Last week, I shared a list of common mistakes first-time home sellers often make. Here are several more. Hopefully, this will help you avoid them!
Seeing Only Dollar Signs
Once a prospective buyer makes an offer, it’s important to remember that price is only one piece of an offer. Contingencies and loan problems can stop an escrow in its tracks. Does your buyer have to sell her house before buying yours? Has she been pre-approved for a loan? When does she want to move in and does that work with your timeline?
Also, if your Realtor says an offer is too good to be true, feel free to be hopeful, but be prepared for less-than-optimal outcomes. Here are a few common ones: 1. The buyer cannot qualify at that price. 2. The buyer’s loan is contingent on an appraisal, and getting an appraisal to support an outlandish offer is tough (if not impossible). 3. The offer is contingent on the prospective buyer selling his current residence at an equally implausible price. If his house doesn’t sell, he’s not buying yours. 4. The buyer who makes a super-high offer has no intention of paying that much. Once the property is tied up in escrow, the buyer may wait for inspections and then demand significant financial concessions.
Another common mistake is opting to try a For Sale By Owner (FSBO). This significantly limits your property’s exposure to potential buyers. Not only do you miss out on the Multiple Listing Service used by all licensed Realtors, but you also miss out on the informal Realtor network—which is huge. Realtors know everyone and they are the go-to people when folks want to know about what’s on the market.
The other downside of a FSBO is that you lose the upper hand in negotiations. When you put your house on market yourself and a buyer looks at it but doesn’t call you afterwards, it’s reasonable to call to see about the buyer’s intentions. As soon as you make that call, you’ve shifted balance of power in negotiations. On the other hand, if a Realtor follows up under same circumstances, she’s just doing her job. In the first instance, you’ve shown weakness. In the second, your Realtor is simply being professional, and by no means suggesting that you care one whit whether the buyer shows any interest.
Finally, if you’ve never sold real estate, let me tell you a little secret – the cost of hiring a Realtor is worth it for the paperwork alone. If not done properly, legal disclosures can expose a seller to significant liability now and in future.
If you’ve never done this before, you may be a little overconfident about how quick selling a house will be. Although I’m sure your house is amazing and buyers would be crazy not to snap it up, don’t go buying your replacement home without a contingency or until after the escrow on your current home closes. If you’ve committed to new purchase, you’ll be pressured to accept whatever offer comes in on your current property.
The other mistake related to lack of forethought is getting so wrapped up in selling your house that you forget you’ll need somewhere to live once the escrow closes. As soon as you put your property on market, I recommend you begin looking for another place to buy (or at least rent). Ideally, you can find another place to buy because if you have to rent for a while, you’ll have to move twice, which is costly—both financially and emotionally.
Timing the Market
It’s incredibly rare to time things so that you sell at the height of the market and buy when prices drop—and even if you do, prices have most likely dropped because interest rates have gone up, so it’s a wash. For most people if you sell in today’s market, you’ll also be buying in today’s market. Don’t waste your energy trying to time things. Real estate is a long-term investment. Get in when you can and hold. Allow appreciation to do the rest.
If you have questions about property management or real estate, please contact me at email@example.com or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.
Dick Selzer is a real estate broker who has been in the business for more than 45 years.