When it comes to selling your home we want to work with you! Here are a few tips every seller should read before selling their home. Help us help you!
Are Commissions Negotiable?
In some areas of the country there is a certain percentage that real estate agents expect to earn as a commission. This commission amount is a certain percent of the sales price. Or, some companies will charge a set fee for their services. However, just like anything else in real estate, this amount is negotiable. When completing the listing agreement, you and your agent will agree on the amount of the real estate commission.
Cut-Rate Listing Commissions
With the advent of the web, a lot of agents are offering “cut-rate” commissions. Most of the time, lower commissions are tied to a lower level of service. If all you want is to be listed with the Multiple Listing Service and a sign in the front yard, then a cut-rate commission may be right for you. If you want an agent who will actively promote your property to other agents and spend money on advertising, then you probably are not going to get that level of service with a reduced commission.
At other times, the lower commissions are offered when you agree to tie in to other services offered by the broker, such as agreeing to use a specific lender, escrow, settlement, or title company. The broker (not the agent) will probably have some type of ownership or profit participation in those businesses. The problem with agreeing to tie in to these other companies is that they do not have to be as competitive in pricing their products or services.
Another common practice when you see an ad for a reduced commission is that the compensation is lowered when you agree to buy your next home through the same agent or broker. Usually, the reduced commission is not really being offered on the sale of your existing home but on the purchase of your next one. The ads are usually unclear on this.
As a result, when you see an offer for a lower commission, you should analyze what you are giving up by accepting such an offer. It probably will not be readily apparent in the advertisement. Be sure to ask lots of questions.
How and When Listing Commissions are Earned
Your listing contract specifies a listing price. Your agent’s job is to bring a “ready, willing and able” buyer to present an offer. If you reach agreement with the buyer, then the agent has done his job and earned the commission. Once the sale has closed, the real estate broker gets paid from the proceeds of the sale.
If the buyer proves unable or unwilling to conclude the sale, the house is placed back on the market and the agent has to begin earning his or her commission all over again.
However, if the seller backs out or does not accept an offer that meets the price and terms of the listing agreement, the listing broker has still earned the commission. They may want to be paid, even though you did not actually sell your home. Therefore, it is very important to carefully consider every detail when completing your listing contract and accepting an offer to buy your property.
“Hot Market” Under-Pricing Sales Technique – Commission Issues
During a “hot market” there is a certain marketing technique which, though very effective, could cause trouble because of the way the contract is written. This is the practice of “under-pricing” the home. In a hot market, a home that is under-priced gets a lot of attention from other Real Estate Professionals, and they all start showing your home to their clients. Often, you get into a situation where multiple offers are presented and the price starts going up because of the frenzy. You end up selling the house above your asking price and perhaps above what you could have received if you had priced it traditionally.
However, the technique does have the potential to backfire, so you should build safeguards to prevent having to pay a commission “just in case.” You see, the listing contract usually states that if an offer is received that meets the terms presented in the contract (including price), the real estate agent has earned his or her commission – even if you decide not to sell. A reputable agent would never attempt to collect a commission if they were using the “under-pricing” technique and it backfired, even if they are technically entitled to one. For that reason, in the “additional terms” space on the listing contract, you should specify your true target price – when the agent has really earned the commission.
When conversing with real estate agents, you will often find that when they talk to you about buying real estate, they will refer to your purchase as a “home.” Yet if you are selling property, they will often refer to it as a “house.” There is a reason for this. Buying real estate is often an emotional decision, but when selling real estate you need to remove emotion from the equation.
You need to think of your house as a marketable commodity. Property. Real estate. Your goal is to get others to see it as their potential home, not yours. If you do not consciously make this decision, you can inadvertently create a situation where it takes longer to sell your property.
The first step in getting your home ready to sell is to “de-personalize” it.
De-personalize the House
The reason you want to “de-personalize” your home is because you want buyers to view it as their potential home. When a potential homebuyer sees your family photos hanging on the wall, it puts your own brand on the home and momentarily shatters their illusions about owning the house. Therefore, put away family photos, sports trophies, collectible items, knick-knacks, and souvenirs. Put them in a box. Rent a storage area for a few months and put the box in the storage unit.
Do not just put the box in the attic, basement, garage or a closet. Part of preparing a house for sale is to remove “clutter,” and that is the next step in preparing your house for sale.
(Even though it may not be clutter to you)
This is the hardest thing for most people to do because they are emotionally attached to everything in the house. After years of living in the same home, clutter collects in such a way that may not be evident to the homeowner. However, it does affect the way buyers see the home, even if you do not realize it. Clutter collects on shelves, counter tops, drawers, closets, garages, attics, and basements.
Take a step back and pretend you are a buyer. Let a friend help point out areas of clutter, as long as you can accept their views without getting defensive. Let your agent help you, too.
The kitchen is a good place to start. First, get everything off the counters. Everything. Even the toaster. Put the toaster in a cabinet and take it out when you use it. Find a place where you can store everything in cabinets and drawers. Of course, you may notice that you do not have cabinet space to put everything. Clean them out. The dishes, pots and pans that rarely get used? Put them in a box and put that box in storage, too.
You see, homebuyers will open all your cabinets and drawers, especially in the kitchen. They want to be sure there is enough room for their “stuff.” If your kitchen cabinets, pantries, and drawers look jammed full, it sends a negative message to the buyer and does not promote an image of plentiful storage space. The best way to do that is to have as much “empty space” as possible.
For that reason, if you have a “junk drawer,” get rid of the junk. If you have a rarely used crock pot, put it in storage. Do this with every cabinet and drawer. Create open space. If you have a large amount of foodstuffs crammed into the shelves or pantry, begin using them – especially canned goods. Canned goods are heavy and you don’t want to be lugging them to a new house, anyway – or paying a mover to do so. Let what you have on the shelves determine your menus and use up as much as you can.
Beneath the sink is very critical, too. Make sure the area beneath the sink is as empty as possible, removing all extra cleaning supplies. You should scrub the area down as well, and determine if there are any tell-tale signs of water leaks that may cause a homebuyer to hesitate in buying your home.
Closets are great for accumulating clutter, though you may not think of it as clutter. We are talking about extra clothes and shoes – things you rarely wear but cannot bear to be without. Do without these items for a couple of months by putting them in a box, because these items can make your closets look “crammed full.” Sometimes there are shoeboxes full of “stuff” or other accumulated personal items, too.
Many people have too much furniture in certain rooms – not too much for your own personal living needs – but too much to give the illusion of space that a homebuyer would like to see. You may want to tour some builders’ models to see how they place furniture in the model homes. Observe how they place furniture in the models so you get some ideas on what to remove and what to leave in your house.
Storage Area Clutter
Basements, garages, attics, and sheds accumulate not only clutter, but junk. These areas should be as empty as possible so that buyers can imagine what they would do with the space. Remove anything that is not essential and take it to the storage area.
Or hold a garage sale.
For most people, changing employers will not really affect your ability to qualify for a mortgage loan, especially if you are going to be earning more money. For some homebuyers, however, the effects of changing jobs can be disastrous to your loan application.
How Changing Jobs Effects Buying a Home
If you are a salaried employee who does not earn additional income from commissions, bonuses, or over-time, switching employers should not create a problem. Just make sure to remain in the same line of work. Hopefully, you will be earning a higher salary, which will help you better qualify for a mortgage.
If your income is based on hourly wages and you work a straight forty hours a week without over-time, changing jobs should not create any problems.
If a substantial portion of your income is derived from commissions, you should not change jobs before buying a home. This has to do with how mortgage lenders calculate your income. They average your commissions over the last two years.
Changing employers creates an uncertainty about your future earnings from commissions. There is no track record from which to produce an average. Even if you are selling the same type of product with essentially the same commission structure, the underwriter cannot be certain that past earnings will accurately reflect future earnings. Changing jobs would negatively impact your ability to buy a home.
If a substantial portion of your income on the new job will come from bonuses, you may want to consider delaying an employment change. Mortgage lenders will rarely consider future bonuses as income unless you have been on the same job for two years and have a track record of receiving those bonuses. Then they will average your bonuses over the last two years in calculating your income.
Changing employers means that you do not have the two-year track record necessary to count bonuses as income.
If you earn an hourly income but rarely work forty hours a week, you should not change jobs. There would be no way to tell how many hours you will work each week on the new job, so no way to accurately calculate your income. If you remain on the old job, the lender can just average your earnings.
Since all employers award overtime hours differently, your overtime income cannot be determined if you change jobs. If you stay on your present job, your lender will give you credit for overtime income. They will determine your overtime earnings over the last two years, then calculate a monthly average.
If you are considering a change to self-employment before buying a new home, don’t do it. Buy the home first.
Lenders like to see a two-year track record of self-employment income when approving a loan. Plus, self-employed individuals tend to include a lot of expenses on the Schedule C of their tax returns, especially in the early years of self-employment. While this minimizes your tax obligation to the IRS, it also minimizes your income to qualify for a home loan.
If you are considering changing your business from a sole proprietorship to a partnership or corporation, you should also delay that until you purchase your new home.