Sell Your Home
| FREE MORTGAGE RATE QUOTE: |
|
|
Benefits for the
Seller
Most sellers of real
property insist on the highest price and all cash.
Sellers want a fast closing with little hassle. Sellers
also want to pay as little taxes as possible on the gains
incurred. In many cases, the seller can have most of his
needs satisfied by an installment sale rather than a
traditional cash sale. Let’s look at these needs one by
one.
1. Highest
Price. There is no doubt that a seller can
insist on and receive the highest price when offering flexible
owner-finance terms. In many cases, the seller can
receive more than the fair market value of the property by
offering these “soft” terms. People are always willing
to pay a premium for non-qualifying
financing.
2.
Cash. Nearly ever seller says he wants all cash, but
few need it. What the typical seller wants is the most
net cash from the deal. Often, the seller has to pay
closing costs, title insurance, broker fees and the balance of
the existing financing. In addition, there may be
capital gains tax due to Uncle Sam. In many cases, the
sale of a property by an installment sale (particularly a
"wraparound") will net the seller more future yield than any
source from which the cash proceeds were
reinvested.
3. Fast
Closing. Nothing holds up a sale more than new
lender financing. In some areas of the country, it can
take months for a buyer to qualify and close a new loan to
purchase your property. Since most standard real estate
contracts contain a financing contingency, you may end up back
at square one if your buyer does not qualify.
Furthermore, if your house is not particularly nice or unique,
it may take you some time to even find an interested
buyer. Since you are competing with all of the other
houses for sale, you may need to spend thousands of dollars in
paint, new carpet and landscaping just getting the house ready
for the market.
There are very few
"assumable" loans and few sellers are offering “soft
terms.” Thus, an owner-carry sale makes your house
unique. Furthermore, an owner-carry transaction can be
consummated in a matter of days, since there is no appraisal,
underwriting, survey or other nonsense involved. In many
cases, you will be able to sell the property yourself, saving
thousands in real estate broker’s fees.
4. Tax
Savings. On an installment sale, so you only pay
gains to the extent you receive payments each year. This
can be particularly advantageous if you have owned the
property for several years. Furthermore, you can combine
the installment sale with an I.R.C. §1031 Tax-Deferred
Exchange for further savings.
Selling -
Selling Your Home: A Quick and Dirty
Guide
Considering putting your
house on the market? You have an important decision to make
before you list your home. Do you want to hire a full-service
broker, work with a discount broker or sell the place on your
own? There are advantages and disadvantages to each method and
it's not an easy decision.
A
traditional broker can expose your home to as many buyers as
possible and may present you with a complete marketing plan.
But for a little extra effort, you could save yourself
thousands of dollars by selling your property on your own. Is
the extra work worth it?
Below are some pros and
cons to consider before making the decision:
Real Estate
Brokers
The
Pros:
Brokers sell houses.
Traditional agents continue to dominate the market, despite
the advent of the Internet. Indeed, 87% of all sellers sold
their homes with the assistance of a realtor, according to the
National Association of Realtors.
Want promotion? Use a
broker. Traditional real estate agents place their property
listings in a database called the Multiple Listing Service
(MLS). This database is used by nearly a million agents
nationwide and contains more than 90% of all properties that
are for sale.
A real estate agent can
do a simple search and find all of the homes in a client's
price range. Buyers can even search the MLS themselves at
Realtor.com. Agents using the MLS have an agreement to spilt
the 6% commission, so there's plenty of incentive to show a
competitor's inventory.
A good agent will take
care of everything for you. He or she will completely manage
the transaction. Your agent will do everything from helping
you set a proper asking price and prescreening potential
buyers to showing your home and negotiating the final price.
The only thing an agent won't do is keep the place tidy. Now
you will have plenty on time to spend looking for your new
abode.
The
Cons:
Brokers are pricey. You
can expect to pay a 6% commission for their services. So if
your three-bedroom bungalow sells for $300,000, you'll have to
cut a check for $18,000 at closing. Realize though that many
brokers charge slightly lower fees and all fees are.
An agent may not always
look out for your best interest. Consider the open house. Did
you know that only 3% of homes are sold this way? And yet
buyers are invited to view a home en masse. Why is the open
house so popular? They help your broker meet more clients and
are used as a means for generating buyer leads.
A broker is in control
of your deal. An agent is free to show your home at
practically any time of day, so be prepared for strangers to
traipse through your house at the worst possible time. More
importantly, you have to trust that your broker is providing
you will all the information you need. Your broker will be
negotiating on your behalf, and helping you make a final
decision. At its worst, you may be asked by your agent to
reduce your price. He or she may be trying to make a quick
sale and move on to another property.
Discount
Brokers
The
Pros:
Discount brokers are
less expensive. Discount brokers charge sellers between 2% and
4.5% for their services. Typically, the more you pay, the more
you get as far as service that's provided. So the commission
on a $300,000 bungalow could cost you just $6,000, far less
than the $18,000 a traditional broker would charge you.
You'll get more exposure
with potential buyers than if you sell your home on your own.
Discount brokerages spend money on advertising and promotion.
They generate a considerable buzz which draws visitors to
their web sites. For example, Foxtons, which operates only in
New York and London, spends $12 million to $13 million a year
on advertising, which generates at least 50,000 new visitors
to its web site daily. Foxtons boasts that 92% of its listings
sell without making it into the Multiple Listing Service
database.
Some discount brokers
will prescreen for qualified buyers. If security is a worry of
yours, this is especially important. If you just put a sign in
the yard or ad in the paper, someone may view the home just to
case the place. Many discount brokers will run credit checks
on all potential buyers and makes sure they can afford a
sufficiently large mortgage.
The
Cons:
The less you pay, the
less you get. Sometimes you are basically paying for a web
listing. Sometimes the discount broker will field calls from
prospective buyers, but leave the showing up to you to deliver
the hard sell. If this is all the benefits you're getting,
some industry insiders suggest you run an ad in the local
newspaper or pay for an online listing.
It costs more to get
your home in the Multiple Listing Service database. You will
have to pay a higher fee to get this service. Instead of
getting the 2%, you may have to pay 4% to 4.5%, for the
listing.
Don't expect agents to
line up outside your door. Even with your listing in the
Multiple Listing Service database, many agents may still
decline to show your property, because it means less money for
them. Many discounters only offer buyer's agents 2% or 2.5%
commission, rather than the traditional 3% buyer's commission.
While that seems like a small difference, it can really add
up. When an agent can make $9,000 selling one $300,000 home
vs. $6,000 on another similar property, which one do you think
he'll show first? The answer is obvious. Not many agents will
want to show your house if you offer them a less competitive
commission.
For Sale by
Owner
The
Pros:
More money for you. No
commissions. You get to keep whatever your home sells for. You
can keep that 6% commission and use it for the down payment on
your next home. It's yours to keep and can go toward more
important expenses, such as your child's education.
You know and love the
special features of your home. It makes sense that you are the
best person to point out all of the amenities and sell it
better than an agent. The majority of agents are not familiar
with your home and showing a home they have never really seen.
Most are walking through it for the first time.
You know what is right
for you. You can have complete control over the deal. You set
the right price, you determine convenient times to show the
home and you get to negotiate the final price. This way, you
know all the information. You get to decide when to lower your
price or stay firm because your house is attracting a lot of
interest.
The
Cons:
Less
awareness. You will be automatically limiting the number of
potential buyers. Through your lack of presence in the
Multiple Listing Service, you'll have a much smaller audience.
Also, many buyers feel more comfortable using a broker and
want to have a professional on hand to help analyze the
properties. Their broker will help them view all of the
available homes in a given neighborhood. They get these
listings through the MLS.
Expect to get less for
you home. Homes that sell with a broker go for a higher median
price than those sold by an owner, according to the National
Association of Realtors. Many buyers feel there is more room
for negotiations when they are dealing with the owner. After
all, the owner is already avoiding a hefty broker's fee.
Selling your own home
takes time and effort. You have to set a proper price,
advertise and promote your home, take calls from potential
buyers, prepare you home and then put on your best smile and
sell that house like a pro. Then you have to negotiate. Some
industry insiders even argue that buyers are more comfortable
with a third party, because they don't want to insult the
seller. It's enough to make you crazy trying to juggle all
that's involved while working a full-time job and trying to
find a new home for your family to move into. Some argue that
the hassle is well worth the 6%
commission. |
