that there is something wrong with your property or that it is somehow undesirable because other homes have been selling much faster.
Let’s say you do find that one person who loves your home, and they give you a full price offer that you accept. Because it’s listed higher than the houses in the area, and we are assuming everything is the same as theirs such as sq ft, layout, condition and type of the kitchen and bathroom, fixtures, lighting, etc. and not recently remodeled with higher-end finishes that would naturally make the house more appealing.
When a bank looks at the price of your home vs the price of homes around it, they will almost always require an appraisal. When the independent appraiser comes through and goes through your home, you are hoping the number he presents meets the sales price that was accepted. If it doesn’t, the buyer can do two things.
The first is they will add more money down to cover the difference and get their loan for the same amount. However, this rarely happens when the home has been sitting on the market for weeks or months, especially because the buyer knows he is overpaying for the house and it’s not market value.
The other option is they reduce their offer down to the appraisal price. Now you have some thinking to do. You just spent however many days on the market waiting for this offer, passing up potential buyers along the way because it was overpriced. Now, you accepted an offer so the status of your house is pending, and its been a week or two for the appraiser to come out and do his work. The only way to get this deal done finally is to accept the lower offer, otherwise they will walk away from the deal with their earnest money deposit back in their pocket and your house goes back on the market. You will have a difficult time selling if you don’t reduce the price.
The way to correct an unrealistic sale price is to lower the price to something that resembles prices for other homes in the area that have similar features and that are in a similar condition. However, there is a major issue with lowering the price. People tend to watch for homes that lower their asking price because they know that the sellers are likely to lower the price again if it doesn’t sell. Therefore, having a high initial price actually encourages buyers to wait until you are desperate to sell for less than the average market value of your home. It is a vicious cycle, and after being on the market for a few months, the stress of it all really takes a toll.
Price vs. Contingencies
There are many factors to consider when an offer is made on your property. A common mistake that sellers make is to focus on the selling price that the buyer is offering rather than the finer details that can actually make a high offer less than appealing.
It is not uncommon for a buyer to offer higher than the asking price when they feel that multiple buyers may be interested in the property. At first glance, this high offer can be exciting. Upon closer examination, these high offers usually involve lots of contingencies and conditions in the offer to purchase that can cause the deal to fall apart at closing.
For example, if three buyers are interested and one of these buyers offers 10% above asking price and signs an offer to purchase, there will likely be a clause that a home inspection or certain repairs are required, an appraisal is needed, and the buyer may even need to sell their current home in order to have the proper funds needed.
A home inspection can open the door to a lengthy list of repairs, minor or major, that the buyer will want to have repaired before the purchase can be completed. Often, repairs outweigh the benefit of having a higher offer.
If your home needs a new roof, or a repair that a bank will not lend on, then the buyer will be unable to secure financing, and you are stuck trying to find an all cash offer if you if you aren’t willing to offer compensation to have these repairs handled or do it yourself. The buyer is often free to move on if you cannot provide the repairs. In this scenario, not only will your home be back on the market, but the other two potential buyers are likely long gone and have found another house.
In fact, it may be in the sellers’ best interest to accept an offer that is equal to or even less than what you are asking in certain situations. For example, if a buyer offers a cash payment and signs an offer to purchase with no obligation for a home inspection, which can be costly, and no requirement for repairs, the seller stands to save thousands of dollars and the house is off the market faster than if new buyers were given a chance to inspect the house and potentially back out of the deal. The cycle of moving forward with an interested buyer and having the deal fall apart at the end can be particularly frustrating.
If you get an all cash offer with no contingencies, it’s almost always a sure thing your house will be sold. Another thing to add, because there are no contingencies such as a home inspection, appraisal, land survey, repairs, or financing, since it’s all cash, you can close in under two weeks typically as opposed to the 30-45 days a typical closing takes.
Current Market Value
It is extremely important to be aware of the current market value of your home. In general, the current market value is a price that similar homes tend to sell for in your area and it is also a price that a buyer would be happy to pay and that a seller would be pleased to receive.
It is a delicate balance that can make or break the sale of your home. As previously mentioned, having a home remain on the market for too long is detrimental to the success of your sale and can impact profit in a significant way.
When hiring a realtor or a listing agent, current market value is determined based on the prices that homes sold for in similar neighborhoods, with similar features. Features can include the number of bathrooms that a building has or the square footage of the lot.
Lake access and vehicle parking can also alter the market value of your home. Of course, calculating the exact value of a home is not easy since each property is different, but experienced people in the industry have computerized programs and techniques to set a fair value for your home so that it sells quickly and for a reasonable price.
What should you do if the value of your home is lower than you were hoping for? After paying for closing costs, agent commissions and the paperwork involved in selling a home, there might be very little profit left, if any.
There is always the possibility of hiring an appraiser who my or may not value your home at a price you are comfortable with, but this is an added expense and will not change what the average buyer is willing to pay for your home.
When you are facing this problem, a cash offer for your home without the use of an agent can allow for a profit margin that exceeds what you could earn selling a home the traditional way to regular buyers. Without added paperwork and requests for repairs, you can pay off your mortgage and move into your next home faster than you thought possible.
Cost of Repairs
Repairs are something that few sellers consider to be a major expense, until buyers start making requests and the seller realizes that their home needs far more work than anticipated. Perhaps the roof is beginning to fail or the siding is getting old. In most cases, banks will require a roof to be replaced in order for them to provide financing. You will have a challenging time finding a buyer without fixing it, and your agent will tell you the same thing.
Some repairs cannot be avoided as every buyer will ask for them before accepting to purchase a home once necessary repairs are listed in a home inspection report. These repairs can cost thousands of dollars and a great deal of time is required to have the repairs completed. Many sellers think that the sale price of their home will cover the cost of these repairs and upgrades, but that is rarely the case. A roof can cost upwards of $10,000 depending on the size of your roof and market, or even more in some cases, and that’s a required repair in most cases that you won’t fully recoup.
A common mistake is for sellers to start renovating the home before they have even determined a fair market price. Many renovations are not vital to the sale of the home and are simply an added cost to doing business.
For example, installing all new windows on a house that was fairly modern to being with is not a smart financial move. Even re-tiling a floor is usually an expense better left alone because it will not raise the value dollar for dollar, especially after the many fees and commissions involved. Frivolous renovations can very quickly eat up your profit and the seller does not benefit from these renovations in any way.
Choosing to accept an offer that does not require repairs or an offer that is below market value, but promises to close quickly without conditions can leave you with enough funds to be happy.
Not Preparing Your Home for Sale
Aside from repairs, there are a few things that homeowners need to do when they are prepping their home towards being on the market. One of the most important things to do is to clean the house and move the majority of personal belongings out of the home before the house is even sold.
Painting over bold colors and cleaning up any shabby areas of the home are also crucial. Granted, these things take time which very few sellers have when all other tasks involved with becoming a seller are factored in. However, neglecting to do these few simple things will certainly lower the interest that buyers have in the home and can increase the amount of time that the home sits on the market. The longer it doesn’t sell, the less likely a buyer will offer a reasonable purchase price.
Preparing a home for sale by removing clutter, furniture and trash has additional expenses tied to it. For example, if you have a lot of furniture and nowhere else to live at the moment, renting a storage unit for your extra belongings becomes the only way to have the house look presentable.
Hiring a cleaning crew and renting a dumpster are also costs that sellers don’t consider when trying to sell in a traditional manner. Cleaning out a home can take a few weeks at best and in many cases the seller is encouraged to rent furniture to stage their home for potential buyers. A major advantage of accepting a cash offer is that staging the home and prepping it for buyers is no longer a requirement. Typically, if you find an off-market investor, they won’t care about what’s in the house or if it’s dirty. They know it’s all cosmetics and can see past it, but they also take into consideration the costs associated with cleaning and fixing it. The time and cost savings can be substantial and may be a viable option.
When a home is placed on the market, the seller in encouraged to ensure that the home is as neutral as possible so that all buyers can picture themselves in your home one day. Buyers like to plan on how they will adapt the home to suit their own style. Unfortunately, it is impossible for a buyer to imagine this scenario when a home is filled with personal belongings and when the entire theme of the home is different that what is shown in magazines nowadays.
For older homes, the style can be particularly dated and redecorating the entire home, inside and out, can add value and is often strongly recommended by a realtor. Once again, the seller is required to move their personal belongings and to pay for the home to be painted in neutral tones, such as beige or white. This process is not only emotionally triggering to sellers that are particularly attached to their homes, but it also make the last few months of living in the home particularly uncomfortable.
When attempting to make the outside of a home more neutral, expenses can add up quickly. Perhaps the type of siding is very unique or specific to an are gone by? In these cases, a quick paint job will not suffice and the seller may make the decision to replace all of the siding or exterior trim of the home.
There is no guarantee that the costs associated with de-personalizing a home will be covered in the sale price. However, the home will likely sell faster than if it were left untouched. In this scenario, selling the home for a cash offer without ever putting it on the marker is especially attractive. The home can be left as is, saving a great deal of money on modernization and repairs, while still selling the home quickly.
Home staging is an excellent way to set up a home and prime it for the best sale prices possible. In fact, a staged home sells four times faster than a home that is left with the previous owner’s furniture. The modern furniture and neutral-toned color schemes make it easy for a buyer to imagine living in the home and tend to encourage the buyer to think about moving in rather than all the repairs and changes that they would make to the home. Sometimes, seeing bright colors that are not appealing is enough to push a buyer towards a home that appeals to their personal style more favorably, even if the home has less bathrooms or a smaller lot.
An added bonus to having a home staged by a professional is that the staging company can take professional photographs of your home, in the best lighting possible, to show future buyers exactly what they can expect when they move in. Photos of this nature can make a room look bigger, brighter and cleaner than any home that has not been staged.
Of course, this service is not free but it can certainly improve the odds of selling a home quickly to a buyer. If you are choosing to sell directly to a local off-market investor with a cash offer who does not intend to live in the home themselves, the added cost and complexities associated with home staging can be avoided altogether.
When Funding Falls Through
After jumping through all the hoops and attracting the right buyer for a solid price, many sellers feel that the worst is over. Unfortunately, it is incredibly common for buyers to have difficulty securing funding and these challenges can cause the offer to purchase to expire.
When a bank won’t provide finding to your willing buyer, there is nothing more that can be done for this buyer and the seller is forced to move on to another potential purchaser. Providing extensions to the buyer only prolongs the inevitable. This keeps the house on the market longer, delays the closing date and means that the seller must start over with anyone else who becomes interested in the home.
Sometimes, a buyer backs out of a purchase simply because they are not interested in the property anymore. Of course, it is possible to hold the offer to purchase against such a buyer, but this would incur legal fees and adds stress to an already stressful process. It’s best to keep their earnest money deposit and move on to the next one.
More often then not, an offer will have a financing contingency, and it may take a few times for you to find a buyer that goes all the way through the process and closes successfully.
If it is possible to conduct business with an investor who can provide cash without requiring that financing be approved, then moving forward with them can be the best way to avoid more time on the market as well as aggravation and stress.
Having a Closed Mind
Reviewing offers can be a stressful time, but it doesn’t have to be. In order to enjoy the process, it is advisable to sit down and carefully analyze all offers.
It is easy to throw any low offers to the side and only look at the two highest sale prices, but a seller is leaving a lot of money on the table in doing so. Each offer should be analyzed with an open mind by calculating the expenses associated with closing each offer to purchase.
How much is the buyer requesting in repairs? Is the buyer requiring a home inspection? Will the buyer be able to secure financing? How long will it take for this buyer to close?
Only after answering all of these questions is it possible to determine which offer is best suited to your particular situation. If you need money quickly, a home inspection could delay the entire process.
Sometimes the lowest offer with the least number of conditions can actually be the best choice because you are almost assured a successful sale in a quick timeframe.
Home Inspections and Negotiations
It is becoming increasingly common for a buyer to request an inspection before committing to any type of contract. Many sellers feel that a home inspection will add to the value of their home, but in most cases minor flaws are pointed out and must be repaired.
In other cases, major repairs are found that were unexpected and unnoticed before the home was inspected. Knowledge of serious problems with the property can force a seller into feeling like they must make all major renovations immediately, regardless of the cost. This is not always the best route, but this is the most common outcome when home inspections are requested. In addition, buyers are always free to walk away after making such requests and wasting the seller’s time.
As for negotiations, some buyers will ask for a lower selling price due to the findings of a home inspection. If the buyer is pushing you outside of your comfort zone for profits, it may be time to consider another avenue.
Average Closing Times
It may come as a surprise, but each failed buyer results in about one to two months of lost time for the seller. This is how a home can easily be on the market for upwards of a half-a-year or more if the sale is not managed correctly.
From the time that a buyer submits an offer to when a closing takes place, anywhere from 30 to 45 days may have passed. If the buyer requests an extension or has difficulty securing financing, then the home could sit even longer.
The stress that is caused by having to go though such a long process with each buyer, who may or may not end up purchasing the home, can add up and often leaves a seller feeling angry and without options.
After factoring in all the work that goes into selling a home, such as cleaning the home, removing old furniture and having it staged, meeting with buyers and a trusted realtor, negotiating prices and conditions, the added expenses associated with closing a home on top of commissions can really put a dent in a seller’s wallet and emotional stability.
It is all too common for financing to fall through and to have to start the entire process over again, which causes months of lost time.
An excellent alternative is to sell directly to an individual with cash on hand who is willing to make an offer for your house, such as myself. I can help you plan a closing date that works for you and can spare you the expenses associated with realtors, home inspections, repairs, closing costs, and more. A closing date in under two weeks is possible in this scenario, which saves an impressive amount of hassle and money. No need to start lengthy repairs or drawn out negotiations. If this scenario sounds appealing to you, get your free no-obligation offer today and let’s see if we can make a deal!