Just as buying a home is one of the biggest purchases an individual can make, selling a home is also a big deal. Here are some insights you can use as you learn all the components of selling your home.
The seller’s dictionary
Appraisal
After an offer is accepted on a home, an appraisal is completed by a professional appraiser; this appraisal determines a home’s current value and justifies the loan of the buyer. During the appraisal process, the appraiser will examine the interior and exterior of a home — including amenities, condition of the property and floor plan — without personal bias.
To arrive at a value, the appraiser looks at the recent sale prices of similar homes in the area. If the property is appraised at or above the sales price, the home selling process will continue toward closing.
However, a low appraisal doesn’t necessarily mean the end of your deal. Some appraisals can be challenged and sometimes buyers may be able to purchase your property even with an appraisal under the purchase price.
Closing and closing costs
There is a process involved with closing on a real estate purchase, including: loan application, title commitment, home inspection and due diligence, scheduling a closing date, appraisal process, loan approval, homeowner’s insurance, re-inspection (if necessary), walk-through, transfer of utilities and finally — closing. The actual closing involves signing all the paperwork necessary to transfer ownership of the home.
Closing costs are a variety of expenses that are paid at the closing of the sale. For a seller, those costs include items like a fee to the closing company and a tax on the transfer of the property. The buyer’s closing costs include fees associated with their loan and title insurance expenses. Sometimes, buyers ask sellers to pay for some or all of their closing costs, which reduces the amount a seller might receive from the purchase price.
Comparative market analysis (CMA)
When conducting a comparative market analysis, a trained REALTOR® will evaluate a home’s worth based on factors like its location, condition and amenities. In addition, a CMA will compare a home’s value to recently sold and listed homes nearby. It’s important to get a CMA in order to determine a competitive yet reasonable price to list your property.
Reach out today to request a comparative market analysis on your current home.
Contingencies — and active contingent listing status
If a property is listed as contingent, it is under contract with a buyer, but the sale is not yet finalized because there are contingencies on the contract. A contingency is a condition that needs to be met or an event that needs to occur before closing. Common contingencies include a professional inspection and the buyer’s ability to obtain a loan.
Days on market
This metric measures the number of days beginning when the property is listed and ending after an offer is accepted and the listing goes into pending status, which most commonly occurs after the buyer removes their inspection contingency.
Disclosures
When selling a home, it is your legal obligation to disclose certain details of the property. Some necessary disclosures include plumbing, roofing or electrical issues, damage from pets or issues with neighbors; whereas haunted house disclosure and disclosure of death on the property are typically not required in Minnesota or Wisconsin.
If you are unsure whether or not to disclose an aspect of the property, even if it’s just a small issue, it’s generally best to disclose it.
Earnest money
Earnest money is a chunk of money paid by the homebuyer around the time the offer on the home is accepted. The funds are typically held by the listing brokerage in a secure trust account. Basically, this money demonstrates that you’re a committed buyer, and will typically range between 1 and 3 percent of the total purchase price of the house.
Equity
Home equity refers to the value of interest a homeowner has in their home. To calculate equity, subtract the amount owed in mortgages or loan balances from the home’s current market value.
When it comes to equity, more is better — increased equity indicates more assets and a higher total net worth of the homeowner. Generally, in order to build equity, loans are paid down or the property value increases (or both).
Escrow
Sometimes the buying and selling parties are not able to get everything done by closing. For example, the seller might not be able to complete an agreed-upon repair due to weather conditions. With a real estate escrow, the buyer and seller agree to having a third party hold money for a period of time after closing. Putting money in an escrow account ensures safekeeping of funds until all obligations of the home sale are met by the buyer and seller.
Note: You may have heard of an “escrow closing,” which is where a neutral third party holds all the money and documents until everything is fully performed up to closing. Minnesota and Wisconsin are not escrow closing states, so when you hear the term “escrow” in our neck of the woods, it’s describing this short-term account that is closed after the buyer and seller obligations have been met.
For sale by owner (FSBO)
Homes put up for sale by owner do not involve an agent or broker during the process of selling the property. Due to the complex aspects of selling real estate and the benefits of using an agent — like coming out ahead on the final sales price — FSBO homes are dwindling.
Inspection
A home inspection is requested by the majority of homebuyers prior to signing a purchase agreement. During the home inspection, an examiner will look at the roof, foundation, electrical system and other functional components of the property.
The inspection process ends with a report of the home’s condition and will inform the potential buyer of defects to the property. A buyer may request that the seller address issues uncovered in the inspection.
Multiple listing service (MLS)
Real estate agents use the multiple listing service as a tool to share active property listings. When these listings are published, other real estate agents and potential buyers will be able to easily access the details on the property.
This means that when you list your home for sale with an Edina Realty agent, listing information will be available to other local agents who don’t work for Edina Realty — and to any buyer who is searching for local homes on the web.
Multiple offers
Multiple offers occur when home sellers receive multiple bids on their listing. Sellers with homes in desirable areas may be able to draw in multiple offers, which can lead to selling their home at a higher price than listed.
Negotiations
When selling a home, buyers may try to negotiate different aspects of the sale, including price, closing date or certain aspects of the house like the washer and dryer. When negotiating with potential buyers and determining the final accepted sales price for your property, your Realtor will be instrumental.
Open house
During an open house, potential buyers will have the opportunity to view the home and ask initial questions they may have regarding the property. When hosting an open house, showcase the best features of the home, and you’ll hopefully elicit the interest of buyers.
Purchase agreement
A real estate purchase agreement is a contract containing the agreed-upon details of the sale of the home. The purchase agreement sets forth the sale price, contingencies, closing dates and all other important aspects of the deal.
Pending listing status
When a there is a pending listing status on a home, the buyer and seller have cleared up most contingencies and are headed toward the closing table, but they aren’t there quite yet. The home is most likely listed as pending because some aspects of the sale like financing, title examination and final walk-through of the property are still in progress.
Radon Law
In 2014, the Minnesota legislature passed a radon law. This law protects homebuyers by requiring sellers to explicitly state if their home has been tested for radon, a toxic gas; sellers must also provide buyers the results of the test.
Wisconsin does not require a radon test prior to real estate transactions, but a pre-sale radon test is recommended by radon experts.
Realtor
Both Realtors and real estate agents are licensed professionals who represent the interests of a buyer or seller throughout a home purchasing process. While all Realtors are real estate agents, not all real estate agents are Realtors.
To become a certified Realtor, a real estate agent must subscribe to a strict code of ethics, including putting the needs of their clients ahead of their own financial or personal interests. Realtors are supervised by their local association boards and represented by the National Association of REALTORS®. All Edina Realty agents are licensed Realtors.
There are many reasons someone should hire a Realtor, but the primary reason is to have a trusted, knowledgeable advocate who can negotiate on your behalf as you buy or sell a property.
Staging
Staging is the process of neutralizing a property so it appeals to the greatest number of buyers once it’s listed for sale on the market. Homeowners can stage a home by themselves or with the help of a Realtor or professional stager.
To stage a property, you’ll want to remove clutter (including photos and knick-knacks), optimize the space with smart-sized furniture and use neutral — but inviting — paint colors on the main walls.
Showings
A showing can occur through an individually-scheduled appointment where a buyer tours your property with their agent or via an open house (which is open to all buyers) hosted by your real estate agent.
Staging is very important during a showing, so be sure to declutter and highlight the home’s best assets. Also, consider that the first “showing” of a home for sale is typically online. Invest in high-quality photos that detail amenities, features and the selling points of the home.
Title and title insurance
When a buyer purchases a home, the title (or ownership) is transferred to the new owner of the home. Because a home sale is a large purchase, it’s important for buyers to protect themselves against loss from defects or problems with the title. Title insurance does exactly that and it verifies that the title to the property is clear of defects.
Tax-assessed home value
Tax-assessed home value, or estimated market value, is a value that determines the worth of your home, and is completed by the city or county where the property is located. This number assists in the calculation of property taxes.
This value is based on historical sales data and mass appraisal techniques, so you may want to get a second opinion before doing taxes or selling — especially if you’ve recently completed a brand-new luxury kitchen remodel. Tax assessed values can be lagging indicators of your home’s current market value because assessments may only occur annually or biannually.
Transfer of utilities
After closing, it’s important for both parties to discuss the details of transferring utilities. Planning ahead with utility setup will ease the transition between the buyer and seller and will insure that no one incurs extra costs or suffers from a lack of electricity.
Truth-in-Sale of Housing Evaluation (TISH)
Depending on the city you live in, there might be a step between hiring a Realtor and getting your home listed on the market. A Truth-in-Sale of Housing Evaluation may be required to assess potential health or safety risks in a home. This report typically recommends or requires certain house repairs to be made prior to selling.
Walk-through
Shortly before closing, a final walk-through is held to ensure good property condition and completed repairs (if they were agreed upon). After a successful walk-through, you’re officially ready for closing!
Zoning
Zoning is a set of rules imposed by the local government that distinguishes the development and uses of properties in certain areas. A buyer may want to look into the zoning laws when searching for a home, as some zoning laws set limitations on the property, such as the types of structures allowed at a residence or whether an in-home business is allowed.
When selling, the zoning laws may affect how a house can be marketed, like whether it can be listed as a single-family or multi-family home or whether that remodeled basement area can be correctly called a bedroom.
Ready to sell?
By now, you’re well-versed in selling terms. For additional help in the selling process, reach out to the Edina Realty customer care team today.
For start-to-finish steps to selling your home, download our seller guide today.
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