GUIDE TO SELLING YOUR HOME CHAPTER 4.

Chapter 4. Meeting With Your Agent

Now is the time to put your planning to work and your home on the market. Your main concerns at this stage are" what to expect at a "listing" appointment, how to be prepared for one. You will want to know how to set an asking price, how to fix up your home to sell and how to show your home to its best advantage.

What is meant by a "listing agreement?"

Click here for a copy of the listing agreement

When you put your home up for sale, it's called "listing" because your agent lists the property on the open market and in the Multiple Listing Service to expose your home to the widest range of buyers. To do this you employ the agent to market your home by signing a contract. All Real Estate Transactions in New Mexico must be in writing. The Listing Agreement contains:

• A complete description of your property
• The price you're asking
• An indication of the financing terms you will accept
• The brokerage fee
• The length of time the agreement is to be in effect

When you sign the listing contract, you may agree to give your agent the "exclusive right to sell" your home for a certain listing period, at the end of which you may extend or terminate the agreement, depending on your satisfaction with your agent's efforts to sell. Just as you give the agent the right to list and sell your home, the agent's has certain duties and responsibilities to you under a strict code of ethics and the laws of the State. All of these are spelled out in the listing agreement.

A listing appointment is most productive if you have certain specific essential and optional information on hand. Because the list is long, you can... click here for a checklist of information needed.

You and your agent will discuss the special features that you think would help sell your home, such as extra storage, built-ins. and other extras, and special features that increase the value of the home. You will make a list of what you personally like about your home and neighborhood- pinpointing the convenience of schools, transportation, shopping, recreation. Anything else that you think would help get your home sold quickly, and profitably.

At this point, a discussion of your wants and needs in this sale will affect all the subsequent steps in terms of expenditures, pricing, terms, and marketing strategy. The most important part of the meeting will be the setting of a price for your home.

Section A. PRICING

This is by far the most important, yet most often misunderstood step.

Failure to understand the market and properly price your home is the single biggest factor that will cause it to NOT SELL for top dollar and sit unsold for months on end! To make sure that this doesn't happen, you must first focus on two main areas:

1. CURRENT MARKET CONDITIONS
2. YOUR TIME REQUIREMENTS

LOCAL MARKET CONDITIONS: When there are few homes on the market for sale, or a large amount of eager buyers prices rise. This is referred to as a seller's market. Conversely, when there are few buyers or lots of eager sellers, prices fall. This is a buyers market.

Of course, that is a very simple example. The local market may be at one of the extremes, or anywhere in between. You must consider things like interest rates, new home sales, and local economic factors such as businesses opening or closing, increasing population, etc.

To get the most complete information, the agent will obtain a computerized analysis of your area from the Multiple Listing Service including homes available, under contract, and closed homes, the average price per square foot, the average days on the market, etc. The agent will identify the homes that are similar to yours, ones that are nearly the same size, age, style, lot size and landscaping as well as other features and upgrades. Then we look for items that are different like additions or remodeled kitchens, baths or other areas, pool, etc. and make adjustments. DO NOT make the mistake of thinking that maintenance items can be considered as improvements that increase value. Things such as a new roof or new heating & cooling unit are really maintenance items. While these items may make your home sell faster, they typically do not add much to the potential asking price of the home. After all, a buyer will expect a home to have a roof that doesn't leak and a properly functioning heating/cooling unit.

Next, the agent will review the data and make honest, unbiased comparisons and adjust values of those houses versus your home. Remember, a seller can ask any price for their home, regardless of what it is really worth. Many times available homes are priced way above the market value. These prices DO NOT reflect the realities of the market. The agent will depend mostly on the pending and closed sales, but asking prices if all moving in the same direction can give an idea of current market conditions. The real bottom line is what buyer's are willing to pay and what seller's were willing to sell for in a free, open market.

Once you determine the proper price range for your home, how quickly you want to sell will dictate whether you price at the lower or higher ends of the price range. This is where your own time frame and other requirements come into play. Your own personal situation will have an effect on the price you ask for your home. It is easy to see that if you needed to sell your home within 4 days, you would have to price it lower than if you had 4 months to sell it.

It is natural for every homeowner to have a certain pride of ownership, and to think that their home should be worth more than the one down the street. This is where you must be objective, and try to take your emotional attachments to your home out of the situation.

You must be reasonable. Unless you are in a total sellers market, if you price your home too high IT WILL NOT SELL!! It will sit on the market for months on end, getting the reputation of a problem property. People will assume that since the home has not sold, there must be something wrong with it. They will start to avoid it like the plague!

Even if you then drop the price, the damage is already done. The stigma is there, and you may need to drop the price even further to entice skeptical buyers.

DO NOT FALL INTO THIS TRAP!

A COMPLETE DISCUSSION OF THIS MOST IMPORTANT ISSUE

IS FOUND IN THIS SECTION:

"PRICE IS THE KEY TO SELLING"

Click here for a full discussion.

Improper pricing is the single biggest mistake that sellers make. Don't let this happen to you. Make sure that you set a reasonable price for your home right from the start. To arrive at a fair price, your agent will provide an expert comparative analysis of value of your home based on the evaluation of all market conditions.

Section B. How much cash will you walk away with?

That's a good question. During your listing appointment, once you and your agent have set a listing price for the property, based on that price, your agent will be able to give you an idea of your expected expenses and your estimated proceeds - or net "walk-away" cash.

Click here for a sample Seller's Estimated Proceeds Form

From the 'SELLER ESTIMATED NET PROCEEDS FORM' you will note that we show a good faith estimate of these costs:

your agent begins with the sales price that you agreed upon initially, and then adds or subtracts anticipated costs as they apply:

Mortgage Payoff (including prorated interest due, pre-payment penalties if they apply), Any buyer's closing costs that you negotiated and agreed to pay (loan discount or origination points, other buyer closing costs), Title Commitment Fee, Title Insurance, Transaction Fee, Brokerage Fee (commission) + Sales Tax , Appraisal, Survey and Flood Certification, Title Company Closing Fee, Tax Service Fee (bank check for taxes owed), Loan Document Fee, Recording fee, Inspections Fees (general home/structural inspection, termite, well or other inspections (Negotiable as to which party pays), Homeowners Warranty, any anticipated owed or prepaid tax reimbursement, escrow reimbursement, impact fee, repair allowances

NOTE: some of these fees are negotiable as to who pays them - Buyer or Seller. The bottom line is your net cash. Remember until final closing this is a good-faith estimate based on estimated costs and sales price. Any changes in the figures will affect the bottom line at the time of the actual sale.

Other costs of selling

Besides the above costs of mortgage payoff, fees, commissions and settlement costs, you may also have some or all of the following expenses:

• Fix up costs
• Home-buying costs, including down payment, if you buy another home
• Moving costs
• Costs of equipping and/or furnishing your new home

Be sure to maintain a cash or credit reserve for unexpected expenses.

Section C. Tax Implications

As you know from the tax deductions that have flowed from owning your home, housing is probably the most tax-advantaged investment available to most taxpayers. When you sell your home, taxes come into play in many ways.

Because of the Tax Relief Act of 1997 and other tax law provision, up to $500,000 of any capital gains realized on selling your residence is excluded for taxation ($250,000 for singles and those using married, filing separate status). The property must have been used as your principal residence for at least 2 of the 5 years leading up to the sale date. You can exclude $500,000 on sales over and over, but there must be at least 2 years between each sale.

If your gains are larger than $500,000 or $250,000 exclusion amounts, you can reduce the tax by deducting from the sale profit:

• The cost of improvements
• The cost of broker's commission and lawyers fees
• The cost of title insurance, recording charges, transfer fees and other closing costs

You can reduce your immediate tax burden, in situations where the gains are larger than the exclusion amounts, by making an installment sale where you spread out your income - and taxes - over a period of years.

In cases where the gains exclusion is not available or not large enough to eliminate the gains, if you can convert the residence to an investment property, a Section 1031 "tax-free swap" might be used to defer the gains into another investment property. You should consult with your tax professional in such situations, particularly since you might be losing the benefit of the $500,000 exclusion.

If your lender requires you pay a penalty for paying off your mortgage before its due date, that charge is deductible.

Remember: All tax matters are subject to change and you should consult your professional tax preparer or accountant before making any claims.

Section D. In selling my home and buying a new one, what can I do to be sure I won't get stuck with two mortgages?

Your best strategy is to place your home on the market far enough in advance to attract a buyer, negotiate a contract with a settlement date that will allow you to go house hunting buy and close in that time period.

If you find a new home before you've sold your old one, you have several options:

You may be able to arrange a bridge loan secured by the equity in either your old or new home to cover your expenses until the closing on your old home. Lenders sometimes require you to have a purchase contract on your old home, but bridge loans can sometimes be found if you home is not yet sold.

If your move is job-related, but no home-purchase relocation program is in effect, you might persuade your employer to either provide a bridge loan or pick up some of your relocating expenses.

If you are buying a new home locally using the same Agent, find out if your Agent has a program where they will buy this home if it fails to sell in time for you to close on another home that you have purchased through that Agent. If we are your agent, we will participate in "A Guaranteed Sale Program" under specific circumstances to be negotiated.

Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6

What should I do to get ready for my agent coming for the "listing appointment?"

A listing appointment is most productive if you have the following information on hand. Because the list is long, we've divided it into essential items and optional items.

• Essential information
  • Your property tax for the past year
  • Your loan account number and loan balance, your interest rate if possible, your P.I.T.I (principal, interest, taxes, insurance) and the amount of assumable mortgage money available, if any. Your agent will help you notify your lender of your intention to pay off your loan, which lessens the amount of prepayment penalty and interest you may or may not be subject to, depending on your lender's terms.
  • A list of personal property that will go with the home (also "Convey") when you sell. If removing the item will create needed repairs, the item is considered real property that goes with the home unless otherwise indicated A list of personal property that will not go with the home.
  • Legal property descriptions
  • Homeowner's association or condominium bylaws
  • A list of major unresolved defects which should eventually be disclosed to a buyer. If you have a major problem you don't intend to correct, be candid about it. Honest disclosure is always best.
• Optional Information
  • Your utility bills for the past year
  • A list of all the energy-efficiency features (insulation, etc.) including improvements you've made (solar water heater, etc) ideally with utility bills before and after improvements to illustrate the savings.
  • A certificate, if available, showing your home is free of termites. (Inspections will be ordered later)
  • A list of property tax assessments and any existing easements (title search and survey will be ordered)
  • A certificate of current inspection of your septic tank and well, if you have either.
  • Any documentation available of other home-related matters such as:
    • Warranties if still in effect on electrical, heating/cooling systems, appliances, etc.
    • A property survey or house location plat
    • A floor plan if you have one
    • Title insurance policy
    • a professional property appraisal if available.
  • A list of special features that you think would help sell your home, such as extra storage, built-ins or a generator to insure against power outage, etc.
  • A list of the features your personally like about your home and neighborhood- pinpointing the convenience of schools, transportation, shopping, recreation. Anything else that you think would help get your home sold quickly, and profitably.