■ By Joyce Miller / Contributed
Editor’s Note: This is the second in a two-part series on how to prepare your home for sale. See last week’s issue for Part 1.
Step 7: Address natural hazards. Any natural hazards must be reported to the buyer in the form of a Natural Hazard Disclosure Statement (NHDS). This includes the presence of danger from earthquake faults/seismic hazards, special flood hazard areas designated by FEMA, a designated very high fire hazard severity zone, a designated wildland area that could contain substantial forest fire risks. You can order the necessary forms from the Internet. You or your Realtor can also use the services of a third-party consultant to complete the NHDS for costs that range from $40 to $200 depending on the level of detail desired. NHDS reports can help you decide if you need to take steps to mitigate against any potential hazards that are present, including work on foundations of houses or undercarriages of manufactured homes to better withstand an earthquake. For more information, see California Department of Real Estate’s Disclosures in Real Property Transactions at: http://www.dre.ca.gov/files/pdf/re6.pdf.
Step 8: Initiate repairs and improvements. You now have the necessary information to determine how much you want to invest in improving the home before you put it on the market. Collect ideas from anyone who you respect in this area. Go to open houses in the neighborhood and see what sellers have done to their homes and what they are touting as important selling features. If you know anyone who is buying and selling homes, they are good candidates for consulting. Get opinions and bids from contractors. Of course, contractors will often have different opinions about what you should do with a home because they have their own preferred approaches. The more people you can talk to the better. You may even find that their prices vary widely for similar work. In the end, you should know what different approaches to repairing and upgrading the home should cost, so you can put that into your budget.
Step 9: Decide whether you will sell the house yourself or use an agent. This is a very critical step. Selling the house yourself or using a Realtor are two very different courses of action. In this step, we’ll look at the advantages of selling the house yourself.
The main reason why anyone sells a house themselves is to avoid paying the Realtor commission. In California, the seller normally pays the Realtor commission, however, this can be negotiated as part of the terms of sale. On a $300,000 house the commission would typically range from $15,000 to $18,000 depending on what commission rate the seller and Realtor have agreed to. Since you are the seller in this scenario, if you decide to sell the house yourself you can avoid paying this amount which is normally handled during the escrow process.
There are not any other significant reasons why you might want to sell the house yourself, unless you decide you can do a better job of creating the marketing materials and staging and selling the house than any of the Realtors in your area. The selling process also would involve researching and using websites and social media to sell the house. Also, you will need to show your property and follow-up and confer with multiple buyers to determine your chosen buyer.
Step 10: Consider using an agent. The reasons for using a Realtor are a bit more complicated. Besides handling the above matters, Realtors acting as your agent are trained in real estate law for California, your county and city, plus any HOA or residential park (for seniors or otherwise) that might also be involved. This includes providing disclosures about the home and surrounding property that are strictly required by California law. The statute of limitations varies for different types of errors and omissions and not knowing these laws can leave the seller exposed to subsequent penalties and payment for many years. For example, if there is a plumbing problem in the bathroom or laundry room and it is not disclosed, the seller could be responsible for fixing it three years after the house is sold. However, if the problem was intentionally covered up, then the period can be longer.
The Realtor deals with appraisers, banks and loan officers whenever it isn’t a cash sale. This includes underwriting conditions that must be followed in order to help escrow officers to provide and clear those conditions including termite inspection, treatment and reports.
Realtors also interface with the buyer’s home inspector and deal with call-outs by the buyer for repairs to be made prior to the sale. In some cases, these call-outs can be complicated and lengthy, unless the house is being sold on an “as-is” basis. Recertification by physical inspections is often a part of this process, to get the house in a ready-to-sell state.
Realtors deal with contractors and sub-contractors brought in or required by the buyer for mold remediation, tree trimming or other structural changes, handling all legal matters with these entities. They also need to be well-schooled in sales and marketing of homes, contracts, as well as California escrow and title insurance law. In California, when a Realtor puts your home on the Multiple Listing Service (MLS), it is automatically shared with a variety of Internet listing sites. One website lists these top 10 places to use to list your home on the Internet: eBay, Zillow, Facebook.com, Amazon.com, Homes.com, Redfin.com, Realtor.com, Owners.com, Craigslist.com and Homefinder.com.
During negotiations with a buyer, be aware that you or your agent can negotiate allowances in lieu of making repairs required by the buyer. For example, if the buyer wants a large over-sized and hard-to-find sliding patio door replaced due to a crack in it, and both you and the buyer are in a hurry to complete the sale and allow the buyer to move in, then you can simply deduct the cost of the repairs from the sale price as a negotiated allowance to facilitate a faster transaction.
Moreover, an experienced Realtor can effectively deal with a sophisticated buyer’s financial or legal team or appear in court if the transaction involves a court hearing to satisfy requirements of a trust or other legal entity with which you are dealing.
When looking for a Realtor, find one that is knowledgeable of the home’s neighborhood or region, as well as the type of structure: R1-zone stick-built house, condo, duplex/triplex/quad, manufactured home, mobile home.
Check through your various spheres of influence including work, friends, family, church/temple, neighbors and social media buddies. Visit both large Realtor chains, and small local family owned firms; each type can bring its own unique advantages to serve your needs. Most importantly, choose a Realtor that you can trust to understand and be true to your needs and will get the job done quickly.
Step 11. Staging the house for sale. A frequent topic of conversation today among sellers and Realtors is whether to stage a home prior to selling it. In other words, to furnish it for optimum appearance to the buyer, or just leave it alone … either leaving it empty or with its existing furniture left intact. There are competing schools of thought on this. Just Google the matter and you will discover conflicting studies on how much staging helps to sell a house faster and for more money. Staging won’t cover up serious flaws that need to be handled before deciding how to decorate your main rooms (not all need to be staged). For a normal size house, professional stagers regularly charge around $900 to $5,000 a month, depending on whether the house is on remote Iowa farmland or in Southern California. If you think you have the pieces to show off the house, consider staging it yourself. Remember, you need to stage the house for the tastes of the buyers you are expecting to encounter for the house’s neighborhood, not necessarily for your own tastes.
Step 12: Close the deal. In California, going thru escrow and title insurance is not required under some circumstances, such as when a quitclaim deed is involved. But the escrow process is advisable under most circumstances to protect both the buyer and seller. A useful California State bulletin explaining the escrow process can be found at: http://www.dre.ca.gov/files/pdf/escrow_info_consumers.pdf.
Title insurance is also advisable to ensure that the transfer of monies and title is all done legally. Title insurance protects you the seller in case there is a prior claim on the property or an imperfection (like a misspelled name) in the chain of title to the final buyer in the case of real property. This does not apply to manufactured homes unless the home is on land that is owned by the homeowner, in which case the manufactured home and land it is on are considered real property. Otherwise, manufactured homes in a residential park are considered personal property, referred to as chattel.
Closing the deal may include moving personal property like furniture out of the house and relocating the occupants who were in the house being sold. It also can include cleaning up the surrounding grounds, driveways, walls and trees.
Throughout all of these 12 steps, you need to be aware of county and city ordinances, not just State of California rules. Sound complicated? It is. If you have questions, write to me and I will respond privately or respond in a future column.
Joyce Miller is a member of the National Association of Realtors and California Association of Realtors and has been a licensed realtor for the past 18 years. Prior to that, she was a real estate investor for 10 years doing rehabs and flips. Miller holds a BS in business management and an MA in educational leadership from the University of Redlands. She can be reached at firstname.lastname@example.org