Tag Archives: negotiations

How To Get Top Dollar For Your Home

iStock_000007731720Small

How does a seller get top dollar for their home? Every seller wants the assurance that his/her house will sell at the highest price possible. But, real estate, as with most industries, is a highly inexact science. There are many factors at play within rapidly changing market terrain. While there are no concise answers as to how one ensures a house sells for top dollar, there are some important considerations to deliberate as the seller that can help you maximize profits, maintain control and reduce the stress that comes with home-selling.

  • Know why you’re selling and keep it to yourself.

The reasons behind your decision to sell impact the process greatly. Do you already have another house in escrow? Do you need to sell quickly? Or is profit your highest priority? All of these questions will factor into your pricing strategy. However, do not reveal your motivation to anyone else other than your agent or they may use the information against you during negotiations.

  • Set your price appropriately.

Setting the right price is the single most important decision you will make when you decide to sell. Price too high and you will turn off potential buyers. Price too low and you may leave money on the table. Make sure you do your homework by looking at comparable sales in your neighborhood in the last 3-6 months. Visit all the competitive offerings and see how they’ve been priced relative to the condition of the home. It’s always good practice to know your competition. While pricing, stay as objective as possible, and really look at your house from a potential buyer’s perspective. Emotional attachment to the house tends to drive pricing higher than necessary.

  • Maximize your home’s sales potential.

You may not be able to change your home’s floor plan or location, but you can make cosmetic updates that will enhance buyer impression. Assess your home, again, through the eyes of perspective buyers, and determine what can use updating. Fresh carpeting and/or a paint job can transform a space dramatically. If possible, avoid showing the house empty. You want to help potential buyers envision the home as their own, so provide neutral staging or de-personalize your existing décor. Furthermore, make repairs to visible damage. And don’t ignore the exterior. Buyer impression starts upon arrival at the house, so make your home appealing from the curb.

  • Consider a pre-appraisal and a pre-inspection.

A pre-appraisal will provide you with an objective basis for pricing your home. Additionally, a pre-inspection can identify any issues with the house that you can address ahead of time rather than during escrow as re-negotiating during escrow can be more costly since you’ll have less leverage and the transaction can be at stake.

  • Know your buyer.

While you shouldn’t disclose much about your reasons for selling, you should try and find out who your buyers are. Why are they moving? Do they need to move quickly? Are they in good financial standing? Having some information on the buyer’s motivation and personal situation will give you the upper hand in the negotiations process.

  • Time your sale.

If possible, watch market conditions carefully and time your sale. Typically, spring and summer are good times to sell. But specific to your market, be mindful of supply and demand. Are there more buyers than sellers? Are interest rates reasonably low? When there are more buyers in the market, sellers can get better pricing and terms, especially if there are multiple parties interested in your property.

  • Hire the right listing agent to represent you.

Truthfully, nothing is more instrumental to your successful home sale than the right real estate agent for your needs. Not all listing agents are created equal. If you hire an experienced agent, they will perform all the research necessary to advise you on all the points listed above: pricing, home improvements, negotiations, timing of the sale, etc. Get a few quality referrals from friends and interview several agents. As part of the interview, make sure you understand how each agent’s marketing plan for your property differs.

To sell your home for top dollar requires proper positioning of your property to the maximum number of prospective buyers. Educating yourself on market conditions and having an experienced agent as your representation will increase the likelihood of a successful transaction for top dollar.

 

Appraisals – Part II

Appraisal Report

After a few rounds of counter offers and negotiations, buyer and seller agree on a price and the home goes into escrow. Time to celebrate? No, not just yet unfortunately. Within the escrow process, there are several hurdles to overcome, one of which is the appraisal. As we mentioned in last week’s post, appraisals are a critical component of the lending process. A low appraisal can derail the agreement reached by the buyer and seller.

Low appraisals can arise in a declining housing market due to the lack of recent comparable homes sales, making it difficult for appraisers to determine the current market value of a property. When home sales slow, good comps “age” fast. Comps of homes that sold over six months earlier generally become obsolete data and aren’t factored in the valuation. Add foreclosures and short sales to the equation and appraisal values can vary greatly depending on the appraiser’s methodology. But, low appraisals can also occur when the market is rising rapidly as appraisers may have a hard time adjusting their valuations to account for escalating market value.

The reality is that appraisals are conducted by independent 3rd parties hired by the buyer’s lender. Legislation requires lenders to use an intermediary entity who then in turn selects the appraiser, ensuring that the lender and the appraiser have no conflict of interests. The regulatory intent is to have the appraisal be as impartial as possible. So it’s not at all possible for the buyer or the seller to choose who performs the appraisal. However, if you have a knowledgeable and seasoned real estate agent representing you, he or she can be instrumental to the process. Here’s how:

  • Your real estate agent would never want his/her client to overpay for a house so chances are, during the negotiations process, he/she will be facilitating the negotiations towards fair market value, already mitigating the chances of a low appraisal report.
  • Your real estate agent presumably is an area specialist so he/she should be well-studied in the specific neighborhood of the home so that he/she might drawn upon nuanced knowledge of schools, community and other neighborhood desirability details that can be shared with the appraiser.
  • All reputable real estate agents will attend the appraisal at the home and provide a package of most relevant comps to the appraiser.
  • In addition, the agent could have knowledge of off-market home sales in the area that can impact the appraisal or conversely have knowledge of recent foreclosures and short sales that should be exempt from the valuation.

Good agents are keen to the fact that appraisers tend to draw their comps straight from the MLS but that data collected may not represent the clearest picture of market activity and value.

And should the appraisal return a lower value than the negotiated sales price despite the diligent efforts of your agent, here are the buyer’s options:

  • Negotiate a new price – sellers may entertain a lower sales price as a low appraisal is a blemish on their home should they have to put the house back on the market, or there could be other circumstances at play like the purchase of the next home contingent of the close of the current home that might increase seller flexibility.
  • Put more money down – if feasible, buyers can always bridge the difference between the loanable amount with cash.
  • Hire a new lender – a new lending entity will restart the process potentially with a new appraiser.
  • Cancel contract – contracts are typically written with an appraisal contingency to protect the buyers from having to follow through on the heels of a low appraisal.

Under any of the circumstances above, the thing to avoid while navigating the pitfalls of a low appraisal is letting the appraisal contingency period expire or else the buyer is locked into the transaction.  Again, your real estate agent should be well aware of the contingency period and would never allow the period to expire.  A seller benefits from a mutual resolution so typically they will grant an extension while the buyer vets all options.

Whether you are the buyer or the seller in a low appraisal situation, your seasoned real estate agent should be guiding you through the entire process and see you through its resolution.