Real estate agents see it all, myself included. From the unmade beds to the overstuffed garages to the strange decor.
Over the years, I’ve learned a thing or two: Why some houses sell, while others linger on the market. Why some promising buyers never close an escrow. How to get a better deal on the mortgage. Even just how much the other agents stand to make on your home.
And the good news is, I want to share. Whether you’re a buyer, seller or both, here are six things I wish you already knew.
NUMBER ONE: While sellers may be optimistic on the value and price of their homes, buyers aren’t.
Your challenge as a seller is to price the house so that it is compelling. What that means in dollar signs: Set a price slightly below market value, just “a fraction.” For example: If similar homes in your neighborhood are clustered around $825,000, you might price yours at $800,000 or $785,000.
What every agent wishes you knew: The longer a house is on the market, the less likely you are to get fair value. So you really want to position yourself to be the one that sells, not the one that languishes.
And that old adage of not wanting to leave any money on the table? Still valid. If you’re turning around and buying a home and you already have cash in hand, thanks to a fast sale, that puts you in a very powerful position.
NUMBER TWO: Watch your spending habits throughout the escrow period.
For many potential buyers, frugality ends the minute they get pre-approved for a mortgage. That’s when they start running up the cards and opening new lines of credit to buy things for their home-to-be.
But that pre-approval letter is just one of the first refreshment stations of the home buying marathon, not the finish line. Just before closing, a lender will re-examine a prospective buyer’s financial situation – complete with a recent copy of the credit history and other updated information.
If those numbers have changed for the worse (salary decrease, higher card balances, new lines of credit), then the applicant could get clocked with a higher interest rate or even lose the loan. The number of buyers who get denied is significant.
What the I wish you knew: Never get new loans or start using credit cards more heavily until after you’ve actually closed on the home. Even better, retain your frugality until you’ve been in the home for a few months and have a good sense of how home ownership affects your finances.
NUMBER THREE: Selling could take lots of time.
If you’re selling a home, it’s important to understand the timeline, and that’s something most people don’t understand. Underestimating the time it takes – and building a schedule around those unrealistic expectations – adds stress. Instead, realize how long the process takes in the real world (not just your head) and plan accordingly. Another important factor: Different markets (and prices) move at different speeds.
A simple seller’s sales schedule breakdown:
- Getting your home in shape: two weeks.
- Average time on the market (varies widely with location and price): 30 days to three months.
- Negotiating after an offer: one week.
- Preparing to close (assuming a traditional transaction): 30 to 45 days.
What the I wish you knew: A smart seller allows a minimum of four to six months to sell. And that’s if you have a home that’s priced right in a good market with one solid offer that makes it to close of escrow.
NUMBER FOUR: Not all Buyers are able to buy.
To prove their worthiness, sometimes prospective buyers will show a pre-qualification letter, and that means nothing.
That’s because in a pre-qualification, lenders usually don’t verify buyers’ information. A pre-approval, on the other hand, involves third-party verification.
Prequalified means they’ve talked with a lender who has verified that they have good credit and make $X per year. Based on that, the lender responds that the buyer can reasonably expect to borrow a certain amount – if those self-supplied facts are accurate and there aren’t any negatives hiding in their financial history. Most lenders don’t research those details until the buyer applies for a loan.
What I wish you knew: Serious (and smart) buyers are pre-approved. That means they’ve already applied for the loan, the bank has verified their financial information and (if the numbers remain the same until closing) it promises to loan a specific amount at a specific interest rate.
Still, after an offer, smart agents will call the lender and verify that the prospective buyer is pre-approved for the necessary amount. At the same time, that agent will verify that the lender would have no problem closing in the expected time period — usually 30 to 45 days. This allows us to represent to the seller that the buyer is a strong, credit-worthy purchaser who can perform.
NUMBER FIVE: Yes, it has to smell good.
Sellers sometimes drag their feet on little details that make a big difference.
I can’t count the number of clients who asked, “Does it really matter if we have the carpets cleaned or take the family photos off the wall?”
The answer is yes. A buyer needs to walk in and have it look good, feel good and smell good.
Sellers should put themselves in the shoes of prospective buyers — and try to see the house for the first time. The home should be kept showroom-ready.
It’s a regular occurrence that I walk into a home with a buyer and find beds unmade and underwear on the floor. In spite of an appointment, I don’t see a home that’s ready to be shown.
What I wish you knew: A mess leaves an impression that’s hard for a buyer to overcome.
My checklist for a showing:
- Home: Clean (and smelling good.)
- Temperature: Heated (or cooled) for comfort.
- Lights: Left on to welcome guests.
- Snacks or soft drinks: A nice touch.
The impression you want: Warm, inviting and comfortable.
NUMBER SIX: How much will my agent earn?
Chances are the agent you hire to sell your house – or find a new one – isn’t getting as big a cut of the fee as you might think. Six percent isn’t anywhere near what we’re taking home. In fact, it’s more like 1 percent to 1.5 percent on average. While the two sides will split that commission, those agents, in turn, each split their share with their broker.
What you should know: Unless your agent is handling both sides of the transaction, figure he or she is getting roughly one-quarter of the commission.
And that 6 percent commission is by no means a given in this day and age. “There’s always a range of fees in the marketplace. Each broker sets his or her own fees independently. The Buyer’s agent has no hand in setting fees, which are arranged between the Seller and his agent.
I spend a lot of time on the topic of commissions, and still, the idea that agents are getting all or even half the commission is still one of the biggest misconceptions.