THE 10 BIGGEST SELLING MISTAKES
when
selling a home.
Most of the focus of earning real estate profits is on buying right. And correctly so. If you buy a property for the lowest possible price and best terms you virtually
assure a future profit. But too little attention is paid to selling real estate right, especially when the property being sold is your personal residence.
Selling your home can be a traumatic experience, especially if you have lived in it for many years. But the sale can also be the most profitable experience of your life
if you do things right. Because of the thousands of profit dollars involved, it is important to plan your sale to maximize the sale profit.
For example, the worst time of the year to sell a home (but it is the best time of year to buy a home) is between Thanksgiving and New Year's Day. Why? Because only the
very serious highly motivated buyers are in the marketplace between these holidays. However, the best time of the year to sell your home is usually between March and
October. Except in winter resort areas where winter is the best time to sell your home, spring is when prospective home buyers come out of their winter hibernation. The
summer and fall months are also good times to sell your home.
But more important than the season are the physical and financial aspects of your home sale that can make the difference between success and failure. People who know me
personally understand I prefer to think positively and look at everything from the most optimistic viewpoint. However, in this newsletter let's take a different approach
and consider the 12 most costly mistakes to avoid when selling your home.
1 - NOT GETTING YOUR HOME INTO TIP-TOP PHYSICAL CONDITION. The most common mistake home sellers make is they fail to get their homes into the best possible physical
condition before putting the house on the market.
"Spend money to make money" should be every home seller's motto. Many home sellers fail to clean, paint, and repair their properties before putting them up for
sale. It's like inviting your friends over for a party but forgetting to wash the dishes, vacuum the carpets, and clean the cat's litter box! Living in our home for many
years we often get used to its run-down look. But, unless we critically look at our residence through the eyes of a prospective buyer, we can lose thousands of dollars by
failing to make profitable but often inexpensive improvements.
To illustrate, before putting my personal residence on the market with a crack in the basement wall, I had a basement wall contractor patch the wall and guarantee it
against future leaks. My investment in this project was less than $200 but the rewards were several thousand.
Cleaning and painting your own residence where you are living requires planning to avoid major disruptions so I advise taking the project slowly unless you are in a hurry
to sell your home. Your goal should be to make your residence a model home "red ribbon deal" where all the buyer has to do is turn the key in the front door and
move in.
Painting is by far the most profitable improvement you can make. A few hundred dollars spent painting your home inside and outside before selling it will usually bring
thousands of dollars in a higher sales price! Before putting any house on the market be sure to completely paint it- including the garage walls and floor!
Other especially profitable improvements include new wall-to-wall carpets (unless your home has beautiful hardwood floors), fresh landscaping, new light fixtures, and
repairing everything (such as leaking faucets and squeaky doors). But don't go overboard. For example, if your kitchen is in decent condition there is no need to install
new cabinets or countertops. Just clean the kitchen up and give it a coat of paint.
A home in first class condition will often overcome other drawbacks, such as a poor floor plan, busy street, poor location, unappealing architecture, or unattractive
neighborhood.
2-FAILING TO CONSULT YOUR TAX ADVISOR BEFORE PUTTING YOUR HOME ON MARKET. Another major mistake many home sellers make is they fail to consult their tax advisor before
selling their house. Only after the sale is complete do they learn the tax mistakes they have made. For example, I recently talked to a senior citizen home seller who
learned she disqualified her new husband (it was a second marriage for both) from claiming his $125,000 "over 55 rule" home sale tax exemption on the sale of
his house because she used her exemption when married to her late first husband. In tax talk, she is a "tainted spouse." If only she and her husband had
consulted their tax advisor before the wedding they could have avoided this tax problem by selling the husband's home before the marriage!
Another frequent tax problem occurs when a home seller in a high cost area is moving to a lower cost community. For example, suppose a Bloomfied Hills home seller gets
$300,000 net sales price and buys an equivalent replacement principal residence for only $200,000 in Brighton. According to Internal Revenue Code §1034 that seller is
going to have to pay tax on up to $100,000 of home sale profit (the difference in the two prices). But there are ways to plan for avoiding the tax, such as by delaying
the home sale until the seller becomes age 55 (if that event is just a year or two away) and is then eligible for the $125,000 home sale tax exemption.
3-OVERPRICE YOUR HOME. One of the biggest mistakes home sellers make is overpricing their homes. They think some foolish out-of-town buyer will fall in love with their
home and pay the full asking price without knowing the true market value of the home. That just doesn't happen. Home buyers are cautious before purchasing. It is not
unusual for buyers to inspect 13 to 25 houses before making a purchase offer. They and their real estate agents soon know the market values and probable sales prices of
most homes within a specific neighborhood. If yours is overpriced, most buyers won't even make a purchase offer because, they think you are not a serious seller. Based on
the comparable market analysis you received from the agent you interviewed, discuss with your agent the correct asking price and the probable selling price. Of course,
these estimates should be based on the recent sales prices of comparable nearby homes after adding and subtracting value for the pros and cons of your residence as
compared to those nearby which have recently sold.
4. -NOT WORKING WITH YOUR MARKETING COMPANY. Selling your home is a team project. Your representative is working behind the scenes to provide excitement from many
purchasers who will want to view your home. They need your cooperation to continue the marketing effort and bring the maximum exposure resulting in the highest priced
offer in the shortest amount of time with the least inconvenience to you.
5. NOT BEING CREATIVE WITH FINANCING FOR YOUR BUYER. There is an old real estate maxim "If you can't finance it, you can't sell it." That is especially true
today. Although mortgage interest rates are comparatively low, mortgage lenders are tightening up on borrower qualifications. Unless borrowers have both excellent income
and excellent credit reports they have difficulty obtaining a mortgage. That's why home sellers should be prepared to help buyers who want your home. Paying discount
points or the buyers financing costs will enhance the probability of your home's sale.
6. BEING GREEDY. Although many home sellers would be happy to receive a purchase offer in today's market, there are many others who will sell only if they get virtually
their full asking price. In other words, these sellers are not highly motivated to sell. Some insist on getting every last dollar of profit from the sale. Usually these
people lose out and either get no sale at all or they eventually sell for much less than their asking price.
Homeowners who have owned their homes a few years and have huge profits due to appreciation of the housing market are often the most difficult sellers of all. Instead of
being satisfied with perhaps a $30,000 net profit, they insist on getting a $35,000 profit by counteroffering a perfectly good purchase offer. If the buyer won't meet the
counteroffer, then the seller loses out completely. As my mother used to say "It's not worthwhile chasing the last dollar of profit." For example, when I
accepted that $116,000 purchase offer on the house with a $118,000 asking price I inquired of the selling agent if he thought the buyer might agree to pay more. He said
she was willing to try. That told me the buyer would probably pay more. But then I stopped being greedy, realizing that I already would realize a very handsome profit. It
wasn't worth chasing the last dollar of profit and risk losing that buyer.
7 -FORGETTING YOUR CLOSING COSTS. You should prepare an estimated statement of net sales proceeds. Depending on the buyer's purchase offer the attorney or title company
will show you how the down payment and mortgage loan proceeds will be disbursed, such as to pay closing costs for title insurance, transfer taxes, sales commission,
attorney and escrow fees, mortgage loan fees, fix-up costs, recording fees, mortgage interest adjustments for the month of sale & property tax pro-rations. Of course,
you won't have to pay all these charges but you should consider closing costs when estimating your net sale proceeds.
8. -NOT DISCLOSING IN WRITING ALL KNOWN DEFECTS. Michigan is a state which require home sellers to provide written disclosure of home defects. But even when it wasn't a
law the best real estate agents encourage their home sellers to provide voluntary disclosure of home defects. Why? Because, if the seller knows about a defect before
buying the home, they don't legal recourse against the seller after the sale closes. However, if the seller conceals a known material defect in the house then either (1)
the sale can be rescinded or (2) the seller can be held liable for monetary damages. It is a major mistake for a seller to fail to disclose known material defects in the
house since it is so easy to avoid liability by disclosing any defects before the sale. Many realty agents now post the seller's disclosure statement in the kitchen or
other prominent spot so prospective buyers can read it before making a purchase offer. This sales technique builds buyer confidence in the house, the agent, and the
seller.
9.. -NOT PROVIDING THE BUYER WITH A ONE-YEAR HOME WARRANTY POLICY. Another major mistake that many home sellers make is they fail to advertise a one-year
home warranty policy is included in the sales price. The cost to the seller is only about $375 but it avoids endless hassles with buyers because some things do sometimes,
go wrong with the house shortly after the sale closes. The one-year home warranty policies are available online or through your local phone directory.
The warranty usually includes a provision to provide repairs to plumbing, wiring, furnace, built-in appliances, and the hot water heater within the first 12 months after
closing.
Some companies also cover the home while it is up for sale, too.
SUMMARY. Home sellers can ease their residential sale by avoiding the 10 major mistakes many home sellers make. By carefully planning the home sale, selling a home can be
a pleasurable and profitable experience.
10. If your home sale, by owner is not successful, it is wise to consider hiring a professional, full time, reputable company that is local and referred by someone
reputable.
I do
have a list of agents through a reputable company anywhere in Michigan at no
Disclaimer: These suggestions are a personal opinion and not to be meant as advice or set rules for selling a
home. If you have any questions on your home sale we recommend that you contact legal advice from a real estate attorney or brokerage that is licensed in the
state of Michigan.
