Home Selling Process – Step Three
This is the third and final in a series on the home selling process.
So, you’ve chosen an agent, prepped your home for sale, and held an open house — now what? It may seem as though the bulk of the work in selling your home is behind you, but there’s still a lot to do. In this post, the third and last in a series detailing the home selling process, we’ll go over the last steps: offers, contingencies, inspections and closing.
If you haven’t already, please review our previous posts in our series of the Home Selling Process. This includes Step One, which covers choosing an agent and prepping your home; and Step Two, marketing, showings and open houses.
Following are some things you can expect in the final stretch of the selling process.
Reviewing and Accepting Offers
If everything goes as planned, you should expect to have offers on your home within days of an open house. Because the real estate market in the greater Sacramento is so strong, you may even have multiple offers. Your agent will go over these offers with you to decide which one makes the most sense for you. Note that agents do not make recommendations; rather, they provide sellers with all the information they need to make an informed decision.
There’s more to a great offer than sale price alone. Sellers should also consider closing costs, which include taxes, fees and insurance. These costs range from 2–5 percent of the sale price, and can often be negotiated between buyer and seller. Another factor to consider when reviewing offers is timing. Although typical escrows are 30 days, some can take as long as 60 days or longer. Depending on your moving plan, you may need to factor the costs of interim housing into your bottom line. However, if a buyer happens to be paying in cash, the period between accepting the offer and move-in date may be much shorter.
There is often an emotional component in selecting an offer. It has become commonplace for potential buyers to submit letters along with their offers. If you are emotionally tied to your home, and prefer it go to a loving family than, say, an investment firm, these letters can often impact your decision. Keep in mind, however, that these letters can sometimes open sellers up to discrimination claims if information is revealed about a potential buyer’s protected status under the Fair Housing Act.
Negotiations are a big part of the home selling process. In a hot market such as the greater Sacramento area, however, negotiations tend to favor the seller. Common negotiations include the final price, closing costs, contingencies, repairs and leaseback.
Common Real Estate Contingencies
No matter the market, contingencies are a common part of the buying and selling process. In summary, a contingency is a condition that must be met before the contract is finalized. The more contingencies, the less likely appealing an offer is to a seller. In a slow market, however, potential buyers have more wiggle room to include contingencies in their offers. Following are the most common contingencies.
- Financing. This is one of the most common contingencies, although it has become less so with more cash buyers entering the greater Sacramento market. In essence, it states that the sale is dependent on the buyer being approved for a mortgage.
- Appraisal. Another standard contingency, this one is required by lenders to ensure the appraised value is at or above the sales price. In other words, banks do not want to loan more money than a house is worth.
- Home Inspection. This contingency stipulates that the sale of the home is dependent on a clean inspection. A home inspector will check every inch of the property for defects, damage and pests, and should anything be uncovered, the deal can be canceled (or renegotiated).
The Home Inspection Process
As mentioned above, the home inspection is one of the most important elements of the home selling process. They are typically required by lenders, and they serve to protect both the buyer and seller from otherwise unforeseen problems. A home inspection is a thorough process that takes several hours. Inspections cover both the interior and exterior of the home and focus on defects or safety issues, not cosmetic issues. Following are some things a home inspector looks for, among many others:
- Pest infestation
- Water damage
- Roof condition
- Electrical safety
- HVAC functionality
- Plumbing issues
- Foundation problems
Sellers typically do not attend the inspection, but they should prepare ahead of time to ensure the process goes smoothly. It’s important that the inspector has access to every element of the home, so be sure to clear away any clutter, trim any landscaping that may be blocking access points and make keys and gate codes available. If you suspect any problems with major appliances (such as the HVAC), you may want to consider getting them serviced prior to the inspection. If you’ve already moved out of the house, make sure the utilities and pilot lights are turned on.
It should also be noted that sellers are required by law to provide disclosures outlining any possible defects in the home. These vary from state to state, but in California, the Transfer Disclosure Statement lists specific items that must be disclosed, including building code violations, flood risk, environmental hazards such as lead paint, neighborhood nuisances, and many others.
The Final Days of Closing
The offer has been accepted, the mortgage approved, the inspection passed and the contingencies released — now it’s time to close! Closing day is when the ownership of the property is officially transferred to the buyer. The funds are transferred from escrow, the fees paid, and the deed signed over. Expect to sign a lot of paperwork during this time. Once it’s all complete, congratulations! You have officially sold your home!