Preparing to Sell Your Home
Before you step foot into the first home you look at, it’s a good idea to thoughtfully determine your wants and needs, and the difference between the two! By analyzing your needs you will be able to get a clear picture of exactly what you want your new home to look like and how it should function for you. Once you’re in the thick of viewing homes, it’s all too easy to fall in love with someone’s decorating or a home’s outstanding architecture – and to completely overlook that there aren’t enough bedrooms or bathrooms to fit your needs. First, you should write down why you’re looking for a home. For example, are you currently renting and would like to have a home where you can begin building equity? Maybe you have outgrown your existing home or changed jobs which required you to move to a new city. These factors will all have an impact on how you approach your home search.
It is important to identify what you envision your home to look like and what features it should have. Writing this down helps to avoid ambiguity later in the home search process. You should make at least two lists: one should describe everything you would ideally like and the other should list the features of the home that are an absolute must. It is most likely that you will blend the two lists into one as you progress through the homebuying process. This is a natural and evolutionary process that becomes clearer as you determine what you want and what is available.
Home Improvements
What home improvements really pay off when the time comes to sell your house?
That’s an important question for any homeowner contemplating moving or remodeling. And the only possible answer is a somewhat complicated one.
That answer starts with the fact that really major improvements – room additions, total replacements of kitchens and baths, etc. – rarely pay off fully in the near term. It ends with the fact that small and relatively inexpensive changes can pay off in a big way in making your home attractive to buyers if your decision is to move now.
It’s often the case that the most appropriate major improvements are unlikely to return their full cost if a house is sold within two or three years.
Does that mean that major home improvements are always a bad idea? Absolutely not. It does mean, though, that if your present house falls seriously short of meeting your family’s needs you need to think twice – and think carefully – before deciding to undertake a major renovation. Viewed strictly in investment terms, major improvements rarely make as much sense as selling your present home and buying one that’s carefully selected to provide you with what you want.
Even if you have a special and strong attachment to the house you’re in and feel certain that you could be happy in it for a long time if only it had more bedrooms and baths, for example, there are a few basic rules that you ought to keep in mind.
Probably the most basic rule of all, in this regard, is the one that says you should never – unless you absolutely don’t care at all about eventual resale value – improve a house to the point where its desired sales price would be more than 20 percent higher than the most expensive of the other houses in the immediate neighborhood.
Try to raise the value of your house too high, that is, and surrounding properties will pull it down.
Here are some other rules worth remembering:
- Never rearrange the interior of your house in a way that reduces the total number of bedrooms to less than three.
- Never add a third bathroom to a two-bath house unless you don’t care about ever recouping your investment.
- Swimming pools rarely return what you spend to install them. Ditto for sunrooms – and finished basements.
- If you decide to do what’s usually the smart thing and move rather than improve, it’s often the smaller, relatively inexpensive improvements that turn out to be most worth doing.
- The cost of replacing a discolored toilet bowl, making sure all the windows work or getting rid of dead trees and shrubs is trivial compared with adding a bathroom, but such things can have a big and very positive impact on prospective buyers. A good broker can help you decide which expenditures make sense and which don’t, and can save you a lot of money in the process.
Showing Checklist
Outdoors
-
Spruce up gardens and lawn; trim shrubbery and replace dead plants.
-
Yard and patio should be neat; outdoor furniture should be clean and in good shape.
-
Clean or paint your front door – remember first impressions last longest!
-
Manicure your front yard, driveway and entry – you can’t sell what you can’t see.
Exterior
-
Check that door numbers, mailbox, and exterior lighting are all in good repair.
-
Touch up with fresh paint as needed.
-
Inspect chimney for cracks or earthquake damage.
-
Repair loose trim, drainpipes and fencing.
-
Clean stains; clean window screens.
Garage
-
Remove clutter; tidy up shelves.
-
Wash floor so it looks clean and spacious.
Living Areas
-
Apply fresh paint as needed…brighten your interiors with neutral-toned paint.
-
Clean draperies and carpets.
-
Replace burned out light bulbs.
-
Clean fireplace, remove smoke stains from wall and mantle.
Kitchen
-
Sinks, appliances and counter tops should sparkle without any clutter.
-
Wax the floor.
-
Clean oven, range and other appliances.
-
Clean tile and grout; replace if necessary.
Bathrooms
-
Clean mirrors, glass, chrome and porcelain surfaces.
-
Replace shower curtain if necessary.
-
Fix any faucet drips or leaks.
-
Clean tile, grout and caulking; replace if necessary.
Closets
-
Doors and drawers should open and close easily.
-
Remove clutter; tidy up shelves and racks.
-
Shoes and clothes should be neatly arranged.
Overall
-
Check the basics around the house. It takes just a minute to check all doors, windows and cabinets to make sure they don’t stick, squeak or are too loose.
-
Clean your furnace & water heater, so buyers know they are looking at a house that has been well maintained.
What is Escrow?
It is customary and prudent for a buyer and seller to have a third, disinterested party to assist them in carrying out the terms of their agreement. In California, this procedure is known as an escrow. When opening an escrow, the buyer and seller establish terms and conditions for the transfer of ownership of property. Your escrow is created shortly after you execute the contract to purchase your home. The escrow becomes the depository for all monies, instructions and documents. The Escrow Officer has the responsibility of seeing that all terms of the escrow are carried out.
NOTE: In some states, the process of completing the purchase of a home is known as the “Settlement” process. Often the seller and buyer will come together at the Settlement table where documents are signed and exchanged. There may be a settlement attorney who facilitates this process. In California, the term “Escrow” is used to describe the process of completing the sale of property.
How does the escrow process work?
The escrow holds all monies, instructions and documents for the purchase of your home, including your down payment funds and your lender’s funds and documents for the new loan. The escrow officer takes instructions based on the terms of your purchase agreement and your lender’s requirements. The escrow officer can hold inspection reports and bills for work performed as required by your purchase agreement. Other elements of the escrow include hazard insurance, title insurance and the grant deed from the seller to you. Escrow cannot be completed until the instructions (requirements) have been satisfied, and all parties have signed escrow documents.
The escrow holder’s duties include:
-
Serve as the neutral agent and the liaison between all parties involved.
-
Prepare the escrow instructions.
-
Request a Preliminary Title Search to determine the status of title to the property.
-
Comply with the lender’s requirements as specified on its instructions to escrow.
-
Receive and handle purchase funds from the buyer.
-
Prepare or secure the deed and documents related to the escrow.
-
Prorate taxes, interest, insurance and rents.
-
Secure releases of all contingencies or other conditions imposed on the escrow.
-
Record the deed and any other documents.
-
Request title insurance policy.
-
Close the escrow pursuant to instructions supplied by the seller, buyer and lender, if any.
-
Disburse funds as authorized by the instructions, including charges for title insurance, recording fees, real estate commissions and loan payoffs.
-
Prepare final statements for all parties involved that account for the disposition of all funds held in the escrow account.
Common Escrow Questions:
-
How do I open an escrow?
Your real estate agent will open the escrow for you. As soon as you execute your purchase agreement, your deposit is given to the title company for deposit into the escrow account. How will you know where your money has gone? Written evidence of your deposit generally is included in your copy of your purchase contract. Your funds will then be deposited in your separate escrow or trust account and processed through your local bank. -
Escrow Instructions
Escrow instructions define all the conditions that must occur before the transaction can be finalized. Your escrow instructions specify, in a debit and credit format, the disposition of your purchase funds. They also provide for title protection for your home. -
What information will I have to provide?
You may be asked to complete a statement of identity. Because many people have the same name, the statement of identity is used to identify the specific person in the transaction through such information as date of birth, social security number, etc. This information is kept confidential. -
How long is the escrow?
The length of an escrow is determined by the terms of the purchase agreement and can range from a few days to several months. On average, it takes 30 to 45 days.
Managing the Details
-
I will constantly check with the title company to assess when they need additional information and whether there will be any problems that could affect obtaining title.
-
I ensure that both you and your Buyer receive copies of all documents pertaining to the transaction. I will have the Buyer sign to acknowledge that he/she has received his/her copies.
-
I will make sure that the Buyer meets and removes all contingencies within the time limit provided or get an extension, if needed, signed by both you and the Buyer.
-
I will keep you abreast of the Buyer’s application for a loan and the progress of the appraisal on your home.
-
I will work with the appraiser to arrange for entry to the property and to answer any questions he/she may have about the home or neighborhood. I will also provide the appraiser with the most recent comparable sales in the area.
-
I will make sure that the Buyer increases their deposit in a timely manner.
-
I will coordinate and attend as many inspections as possible and keep you informed of all findings.
-
Once the inspections are complete, I will negotiate for you if any problems arise.
-
I will cooperate with the Buyer and others involved ensuring that corrective work is completed according to the terms of the contract.
-
I will ensure that all documents are ordered and drawn, including your loan pay-off and insurance for the Buyer.
-
I will do my best to have your closing papers drawn one week before Close of Escrow (COE) so that if any problems arise, I can solve them while remaining within the time frame you expect.
-
If you prefer, I will deliver your escrow check to you personally. I am also happy to coordinate move-in dates.
Seller’s Disclosures
-
Lead Paint
Sellers of properties built prior to 1978 have the following obligations:
- Provide buyers with a HUD pamphlet entitled “Protect Your Family From Lead in Your Home”
- Disclose all known lead-based paint and related hazards and provide any available reports
- Include a standardized warning as an attachment to the contract
- Complete and sign statements verifying that requirements have been met
- Retain the signed acknowledgement for 3 years
- In addition, you must provide the buyers with a 10-day opportunity to test for lead
-
Natural Hazards
California law requires sellers to disclose, via a “Natural Hazard Disclosure Statement” or NHD, if properties are located in one of six predetermined “natural hazard” zones. (If the property is not within one of these zones, you, of course, have no such obligation.)
The six zones are:
- A flood hazard zone as designated by the Federal Emergency Management Agency (FEMA)
- An area of potential flooding after a dam failure (also known as an inundation area)
- A very high fire hazard zone
- A wildland fire area, also known as a state fire responsibility area
- An earthquake fault zone
- A seismic hazard zone
If an NHD is delivered to the buyer after both parties have signed the Purchase Agreement, the buyer will have three days to rescind the agreement. However, if the buyer received the NHD before they signed the Purchase Agreement, then they cannot use the NHD to rescind.
-
Mello-Roos Districts
Especially (but not exclusively) if you are selling a home in a newer area, you may be within a Mello-Roos tax district, and you must provide to the buyer a “Notice of Special Tax.” If this notice is delivered to the buyer in person, they have three days to rescind their offer. If it’s delivered via U.S. mail, they have five days to decide.
Basically, a “Mello-Roos Community Facilities District” is formed by a local government, district, or agency to finance public services and facilities including police and fire departments, ambulance and paramedic services, parks, schools, libraries, museums and cultural facilities.
-
Condominiums etc.
If you’re selling a condominium, townhouse or other planned development (for purposes of this discussion, we will call them all “condominiums”), there are the buyer needs to know about common areas (such as greenbelts and recreational rooms) and the homeowner’s association.
The buyer will be required to make monthly payments, known as regular assessments, to maintain common areas, as well as special assessments to replace a roof or repair the plumbing, as determined by the homeowner’s association (HOA.)
Condominiums also may have regulations regarding architectural requirements, limitations on pets, and age restrictions (i.e., senior housing). These must be formally disclosed to the buyer during escrow. You may provide this information via the following documents, to the extent that they exist and are available:
- Declaration of Restrictions: Commonly known as “CC&Rs”, or Conditions, Covenants and Restrictions
- Articles of Incorporation or Articles of Association Bylaws
- All current financial information and related statements, including operating budget, estimated revenue and expenses, HOA reserves, estimated remaining life of major components (including roofs, plumbing etc.), and regular and special assessments
- A statement describing the HOA’s policies and practices in enforcing lien rights or other legal remedies for default in payment of its assessments
- A summary of the HOA’s property, general liability, and earthquake and flood insurance policies
- On existing HOA’s, a statement describing any restrictions on the basis of age, such as authorized senior citizen housing
Many smaller HOAs will not have all of these documents, but must provide what they do have.
