Here's the knitty-gritty lowdown on what happens once we have a fully signed Purchase Agreement. Typically, it will take 30-45 days to close. But know that along the way there can be bumps in the road that cause delays: perhaps something unexpected came up during the inspection, or the appraisal takes longer than expected, or the buyers financing falls through---I'll be here to help you navigate any twists & turns in the road throughout the process!
If the Inspection Contingency is in place, the buyer has up to 10 business days for any & all inspections, renegotiations, or to terminate the contract & get their deposit back. The buyer needs full access to all areas of the house during the inspection--likely 2-3 hours.
The Buyers lender will require an appraisal of the property to determine if the purchase price that has been offered is market value. This will likely be scheduled for around two weeks from today. The appraiser will schedule an appointment with me & I will be there to let them in & I will be there for the duration of their inspection which shouldn't take longer than 15 minutes. The appraiser will need access to all rooms including the attic & basement. The appraiser will be taking pictures of all rooms. It will take 7-10 days or more for the buyer to receive the appraisal report.
Schedule the Smoke Detector Inspection: As required by the lender, the fire marshall will have to inspect the property to make sure that the smoke & carbon detectors are up to current code. I will instruct you on this process & what you need to do.
Buyers satisfaction of the Mortgage Contingency: if the buyer is securing a loan for the property they will need a mortgage. Once the Underwriter for the lender has reviewed all of their financial documents, taxes, employment history & verification of current employment, as well as the Appraisal Report, they will determine whether or not they can approve the Loan. If their application for the loan is approved they will be issued a Mortgage Commitment--this is usually a week and a half to two weeks prior to our target Closing Date. If their loan is denied then the contract will be terminated & we will find another buyer. If the loan is approved the attorneys will work on scheduling the closing.
Info to Submit to the Attorney prior to closing (typically the week of the closing):
The Closing: the actual closing will take place at your Attorney’s office or at the Buyers Attorney's office. You may or may not be there at the same time as the buyers. Your portion of the closing is pretty quick, it will likely only take 20-30 minutes. You should receive the final closing documents to review the day before the closing however, sometimes they’re unable to get you the document to review until the last minute. You should have a good estimate of your Net Proceeds early on in the process--the attorney & I can help you with this. Once the buyer has signed their documents & the updated deed has been recorded the funds will be transferred into your account. Congrats on your closing!!
Wrap up: a day or two after the closing I recommend you call all of your utility providers to let them know that you have sold the house, including your homeowners insurance provider.
You've decided to sell your home & you want to know, after all the expenses, how much will you be able to put into your bank account--or into another property--once you've sold the property? And what are the expenses involved? You'll want to work with your Attorney to get to the exact amount but here's a general formula that you can use to figure out the ballpark number:
1) Sale Price of your home: if you haven't sold your home yet I'd recommend you follow the recommendation of your Realtor & use a conservative amount that you think you will sell your home for rather than the number that you're hoping for. You want to go into this real estate transaction knowing the minimum amount that you're willing to sell your home for. Whether or not you share that info with your agent is up to you but I think it's helpful to be upfront to ensure that your number is realistic & that you're on the same page. If you're working with the right agent you can trust that they will work in your best interest to get you top dollar.
2) Principal Balance of your Mortgage: look at your most recent mortgage statement & find the principal balance. You'll subtract this number from the Sale Price. Note that you need to add in one additional mortgage payment---mortgages aren't like rent which is due at the 1st of the month. Your September 1 payment pays for August.
3) Real Estate Commission: you will negotiate the real estate commission with your Realtor prior to listing your property. Be sure to find out if the commission is based upon the Net Sale or Gross Sale. What's the difference? Net Sale would be based upon the agreed upon contract purchase price minus any seller concessions. For example, if the contract purchase price is $300k but the buyer has requested $5k towards closing costs, the commission would be based upon your Net amount which in this case would be $295k. A commission based upon Gross Sale price would be based upon $300k
4) Attorney Fee: not all states require Sellers to have an attorney represent a Seller for a closing but Rhode Island, Massachusetts, and CT do. You should work with an attorney that specializes in Real Estate Law. Your attorney will do the following: review any legal documents that are prepared on your behalf & answer any questions that you have, prepare the Deed that will be transferred to the Buyer; order your mortgage payoff; if there are any Title issues that arise from the buyers title search or any liens on the property, your attorney will work to resolve these issues; your attorney will review the settlement statement that has been prepared by the Buyers Attorney prior to reviewing it with you to make surer there aren't any errors. Attorney fees are typically $800-1500
5) Deed Transfer Tax: also known as tax stamps or realty transfer tax. Typically paid by the seller, the current rate in Rhode Island is $4.60 per $1000. Example: sale price $300k the total transfer tax amount would be $1380
6) Real Estate Taxes & Prorations: property taxes in Rhode Island are typically paid quarterly, depending upon your town. Depending upon where you land in the tax cycle you may owe taxes for a portion that the buyer will be responsible for paying & therefore you will be responsible for paying those at the closing, this will be deducted from your settlement sheet. Example: If you close May 31 and you've paid for taxes for the first quarter of Jan-April that means you will also be responsible for the month of May. You will also be responsible for water & sewer bills up until the day that you close, your attorney will be in touch with the providers to settle the final bill. Any money owed will be calculated on the settlement sheet.
7) Buyer Concession or Credit: if you have agreed to a Buyer closing cost credit, or a credit amount in lieu of a home repair, you'll need to make sure that you subtract this from the net amount. Prior to listing you may want to conservatively plan for $2-5k depending upon the condition of your home.
Would you like a copy of my Simple Seller Net spread sheet? I'm happy to share--send me a message with your request through email & I will send it to you! I'm happy to help!
What is an Appraisal?
One of the contingencies in a real estate purchase contract when the buyer is securing a mortgage, is that the property must appraise for the purchase price. A home appraisal is a report provided by a licensed professional required by the lender to ensure that the purchase price is the fair market value of the property you’re buying.
Appraisal reports usually run around $500-800 for a single-family house and a little bit more for a multifamily property--the report is paid for & belongs to the Buyer. The lender will order the appraisal, using an independent third-party professional who has no interest in whether or not the transaction goes through.
How an Appraisal WorksThe appraiser will visit the property and walk through the inside and outside, taking measurements, photos, and notes--the appraiser needs access to every room. It won’t take long, about 15 minutes. After the on-site review, the appraiser will look at comparable properties (aka “comps”) & write a professional report indicating the appraised value of the property.
Some of the key factors an appraiser looks for include:
Whether you’re buying, selling, or refinancing, a home appraisal that comes in too low could put the entire transaction in jeopardy.
What happens if the appraisal is lower than the purchase price?
The possibility of a low appraisal is why home purchase contracts are often written with an appraisal contingency. Should the home fail to appraise for its contracted purchase price, the contingency clause allows buyers to re-evaluate &, potentially, walk away without losing the deposit. FHA loans require this contingency in any purchases financed with FHA mortgages.
As a home buyer, it’s risky to waive your appraisal contingency as you may be on the hook to make up the shortfall or forfeit your deposit if you walk away. You need to talk to your Realtor & your mortgage lender to make sure that you fully understand your options.
Here’s an example:
A buyer that plans to put 20% down on a house may have the option to increase the loan amount in order to make up an appraisal shortfall. Instead of 80% LTV (loan to value), you could opt to put 10% down instead---this may have other implications such as PMI or a different interest rate so again, it’s important that you talk to your lender BEFORE you jump into the home buying process & talk through these options so that you can make the best possible offer in a competitive market.
Options for a low appraisal
When a home appraises for less than its purchase price, there are a few potential options:
How to rebut or appeal your appraisal
The home buyer, or seller in some cases, can request an appraisal rebuttal or challenge. This is a formal process in which the buyer’s lender submits a request for the appraiser to re-examine the appraised price of the home. Your Realtor can submit additional comparable homes to try & get the appraiser to reconsider the value.
There are a few things to keep in mind:
First, the Lender will have to submit the proposed comps to the underwriter & if the underwriter does not think that they are relevant comps they will decline the request to refute the appraisal. Second, it is crucial to note that the comparable homes MUST be very similar---similar style, condition, location, etc. You can’t compare a Cape to a Contemporary for example, or a 1200 square foot home to one that is 2400 square feet, or one that has recent updates with one that is not. Third, even if you make it past the Underwriter, these rebuttals often have little or no effect on the appraisers report except to take up time & prolong the stress for all parties. The appraiser will submit a rebuttal response, stating that value has been changed based on new evidence, or that it wasn’t changed and why. It's not impossible & if the appraised value comes in significantly low it's certainly worth the effort but you should know that the chances are very slim that the appraisal will reconsider their original report.
The good news for sellers is that many buyers in today’s market seem to have the cash available to either waive the appraisal contingency or offer to pay a specified amount that they’re willing to cover in the event that there’s a shortfall. This is an important strategy that your Realtor should work to negotiate when determining which offer is the most competitive. Likewise, for a buyer, if you have the funds available, offering a specific amount of funds that you can offer in the event of an appraisal shortfall may be the deciding factor between you & another offer in a multiple offer situation.
If you've spent any amount of time window shopping for homes then you know that there are a lot of homes that are listed with TERRIBLE photos. It's so common that there are multiple websites dedicated to this topic (here, here, & here). I often wonder if home owners just don't look at the photos that have been taken of their property??
It's easy to make light of it but when it comes to your home there are a few things that you need to make sure that you understand & discuss with your Realtor. If you click on the links above you'll see photos that are very over the top & it's easy to assume that it's not really a problem. But the photos below were easy to find & are from properties that are currently listed in RI right now: I spent LITERALLY three minutes in a search & found these examples of terrible photos:
Any day of the week I can skim through MLS & find examples that are identical to these photos. This is primarily true for listings priced under $300,000 but at the same time I can find other listings in that price range with photos that have been taken by a professional photographer & there is a stark difference. Likewise, there's a difference in quality between professionals---an agent needs to know what he/she is doing & have the best resources available to you. I have a current listing in Rehoboth & the first set of professional photos just didn't cut it for me so I hired a different company--yes, that meant that I had to pay for a second set of photos but I have an extremely high standard that I simply will not lower.
Here's my two cents:
All Realtors should offer free, professional photography. Period. Certainly some agents have taken courses & have learned how to take photos that would be considered professional quality, but Sellers should look at previous examples and decide if they are high quality.
It is a Realtor's job to help a Seller understand the current condition of the home & the impact that will have on the listing price. This takes experience & first-hand knowledge.
Photos should be an accurate representation of the home-- you do not want photos that "make the house look bigger" or gloss over an obvious issue. I recently showed a house to a client & the kitchen was under construction but that was not shown in the photos or in the listing remarks/details about the house. And when I say "under construction" I mean that it's obvious the work was started months (or years) ago & that's as far as the work was going to go....No one likes to walk into a house & feel like someone isn't being forth-right, it makes people wonder what else is being hidden or not disclosed. Fish-eye lenses or wide angle lenses, for example, should not be used.
Your Realtor should have industry partners that can assist you to maximize the value of your home.
Your Realtor is your home selling partner not a Wizard! There's work that Sellers must do to get their home ready if they want to maximize the value. I have a Pre-Shoot Checklist that I offer all of my Listing partners so that they have a plan in place to help get ready for great listing photos. Send me a message, I'd be happy to share it with you!
How to Get Your House Ready to Sell
Being proactive is something that both Buyers & Sellers should consider. My advice is to create a plan to Buy or Sell six months to a year in advance. Why? It’s the proactive homeowner who ends up having the smoothest home sale and, typically, makes the most money. And it's the proactive Buyer who understands the market, where they want to live (as in area/neighborhood), what their loan options are, & understands the number$. For the sake of this post, I'm focusing on what sellers can do to Get Your House Ready to Sell.
If you start now, you’ll have plenty of time to prepare your home (and yourself) for the Spring market and be among those success stories of quick & painless home sales. It's all about working with a Realtor to help you to create a strategy to maximize the value of your home. Here are some Action Steps that will help you to prepare.
Current Market Value:
What is the current market value of your home? Let’s get a market analysis done now so that we have at least a rough idea of your home’s current market value.
Will you be buying a home when this one sells? If yes, that market analysis will be important so that you can work with a lender to figure out what loans you would qualify for once your home sells. One of the worst things you can do is sell your home before being pre-approved for a loan for your next home. You also need to understand the moving parts of Selling to Buy options, it's a process with a lot of moving parts.
Have a pre-sale Home Inspection:
Rarely do Sellers take this advice although I think it's incredibly important & useful. Having your home professionally inspected before putting it on the market is the epitome of proactivity!! After all, one of the most common home sale deal-breakers is the home inspection report--if the report is too long buyers often become overwhelmed and get "cold feet", especially first time home buyers. Often there are items that could be easily addressed & handled. Let’s get in front of those objections & find out now what an inspector will learn with a thorough home inspection. I can help you to decide which concerns absolutely must be remedied and which don’t. And, since we’re starting so early, you’ll have time to get the work done before the home hits the MLS in Spring. A few hundred dollar fixes could easily save you Thousands. Please read that again....It's not over-stated. Additionally, if buyers know that an inspection has already been completed this information may build trust with potential buyers--win!
Curb Appeal matters:
Again, this tip is all about making a plan. Our New England Spring can be somewhat elusive but once the Forsythia blooms (right around my sons birthday on April 15) the grass begins to green and the flowering trees begin to bloom. Even though your landscaping isn't in full on IMPRESS mode, there are things that you can do to increase your curb appeal:
Staging for SOLD:
Now is the perfect time to construct a home staging plan and I can help you to look through the eyes of a buyer. Pre-staging will help you to identify personal items that should be removed, rooms and areas that need deep cleaning and furniture rearranging (or removal), areas that need a fresh coat of paint, and items that can be purged from closets, drawers, cabinets etc. These tasks will be far less overwhelming if you identify what needs to be done & create a plan with plenty of time to accomplish them!
The Spring real estate market will be here before you know it. Ensuring that you have a plan in place so that you have time to prepare will make the process much less stressful & far more successful! I'm happy to meet with you to help you create your plan!
Here are some industry tips that I've learned along the way. Sellers need to be sure to ask the right questions when interviewing agents to list their house.
1. Professional Photography: Regardless of the home size, the photos are the first impression & they need to showcase your home in the best possible light. Cell phone photography just won't cut it! And unless your agent is also a professional photographer, you should expect that he or she will be hiring someone else to handle the photography. Do your research---ask to see a few examples of their previous listings. Once the photos have been taken & the listing is posted make sure you have reviewed it & that you are are completely satisfied with the listing (would you buy your house if you saw the photos as a buyer?).
2. Expanded online presence: From social media to enhanced Zillow listings. Your agent should be able to describe the additional social media & online presence that he or she will be able to generate for more exposure of your home. SEO searches, Google+ posts, Facebook Ads, IDX search engines, etc. Your home deserves every effort & there is much more that can be done in addition to submitting a listing on MLS.
3. Follow through: Do what you say, say what you mean! Your agent should be clear about the services that he or she will provide. Your agent should be accessible & available. You should not feel like your agent is too busy.
4. Organizational Systems: Your agent should be able to outline the systems that are in place to keep your listing on track & moving forward at all times. From electronic signature platforms, to apps that develop a shared timeline to meet deadlines, there are a lot of moving parts to a real estate sales transaction & your agent needs to have systems in place in order to stay in charge.
There's a lot more to it than just putting up a For Sale sign and posting a listing on MLS! Ask me how I am successful & how I make sure my sellers are over the moon with the service I provide!
Fall Leaves Bring Sold Signs
Summer has come to an end and you probably are thinking you've lost the opportunity to sell, and need to wait till next summer. But that's far from the truth! Although it's not as hectic and crazy with the swarm of buyers on the market, the fall season brings out the most serious of lookers. They are the pool of buyers that waited out the summer frenzy to find their perfect home in the fall, and you don't want to miss these buyers! They are ready to make a move, today! And selling in a slower period does not equate to less money. That's a misconception that home owners have based on untrue data that floats around. With the right agent, and your home being priced correctly, you can get a great deal selling your home during the fall season. And might actually prefer it. Here are the top 3 benefits to listing during the fall season.
1. Serious Buyers - Let's be honest, if buyers are out during the busy season, looking for homes, they are serious and ready to buy. Although the summer brings in a large crowd, that crowd contains a lot of people that are excited by the season, and fall into the "trend" of house hunting. These people end up not really being serious about the process, and tend to hold off for another time. If people are investing time to look during the fall season, they are more likely to be interested in actually buying your home, instead of touring it.
2. Less Competition - Selling in the fall isn't something many families can accomplish due to personal schedules. That's why a significant amount of homes get listed during the summer season. Which means that summer time brings in a lot of competition. Selling in the fall means the potential house next door that has slightly more perks that may have been listed during the summer, doesn't make your home sit stagnant, since everyone wanted your neighbor's house. It also doesn't devalue your home because of the house that could go up next door that could be under-priced in your neighborhood, and draw all of the attention. With a slower season, you get dedicated attention to your property, which increases the chance of a sale.
3. Easier to Find Your Dream Home - Not only do you get to benefit from a slower season during the selling process, but you can also benefit on the buying side. With less competition on your dream house, you can get a better deal. The summer brings a lot of missed opportunities for buyers on their dream homes, because they go off the market instantly. This will give you the opportunity to get your home on the market and take your time to find the right one to resize into. A much calmer pace to the transaction will make it less stressful, and everyone all around happier. Don't feel rushed into buying a home overnight during the summer, it could turn into a headache. If you want a far more peaceful transaction, that has calmer pace, then selling during the fall is perfect for you.
Buying or Selling? Here's some useful advice!