When it comes time for selling your home there are so many options. This actually makes selling your home very hard.
This is why we decided to put this guide together. After reading it, you will have all of the necessary knowledge to sell your home. Even if that means doing it yourself without a real estate agent.
The biggest question you must answer when selling your home is, what's it worth?
As a homeowner determining your homes TRUE value can be tough. This is usually why many people hire a realtor.
We will talk about the PROs and CONs of hiring a realtor later.
For now, let's figure out how to do this correctly.
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This is something that usually disappoints many homeowners. Especially, if you have done any considerable work to the home.
This is what your house is ACTUALLY worth. This is the value that an appraiser will give the home. This is then used for the buyer to get a loan. While an appraisal is an opinion and can be disputed, they're usually pretty accurate. This can really hurt if you have over improved your home and it is not reflected in the appraised amount.
How an appraisal works
An appraiser looks at your home and then compares it to "similar" homes that have SOLD in your neighborhood.
Similar homes are:
If they find plenty of similar homes, usually 3-5, then they can determine a value. Now, they will make some adjustments. The issue is that these comps will usually be done through PICTURES. If the homes look updated they will be considered comps. It won’t matter that you have more expensive cabinets or countertops or high-end paint.
If the other homes in that neighborhood are selling for $180,000 then your home is worth $180,000.
This is why we always explain what updates make sense for your home. We help homeowners determine their home’s value and what repairs they need to make. We have seen many houses where the homeowners have over improved their home. Then when it came time to sell they couldn't get their money back. So, when thinking about doing any work before selling your home, make sure to NOT over-improve.
This is usually what you as the homeowner feel your home is worth. This also comes in to play when a buyer is looking at your home.
Keeping in mind what we just talked about above. However, some over improvement might actually help you when selling your home. If all of the homes similar to yours are selling for $180,000 with say a standard style of updates. You can now come in and add a few extra features and sell faster! Of course, keep in mind that the features you add will NOT raise the value. But, it will help in the speed of sell. Also, if it's that nice then maybe someone is willing to pay more.
Now you're probably wondering how can they pay more if the value is appraised at $180,000. Just because the value of the home is $180,000, which is what the bank will lend. Doesn't mean the homeowner can't bring more money to the table at closing.
We understand this might get you excited. But, keep in mind this rarely happens. You need to be an extremely HOT market with almost no houses for sale.
Why is perceived value important?
Even though an appraiser says that similar homes to yours are worth $180,000 doesn't mean a buyer will pay it.
If, when you're selling your home you don't do the necessary updates then it will not sell for $180,000. The reason for this is, no one will pay for it.
So even it though it did appraise at that value, it doesn't mean someone is willing to pay that much.
Just because the house appraises for $180,00 doesn't mean:
Also, just because you did all of these amazing updates doesn't mean it'll appraise.
So, what do you when selling your house?
The best way to determine what the approximate appraised value will be to run comps.
Comps is short for comparables. These are the same houses the appraiser will use to determine your home's value.
The tricky part is that you will need access to the MLS (Multiple Listing Service) in your area. Only real estate agents have access to these.
You can hire a realtor. Or, you can reach out to an investment company like PRYME Homes and ask for a free evaluation.
With either option, you will have to listen to their sales pitch. This is fine because this is their business, not yours. You should always ask for experts opinions so you can determine the proper value.
So, now you have access to comps. You should look at houses that are very similar to yours. Look at the ones that sold for the highest amounts.
NOTE: If one house sold for $195,000 and the 3 other ones sold for $180,000. Don't think yours will be worth $195,000. There are many different factors to why just ONE property sold for significantly higher.
No matter who is pulling this info for you, make sure that they're looking for SOLDS, not Active properties.
The reason for this is, Active properties reflect a price that someone wants NOT what they'll get. SOLDs on the other hand, reflect what someone got for it.
So hopefully you have about 3-5 properties that have the same beds and baths as yours. With similar square footage and year built. Are also in the same neighborhood.
Now, you start to see what they all have when they sold.
What to look at:
Now you simply compare what you have or need to those houses.
Don't get creative or start trying to do what you saw on HGTV. This when people get into trouble. They start adding barn doors and subway tiles to a house that doesn't need it. That material is a lot more expensive than you would think.
Now you have your homes worth and what types of repairs/updates you need.
Time to get to work.
A few things to keep in mind:
1- A friend recommended them. Just because they did a good job before doesn't mean they will now. Many people get hire a contractor because they did work on their friend's house. Nothing wrong with this. But don't give them a really big job all at once. Section it off so if you see they're not doing something right you can correct it or fire them.
2- Hiring just on price. We know that you want to make as much money possible. But, if you hire purely because they are the cheapest you might actually spend more. The reason many end up spending more is because the cheaper contractor cut too many corners. Or maybe they use really cheap materials. Or they may have even done it all wrong and now you have to pay someone else to fix it. Fixing bad jobs sometimes cost more than doing right from the beginning.
3- Have a scope ready. The reason you did all of the research above is to know what work your home needs. Asking a contractor what you should do is the wrong way to go. The contractor doesn't know what you need for your home to sell in that area for top dollar. This is why you do the value research. We go over this in one of our podcast episodes.
4- Be clear with what you want. Make sure to explain very thoroughly want it is you expect. Don't just say wall tile in the showers. Tell them "I want these long tiles that I saw at Home Depot". They may recommend similar material for a cheaper price which is good. But you want to make sure you OK all materials before they're installed.
Many homeowners, for big jobs, hire one General Contractor(GC) to handle the whole job. This is fine. Just keep in mind that with GCs there is always a markup in price.
If you hire a GC, we would recommend you hire one that will be there working in the project. There are many GCs that send their guys there and you don't see him until the end of the project. This is a big red flag because the workers they brought may not have clear instructions which will cause problems. Also, in order for GCs to make more money, they hire cheaper help. This means that those guys need to be watched over to make sure they do things right.
Another option is to hire individual tradesmen. If you need a roof, call a roofer. If you need floors, call a floor guy. You get the point. This helps keep prices low because usually, the guy you're calling is the one doing the job.
The easiest way to find contractors is at the places they sell the materials they will need. Go to a tile place to find a tile guy and so on.
When you're there you simply ask someone that works there. Don't just ask for one person. Ask them for multiple contacts. This way you can call them all and compare.
Always get more than one bid for a job. The reason for this is obviously price, but also to learn. What we mean by "learn" is, you can see what's different about each one. You may get one contractor that says you need this while another says you need that. When that happens ask each of them, "why this and not that?". This way you can see which one really knows their craft and which is just selling.
When selling your home, many decide to go with the help of a realtor. This is a great choice for many reasons.
But, there are also downsides to hiring a realtor.
There are exceptions to both sides. Let's cover how to hire the RIGHT realtor.
Yes, you can hire the wrong realtor. There are over 1.3 million real estate agents in the US. With less than 5% selling more than 15 homes per month. This means the majority may not be even able to cover their bills.
Like we spoke about above in "2. Lack of experience." Sometimes new agents can cause more problems than they solve.
Qualities you want to look for:
WARNING: You want to make sure you watch out for is hiring your "friend" the realtor. Many people make this mistake because they're thinking it might save them money. IF your "friend" is a good realtor then there's no issue with this. But, if they're not, now you have a problem.
Hiring the wrong realtor can actually end up costing you thousands of dollars more!
When selling your home, having the right person representing you means a lot. A friend or family member while might not have the necessary knowledge or skills.
When selling your home working with an investor may be by far your best option. Realtors can only list your property on the open market. This also costs you money. Many times working with an investor can be FREE!
We have seen many, many times when a homeowners only option is to sell to an investor. This is an issue if you go with a realtor because your house won't sell.
Like realtors, there are right and wrong investors. If you think that when selling your home having someone agree to your price is enough... listen up.
There are many investors that will agree with your price at first just to get you under contract. They then wait you out and lower the price last minute.
There are also wholesalers, who call themselves investors. Wholesalers pretty much negotiate a price with you and they sell it for more to an investor. There's nothing wrong with this if it solves your problem. But this does become an issue when they don't have a network of buyers.
Always reach out to multiple investors to average out the truth.
As you see both working with realtors and investors have their pros and cons. We recommend reaching out to both to get the full story. A good realtor or investor will tell you when they can't help you.
For Sale By Owner (FSBO) is something many homeowners try in order to save money.
There's nothing wrong with trying to save money. But, you must understand that there's a reason we talk a lot about experience.
Besides the fact that most FSBO sell for 23% less than what they would sell with an agent. There are a lot of risks when selling on your own.
There are more but we think you get the point. While you're more than welcomed to try, we don't think it EVER makes sense. Unless if you already have the buyer and your house is in perfect conditions. Even then, you should get an agent to assist for a very reduced fee.
We know you may feel overwhelmed with all of the information in this guide. But, use it as a guide!
Feel free to scroll to the parts that you care about and read that part.
Of course, PRYME Homes is always here to help. So, feel free to reach out to us for any questions or concerns. When it comes time for selling your home PRYME Homes is here to help!