Updated: Jan 3, 2021
There are some things we do all the time, like grocery shopping.
Other things come naturally and feel intuitive, like riding a bike.
But some things are weird, messy, and leave many of us with a lot of questions.
Selling your house is one such thing that's likely to have you asking a million and one questions.
Here are a few things I wish I knew before selling my first house.
Hopefully, my experiences will help answer some of your questions, and better prepare you for selling your house.
Buyers Will Ask You To Help With Closing Costs
Before I sold my first house, I had no idea buyers would ask for me to help pay their closing costs.
When a buyer asks a seller to put money towards their closing costs, it's known as seller concessions.
Buyers may ask sellers to give a credit towards repairs
Help put cash towards their down payment
Or contribute some money towards their other closing costs
These costs don't necessarily come out of the seller's pocket. But they will show up on a settlement statement in some way or another as credits to the buyer.
I've received offers asking me to contribute over $10,000 in buyer closing costs, and I've been presented offers with no mention of concessions.
It's the luck of the draw. The only thing you can do to manage the amount of concessions a buyer will ask for is to note a cap in your listing.
For example: "Seller will contribute up to $5,000 in closing costs."
But, if you do this, you run the risk of negotiating against yourself if someone was going to request no, or less of a contribution.
Buyers Will Ask You to Make Repairs
Before I sold my first house, I had no clue buyers would ask me to make repairs to the property.
What threw me off is that I had just fully remodeled/renovated the property, and yet, almost every offer came with a request for repairs.
Let's face it; no matter how excellent condition you believe your house to be in, it won't be perfect. It's incredibly likely buyers will ask you to make repairs, small or large, before you sell.
I've had offers include repair requests as small as installing carpet on the stairs, and I've had offers where they wanted me to replace the roof.
Your mileage will vary here, but be prepared for people to ask you to perform some work on the house, and set aside a budget for it.
If you don't want to make any repairs, you can offer a price reduction equal to the amount of work they're requesting, and hope the buyer goes for it.
You'll Get A Lot of Showings, But Not A Lot of Offers
Getting showing requests is exciting after you list your house, but it's important to remember that not every showing will result in an offer.
I remember calling my agent after almost every showing asking if the interested party was going to write up an offer.
More often than not, the answer was no.
Just be patient, and the offers will come.
You don't want to wear out your agent by calling them after every potential buyer finishes their tour. If something important happens, such as:
The buyers are interested in putting in an offer
The buyers left you some vital feedback
Anything else that needs to be brought to your attention
Your agent, so long as they're good at their job, will call you and fill you in.
Not All Offers Are Created Equally
You must understand that not all offers are created equally. There are many significant differences to consider when choosing which offer to accept.
Let's discuss them all in detail, starting with the financing type.
Cash Offer / No Financing
Cash offers come with no financing strings attached. Your buyer will not have to get approval from a lender, and they will not be bound by an appraisal to determine the maximum sales price.
Investors most commonly make cash offers for properties that need rehabilitation, so it's unlikely you'll receive a full price cash offer for your house if it's in top of the line condition.
Back in 2017, about one in four homes sold for cash, according to the National Association of Realtors. However, most of those sales were to investors and buyers of distressed properties.
When a buyer uses an FHA loan, the property has to meet what's considered the minimum property standards.
Generally speaking, these standards are put in place to ensure buyers are purchasing a safe home and that all the major systems are in working order.
Some examples of things that may prevent an FHA loan from closing are:
A roof having more than three layers
A missing water heater
If a property does not meet the minimum standards, the deal isn't necessarily over. You may be able to perform repairs that will bring the property into compliance so the loan can close.
VA loans are powerful tools for buyers who qualify (VAs).
These loans also require a property to meet minimum property standards before the deal can close.
Some examples of the minimum property standards include:
Crawl spaces are free and clear of debris
Lead-based paint being safely remediated, if it's detected on the property
The property provides adequate space for living, sleeping, cooking and dining, and bathrooms
Similar to an FHA loan, a property can be brought up to the minimum VA standards so the loan can close.
USDA loans are another loan type available to buyers. USDA loans can only be used for properties that are in rural areas, and properties must also meet another set of minimum property requirements.
Some of the minimum requirements for a USDA loan are:
No cracks in the foundation
All exterior doors must have functioning locks
Roofs must have at least five years of life left, with no visible holes or leaks
Just like a VA and FHA loan, a property should be able to be brought up to the standards if it doesn't already meet them.
A conventional loan doesn't come with all the strings attached, like the VA, FHA, and USDA loans.
Conventional lenders may require properties to meet their standards, but there's no general guideline that all lenders follow that I'm aware of.
If you were to receive four identical offers, one FHA, one VA, one USDA, and one conventional, it might be safer for you to go with the conventional offer as the lending requirements are less strict.
The closing date determines when the sale will be finalized, and when the title of the property will transfer to the new owner.
Whether or not an extended or shorter escrow period is better is up to you to decide.
Buyers using any type of financing will likely need at least 30 days to close. The banks have a lot they need to do behind the scenes.
Cash buyers can typically close much quicker. Sometimes in as little as 7 - 10 days.
Earnest Money Deposit
Earnest money acts as consideration for the purchase of the property.
Buyers may submit how ever much earnest money they'd like, unless a minimum amount is required, which is typical of homes being sold as a bank foreclosure.
Generally speaking, the larger the earnest money deposit, the better.
A $10,000 earnest money deposit is a lot more convincing than a $1,000 earnest money deposit.
After all, if a buyer fails to perform, but doesn't meet one of their contingencies, the earnest money is often not required to be paid back.
Lastly, you need to consider the seller concessions buyers are requesting, if any. Keep in mind; you can negotiate the amount of concessions you're willing to give.
Seller concessions typically come in two forms:
Down payment/closing cost assistance
Repairs requested after an inspection
Let's say you receive two identical offers, both for the full asking price.
However, each offer has different concessions.
The first offer asks you to contribute $5,000 towards the buyer's closing costs, and that's it.
The second offer asks you to pay $4,000 towards closing costs but also asks you to fully replace the roof, replace the electrical box, and all the electrical outlets.
Which offer is better?
It's Possible To Negotiate Your Realtor's Commission
When you hear realtor commission, 6% is probably the first thing to jump into your head.
But did you know you can negotiate the commission with your realtor?
An important thing to consider is that your realtor doesn't collect the entire commission for themselves.
When a buyer's agent is involved, they split the commission with them how they see fit.
You can negotiate with your realtor for a better commission, maybe somewhere between 5% and 5.5%, but any lower and they may not be happy.
If you're feeling up to it, you can try to negotiate a lower commission with your realtor should there be no buyer's agent involved.
When no buyer's agent is involved, your realtor gets to keep the entire commission, and they may be willing to drop their rate a percent or two.
They still get paid, and you save a little money. It's a win/win.
You Can Accept Backup Offers
After accepting an offer, you can continue accepting back up offers.
A backup offer might come in handy if the first contract you have falls through for some reason.
Many buyers may be hesitant to put in a backup offer, though, as it locks them into a property that is likely to sell to someone else.
Many people don't want to fall in love with a house they're unlikely to get. And that's understandable.
Another thing to consider is after you accept an offer for your house, it's status on the MLS will change.
The status will go from "active" to a form of "pending."
If you want to accept backup offers, the status will likely be switched to "pending - continue to show."
Likely, you won't receive a lot of showing requests though for the reason stated above.
The Longer You're on The Market, The Lower The Offers Will Get
You must make your listing as strong as possible right out of that gate.
You have to nail your price point
Stage it beautifully (If you choose to stage)
Have a killer listing description
And have incredible photos
The reason you need everything to be 100% ready before you list is that the longer your house remains on the market, the less likely you are to receive a full price offer, or at least an acceptable offer.
Every house on the MLS has a statistic called DOM, or days on market.
DOM denotes how long a particular property has been listed.
Put yourself in the buyer's shoes for a second.
Let's say you're looking for a house, and you stumble across the seemingly perfect fit for you online.
It's got everything you want
It's a fantastic price
But it's been listed for over a year
What's your first thought likely to be?
My guess is, "Why has this house not sold yet? What's wrong with it?"
The longer your house sits on the market, the more likely you'll have to accept a lower offer, as the buyer starts to gain more negotiating power.
Once You Sign The Contract As A Seller, You're Obligated to Sell
I've spoken extensively on this blog about what contingencies buyers can use to back out of a contract after signing.
But are there any contingencies sellers can use to legally back out of the deal?
Unfortunately, not really. You're at the mercy of the buyer failing to do something.
As a seller, one of the few things you can do is wait out the contract should the buyer fail to close by the specified closing date.
Another way you may be able to back out is if the buyer fails to provide their earnest money deposit by the specified date.
Lastly, if a seller fails to apply for a mortgage, as stated in the contract, you may be able to back out of the deal.
Your Agent Does A Lot More Than You Think
Your real estate does a lot more work than you think. At least they should!
After listing your house, the real work begins.
Your agent will handle a plethora of phone calls
Negotiating to get you the best price
Helping schedule and coordinate inspections
Helping coordinate the appraisal
And negotiating repairs and concessions
Realtors have to jump through a ton of hoops to make sure they:
Handle all the paperwork correctly
Follow all the rules and guidelines placed on them by the National Association of Realtors
And they have to consistently take continuing education courses to stay on top of everything
Your agent should be doing much more than just sticking a sign in the yard, and then collecting a commission.
Make sure you tell them how appreciative you are of their hard work.
The Appraiser Has The Final Say
No matter what you do
No matter what you say
No matter how much you think your house is worth
The appraiser has the final say.
It's the appraiser's job to provide a third party, non-emotional opinion of a property's value.
They do this by using what's called a uniform appraisal report, which takes into account the sales prices of recently sold homes around the subject property.
Appraisers do their best to select accurate, comparable home sales.
However, appraisers are still human, and they can make mistakes.
If you feel an appraiser has valued your property lower than it should be, you can contest the appraisal. But it is very challenging, and you need to make a solid case.
Ultimately, the appraiser will determine the maximum loan amount any lender will lend on for a property, and if an appraisal comes back much lower than the contract price, it could stop the deal in its tracks.
Get A Pre Inspection And Fix Anything Important
You may scoff at the idea of spending money to get a pre-inspection, but trust me, you'll want to!
Neglecting to get a pre-inspection cost me the sale of one of my properties due to some plumbing and electrical stuff I was unaware of.
Before listing your house, order a professional inspection, and review the results with your realtor.
Your realtor will be able to point out the things that matter, such as:
Problems with these systems are more likely to cause buyers to panic and back out of a deal.
Yes, you may have to spend a bit of money, but I highly recommend having issues involving these systems repaired before your listing goes live.
By doing so, you'll reduce the chances of any buyers backing out of the deal using their inspection contingency.
If you think the inspector will just gloss over stuff, I promise you; they won't!
Buyers Will Want A Solid Home Warranty
Let's be honest; how often do you pay for a warranty or an extended warranty?
If you're anything like me, the answer is a big fat
However, buying a house is a different story. And when something goes wrong, it isn't cheap!
Your buyers will most likely request you provide a home warranty.
A warranty will help buyers fix any issues that pop up during their coverage period for a small service fee.
A home warranty may cover it.
Even if buyers don't directly request one, it may be in your best interest to offer one up anyway.
It'll help your listing look that much more enticing.
A good home warranty will run you somewhere in the ballpark of $500 but can be paid for out of escrow at closing.
Don't Be Afraid To Counter an Offer You're Not Happy With
You don't have to accept an offer as it is if you're not happy with it.
Most buyers are probably expecting a little negotiation anyway.
Your most likely negotiation points will be:
Repairs you'll make
Any seller credits/concessions
They always say the person who speaks first in a negotiation is at a disadvantage. Consider the buyer having to make the offer first as them "speaking first."
Which means you have a bit of an advantage in the negotiation. As we discussed above - You will slowly lose your position the longer your house sits on the market.
When you receive an offer you like, but want to see if you can get a little more out of the buyer, have your agent write up a counter offer.
There will more than likely be wiggle room for you somewhere.
If You Do A Remote Closing, You'll Have To Get Documents Notarized, Which Can Be Expensive
If you live far away, out of state, or simply don't want to attend the closing in person, that's no problem at all.
Your title company can set up a remote closing for you, where they'll send a notary to meet you at your house or a location of your choosing to sign the paperwork.
I signed some closing documents at a Starbucks.
One thing to keep in mind if you decide to do a remote closing is that you will have to pay for the notary.
The notary fees may be paid directly out of escrow, or you may have to pay out of pocket.
Either way, there will be a lot of documents you need to sign, and where I live, each notarized signature costs $15.
I've paid over $100 in total for notary fees on my remote closings.