Home Selling Process

 

Step 1:

Market Conditions

Generally speaking, there are three broad real estate market states that industry members recognize. 

• Buyer’s Market: There is more supply than can be absorbed by the current demand levels. Buyers can spend more time looking for the perfect home and given the excess supply sellers have to compete for buyers. Prices can be stable in these conditions but are usually moving downward.

• Seller’s Market: There is less supply than is required by the current demand levels. The shortage of supply usually drives prices upwards and grants Sellers more negotiating power.

• Balanced Market: Supply is equal to demand. Prices are stable and neither Buyers nor Sellers have an advantage.

Step 2:

Buy or Sell First?

This can be a very difficult choice and the implications of the decision could have serious repercussions. If your home sells before you find a new home, you may find yourself living out of a suitcase. On the other hand, if you find your dream home before you sell your existing one, you may be obligated to carry two mortgages at the same time.

There are some legal instruments realtors have at their disposal to alleviate the problems that can arise in these sensitive situations. These include the use of special clauses in the Purchase and Sale agreements. 

Step 3:

Understanding the Cost of selling

Before embarking on this journey sellers should be aware of all the explicit and implicit costs associated with the sale of their home. The explicit costs include:

• Staging Costs (Optional, but highly effective)

• Mortgage Discharge Fees (May be applicable in certain situations)

• Closing Costs (Unpaid Taxes or Lawyers’ Fees)

• Sales Commissions

• Home Inspection Cost

Step 4:

Interviewing Agents

When considering who will market and potentially sell your home, keep in mind the important functions that this person will have to perform. An agent will be responsible for providing you with all the information needed to establish the intrinsic value of the property and will be required to personally have an understanding of the greater economy, the particular market, and the specific inventory type. They will also be responsible for

Step 5:

Choosing the Right Agent for you

When it comes to choosing the right agent for the job it is important to do sufficient research and have full confidence in your decision before moving forward. There are a number of misconceptions about what a successful real estate agent is and how effective that agent will be at promoting your home. Some agents invest a great portion of their marketing budget in advertising their brand and ensuring their faces are everywhere. They will brag about the number of closed transactions and the “expertise” this provides them in your market. Although at times this is a fair measure of the competence of these agents it is important to keep all the relevant detail in context before making your decision. There are a number of very important caveats to keep in mind in this situation. 

Caveat 1: The money spent on branding is money that could have been spent on better marketing of your home, which would achieve greater exposure and presumably a higher selling price. Get a detailed breakdown of what the marketing budget for your property will be before signing any contracts and have a way to keep track of this expenditure over time. If the predetermined cadence is not followed make sure to ask questions and if necessary change realtors.

Caveat 2: A high transaction count can be indicative of marketing prowess and an intimate understanding of the market conditions, however, it could also be an indication of an aggressive pricing strategy designed to get homes sold faster than necessary. This is usually done to get quick closes and increase overall transaction count for the year, however, it could be costing you money in the long run as your property will not be selling at the top market price. Make sure to ask detailed questions about the Comparative Market Analysis and have more than one agent provide you with an appraisal of your home.

Caveat 3: In order to facilitate many transactions many agents will delegate the required listing care activities to someone else. Make sure to ask agents if you will be dealing directly with them or if the majority of the communications will be conducted with an “assistant”. 

Caveat 4: Offering to give you a deal on the commission, but not specifying if the discount will be coming out of their own portion or that of the realtor who will introduce the buyer. Ask detailed questions about the commission breakdown and have a good idea of what the total cost of closing will be before deciding to list the home.

Essentially you want to pick an agent or a team that will be transparent with the marketing budget allocated of your home and will allow you to walk away from the agreement at any point if you are dissatisfied. You want to make sure that they will be in contact with you directly, will be handling all aspects of the transaction, and are pricing the property at a price that most appropriate to your needs. 

Step 6:

Preparing your home

Kitchen and Bathroom: Invest an extra amount of time and resources in these areas, as they will have a great impact on the final selling price of your home.

Make sure the Bathrooms are clean from mold and mildew, replace anything broken or outdated, and caulk as needed. Also, ensure the drains are unclogged and that everything shines like new.

Regarding the Kitchen, ensure all the appliances are clean and in good working order, clean and organize pantry and cupboards, wipe the walls, clean the floors, and again make sure everything shines like new.

Floors and Stairs: If you decide to upgrade the flooring make sure to purchase a color that flows well with the interior colors of your home and doesn't look out of place. Make sure the floors and stairs are always clean and free of clutter.

Doors and Windows: The exteriors of windows and doors are quickly worn down in the Canadian climate. Take the time to repaint portions that need refreshing and make sure the interiors match the new fresh look. 

Basement: Whether finished or not, make sure the basement is organized and clean. 

Clutter: Generally speaking an organized and well-maintained home will appear larger and more expensive. If you have too much stuff, rent a storage locker for the time being and move it off the property, don’t use the basement or the garage as a temporary storage.

Step 7:

Deciding on Asking Price

Perhaps the most important aspect of selling your home is establishing its true intrinsic value. There are a number of methods used to accomplish this goal depending on the inventory type, location, market activity, and product differentiation. The most common method used for residential properties is what is known in the industry as a Comparative Market Analysis (CMA). Essentially this approach compares a list of recent sales, that resemble the target property, and uses this data to extrapolate the current market value. It is the most widely used method in residential real estate because it is efficient, effective, and highly accurate. A second method that is sometimes utilized for the sale of unique properties that don’t have enough comparable recent sales is the Cost Approach. This method establishes the current costs of reconstructing the property, subtracts any depreciation, and arrives at the current price. Both methods have various advantages and disadvantages.

Arriving at the true intrinsic value is perhaps the most important services a realtor will provide you with in the entire process. Introducing the property at a price too high or too low will cost you time, money, or both. The pricing strategy will be determined by both you and your realtor. If time is of the essence an asking price slightly lower than the current market value would be utilized to incentivize active buyers. On the other hand if receiving the highest possible selling price is of greatest importance alternative strategies will be employed to ensure this outcome.

Step 8:

Evaluating and Negotiating Offer

The offer will contain the following:

• Names of Potential Buyer’s 

• Property Address

• Price

• Possession Date

• Conditions and Terms

• Date of Offer Expiry

Your agent will notify you when an offer to purchase has been submitted. At this point he will provide you with a copy of the offer and go over all relevant information, answering any questions you might have. If the terms of the offer in line with what you wanted to achieve all along it can be accepted on the spot without any further negotiations. This is rarely the case, most offers will entail a number of counter-offers from both sides before the price and all other terms can be agreed upon.

Step 9:

Acceptance of offer to purchase

There are two distinct outcomes depending on the contents of the initial offer to purchase. If the offer had no conditions then after the price and possession have been agreed upon the transaction is a firm deal and the sale is final. If the offer to purchase has specific conditions at the submission of the offer then the sale is conditional, as long as price and possession were agreed upon. After the conditions have been satisfied and a waiver is received the conditional sale will become a firm deal and the sale will be final.