Selling Your Home In San Diego
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By Ginny Ollis
Coldwell Banker Residential Brokerage
1621 West Lewis Street
San Diego, California 92103
619-574-5138
www.GinnyOllis.com
GinnyOllis@aol.com
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THE HOME SELLING PROCESS IN SOUTHERN CALIFORNIA
1. Selection of Agent.
2.
Preparation of the Property.
3.
Determination of property value and marketing price.
4.
Marketing
5.
Offer Negotiation
6.
Escrow period and process
7. Closing
A Few Basic Questions
Should I have a lockbox?
Should I be present when prospects are viewing my home?
Should I have open houses?
How often should I talk to my agent?
What can I do if I’m not comfortable with the marketing and representation
of my home?
How do I know when negotiations are fair or appropriate?
Typical Costs of Sale
Taxes
and Real Estate
Relocating? – Tips to Ease Your Move
Helping Your Children Make the Move
1. Selection of Agent:
Now that all homes listed for sale are on the internet, what do we need an
agent for?
Buyer Access.
Over 95% of all properties are sold through the
services of a professional Realtor.
Perspective. Objectivity, insider understanding, expert witness to
market events.
Representation. Operating for YOUR best interests from full-time,
inside, expert stand.
Intermediary. Delivering, de-pressuring, and creating some emotional
buffer and objective guidance.
Counseling. Information source, strategy consulting, avoiding the
irrelevant.
Negotiation. Strategy consulting, data and information gathering,
keeping the eye on the ball!
Protection. Legal obligations, disclosures, qualified prospects,
security improvement.
Tips In Choosing The Right Realtor
For You
Referrals from friends, family and associates.
While the personal experience of another person can be colored or unique, it
is the most reliable source of excellence. Always consider the source and
always call references.
Open
houses.
Most sellers cruise their neighborhood open houses a little while before
putting their homes on the market. This wise step in exploring the
“competition” also exposes them to marketing techniques and professionals
working in the area, and things NOT to do as well as to do. And more agents
are recommending against open houses today, because they are not the best
selling environment, give buyers more opportunity to be Unsold than sold, so
do not consider ONLY agents you meet at open houses.
Advertising.
The least reliable source is advertising, because often it is managed for
agents by a staff person or controlled by management. However, when a
person is entirely new to a community, as in the situation of selling a
property belonging to a deceased relative in another location, advertising
is an excellent indicator of brokerage companies who service the area.
Talk
to owners of related businesses.
(escrow, title, lenders, insurance agents, contractors, moving companies,
and architects). They and other business owners in the area often have an
excellent measure of the professional competence or excellence of Realtors
in their area.
The
interview.
The best judge of who will be YOUR best Realtor is you. Realtors are
accustomed to being interviewed. They realize sellers are putting a very
large trust in their hands and make cautious decisions. Some of the
questions you may ask are:
-
Experience level in years, local area, and full or part time.
-
Explanation of marketing plan for your property. Who will assist the
agent in servicing your listing. What is the agent’s policy if he/she
procures their own buyer for the property.
-
Commission rate and other financial obligations you will incur during
the sale process.
-
Referrals should always be checked. Smooth talkers are not always the
best people to rely on.
-
General character/information questions such as: prior work experience,
why this career, why this company, what is his/her greatest challenge in
this business and/or greatest achievement.
The interview is also for listening to more
than answers. Are you hearing questions such as:
- What is your overall purpose in
selling this property (usually selling a home is only a means to an end
and sometimes there are solutions better than selling.)
- What questions do you have
about the process?
- What concerns do you have about
showing, about the process?
- What have you found are the
greatest advantages, benefits of your property?
- What specifics would you like
to have at this time or as soon as possible?
Note:
While price determination is an important part of your marketing, it
should NOT be an important part of your agent selection. You may wish to ask
agent opinions of price during the interviews, but you risk losing your
competitive edge if agents try to “buy” the listing by proposing the most
attractive (highest) price. Market value is NOT an agent opinion, it is a
condition of the market and should be recognizable by you when the agent
delivers his support information. Sometimes a seller will ask an agent to
take him to view competitive homes or past recent sales. This is actually
more desirable than creating an agent “bidding war”, which can be irrelevant
to the market value.
And finally, having taken the right steps,
trust yourself to choose someone who you would like to work with.
Agency Law says the Principal is responsible for the
acts and representations of his agent – Who do you want speaking on your
behalf?
2.
Preparation of the Property
Preparing Your Home To Make
Its Best Impression
A buyer “sees” with all his senses. Consider
how it looks, smells and sounds. First impressions last. The most
important words in your “get ready” vocabulary are crisp and clean.
Hiring cleaning people, fix-it people and painters for a few hundreds or a
few thousand dollars can return your investment even ten times the cost!
THE
MOST IMPORTANT ISSUES
-
Curb Appeal
-
Inviting
-
Clean
-
Smells Fresh
-
Light and Airy
-
QuietFresh and
well-maintained
-
Attractive
outlook from the windows
-
Drive up and
stand across the street. You will see immediately if your landscaping
obscures the house, if your yard needs tending, if your paint needs
freshening, if your roof needs attention, if you have too many
distracting “accessories” around the home, if your home needs some
graceful landscaping to soften its appeal. Your windows are the eyes of
the house, make them shine. Your front door is the welcome smile, make
it bright and welcoming.
-
Decorating can
speed up the sale. It is often said a buyer buys in the first 15 seconds
of his visit. The front door, shiny hardware, crystal clear windows and
immaculate surfaces are important. Impact furnishing or accessories is
smart, but more important is having furnishings that show the use and
space. Lighting fixtures and wattage are critical. Bright always feels
bigger and cleaner. De-cluttering is crucial, fresh paint on chipped
areas and trims is necessary, rearranging furniture can open space or
open avenues to windows (you might even store some pieces with a
friend?), fresh grout and caulking is imperative (!!) as are fresh
towels and shower curtains.
-
Pets. Pets are
“family” to their owners and often a threat of dirt, smells, destruction
to other people. It is also important to realize that having herds of
strangers tromp through their territory can also be traumatic for these
little people to whom we cannot explain the events.
• The rules of cleanliness
and tidy management apply especially to pet areas and paraphernalia. Cat
boxes were addressed above. Failure to do yard clean up, feeding areas
that people are likely to step in, billows of bird feathers, odors of
wet dog, visible collections of exotic pets that might make people feel
fearful, all can be sufficient to deter an otherwise good prospect.
• It is also important to
stay alert to any reactions your pet may be having. When in doubt,
consult your vet for the best care of a fretting or unhappy pet. You may
not see exactly what happens when the home is shown, and they may not be
as kindly treated as you would do. This happens seldom, but we agents
generally do not know how our clients will react in all situations. If
you notice a change in your pet’s behavior, you may want to ask
questions and give your pet extra attention.
• Pets can also be a
liability. Prospects are sometimes less well behaved than we would
expect from our pets. If your pet could harm anyone, this is something
to prepare to avoid. Signs telling people not to stick their fingers in
your bird’s cage will at least protect you somewhat in the event a
finger is bitten off. Talking to your Realtor about pet concerns and
enlisting their responsible assistance is very wise. If your dog has
never bitten anyone, he may not have been confronted with armies of
self-absorbed people trespassing on his “turf” and perhaps even a child
who reflexively makes a kicking motion at the dog.
• SAFE IS BETTERTHAN SORRY.
If your pets are an issue, find a solution before you put your home on
the market.
-
Light. Light
makes a home feel larger, cleaner and better maintained. both natural
and synthetic light are important. Windows should be clean and coverings
kept open. Rheostats, although highly desired, should be on “high” for
showings. Lamps should have their largest wattage on for selling
purposes. Skylights and solartubes are excellent assets. Mirrors reflect
and expand light and space.
-
Sound. Quiet is a
valuable selling commodity. However, if your home has noise issues, in
addition to meeting your disclosure responsibilities, you may wish to
repair any that are caused by maintenance needs, avoid barking dogs and
crying children, vacuums and lawnmowers. Fountains, classical music or
“elevator” music can be soothing.
-
Smokers. If the
property is occupied by smokers, it can mean 5-10% more price point to
vacate the house, replace carpets and window coverings, have the home
professionally cleaned and repainted prior to showing, because smoke
affects the entire home and is a big job for a non-smoker to eliminate.
Most homes have at
least one “negative”. Hiding it is futile. Try the “flip side” idea – what
is the benefit of having the negative? Living on a traffic street can
provide activity for elderly people to observe and enjoy, and freedom from
isolation. Having a small lot and yard can provide low maintenance and ease
of management. “Yard removed for your convenience.”
TOP FIVE HOME
PREPARATION-TO-SELL PROJECTS
Based on Cost and Return on Investment
-
DECLUTTER,
PACK AND STOW. Everything that you don’t use regularly, that doesn’t
fit, or that has outlived its best visual effect, should be removed and
boxed, donated or put in the garage-sale pile. Then go back and subtract
more. A rule of thumb in most homes is to pack up three quarters of your
“stuff”. Bookcases should be less than half full, books and 1 or two
showcase items being that half.
Then look at each room again and select one focal point and a FEW items
that demonstrate something good about the room. This could be mirrors to
reflect a view or light, lights that brighten the edges or corners, or
accessories that define the purpose of a room.
Then look again, specifically this time at the colors, to be sure you
have neutral tones that will allow every buyer to move his style in
mentally. A graceful accent color that trends well into the next room
but is still universal will keep the room from being pizzazz-less. Some
small accent of red in the corner to draw the eye through the depth of
the room is often advisable.
You may find it smart to rearrange the furnishings to open access to
windows and doorways. Avoid the classic feng shui error of putting
“blocking” couches across a room that inhibits entry. Don’t overlook
window coverings.“Light and airy” is the mantra of all buyers. Dramatic
heavy drapes or dark blinds or curtains should be opened as far as
possible, if not removed.
I DON’T CARE
WHAT THEY ACCOMPLISH ON HGTV FOR $2,000, YOU CAN’T POSSIBLY GET IT DONE HERE
FOR LESS THAN TWICE THAT! BUT YOU CAN HIRE A PROFESSIONAL “STAGER” TO
CONSULT THIS JOB FOR $200-$500, DEPENDING ON THE SIZE AND COMPLICATION OF
YOUR HOME
-
REPAIR,
REPLACE, AND TONE. That loose faucet, occasional drip, suspicious
stain, worn carpet, chipped tile, wiggly doorknob, doorbell that quit
years ago, and corroded mail slot are examples of the little things that
will make buyers think “fixer” instead of “desirable”. If it has been a
long time since you have had the time or money to really tend to things,
or if you are selling an estate or trust property, it is very smart to
hire a pre-sale inspection and take care of the items on that list. They
will be requested by the buyer, so better to do it ahead of time and
look like a reliable seller. Fear costs dollars. (If you have
significant plumbing or electrical issues and do not have the money to
take care of them, I recommend having a contractor’s estimate already on
the property when buyers view it, with your testament that you will have
the work done and warranteed prior to close by appropriate licensed
tradesmen or credit the bids to the buyer to have done under their own
control.)
IT IS HARD TO
ESTIMATE THESE COSTS, BUT IF THEY ARE ALL TAKEN CARE OF, THE OVERALL BENEFIT
CAN EASILY BE 5 OR MORE TIMES THE COST. IN MOST CASES, THESE TOUCH UP
REPAIRS SHOULD NOT EXCEED $1,000 MAXIMUM
-
CLEANING AND PAINTING. If this
isn’t done well, everything else is wasted. I tell my buyers that their
very very best buy will be something filthy.
A PROFESSIONAL CLEANING CREW IN THE MOST
DREADFUL CASE WOULD COST $1000, AND SPARKLING WOULD MEAN A MINIMUM
OF $10,000 MORE THAN IN THE FILTHY STATE, PROBABLY DOUBLE THAT.
And this includes the exterior! Landscaping is the wrapping on your
package. At a minimum it should be trim and tidy, cut back from roof and
windows, edged with some color flowers. They say a pot with flowers at
the front door is how you know a house is for sale. Because it works!
Power washing the home, absolutely spit-polishing the windows, and
shining up any hardware with special attention to the house numbers will
give you a head start on the all important “curb appeal.”
A good painter can determine what can be powerwashed and what you need
to repaint. Fresh trim is the first sign of “crisp and excellent
condition” both inside and outside. Your painter can be your next best
profit friend, right after the stager, handyman, housekeepers.
ASSUMING YOU HAVE A HOME IN AVERAGE
CONDITION, THE TRIM AND FRESHENING OF THE LANDSCAPING, POWER WASH, PAINTING
AND REPLACING ANY WORN/CORRODED EXTERIOR HARDWARE SHOULD COST AROUND $1000.
PAINTING INTERIOR ROOMS, ESPECIALLY TRIM, TO OFFER THE HOME IN ITS BRIGHTEST
AND FRESHEST IS ALSO CRITICAL. AND AGAIN, WE ARE LOOKING AT THIS WORK
EARNING $5,000-$10,000.
- UPGRADING KITCHEN. Depending on the existing
condition, the cost of this project is the priciest you will consider.
It is not necessary to spend $50,000 to turn out a magazine cover,
unless you have a luxury home. A quick assessment will point out what
you need. Big spaces are the most noticed, so you will want to consider
flooring, cupboards and counter tops. What needs to be replaced, what
can you clean up or paint, will scrubbing with new hardware stand the
cupboards in good condition? If you have harvest gold or heaven forbid
avocado appliances your choice is to make the colors around them
coordinate the best possible and deliver them in the shiniest condition
they have ever seen, or go for all new stainless.
With kitchens and baths, doing part doesn’t help enough to earn back
more than your investment in dollars. What stands out is what is NOT
Updated. So the decision is to accept what appliances and fixtures and
floor plan exist and to make it as fresh and attractive as possible
using paint, towels, decluttering, and the right small accessories, or
to do over the entire room. Making the choice in keeping with the style
of the home itself is very important. You would not put sleek glass and
metal cupboards in an historic craftsman home.
MAKING THIS DECISION NEEDS MORE
INFORMATION THAN A GENERALIZATION CAN PROVIDE. LOWE’S OR HOME DEPOT WILL
MAKE YOU AN ESTIMATE AND FREE DESIGN. I CAN PROVIDE A DISCOUNT AT BOTH
LOCATIONS. AND I HAVE CONTRACTORS WHOM YOU CAN TRUST TO GIVE YOU FAIR BIDS
AND WORK ETHIC. BUT OVERALL YOU SHOULD RECOVER AT LEAST THE COST OF THE WORK
AND RECOGNIZE YOUR GREATEST BENEFIT IN THE SPEED OF YOUR SALE.
- UPGRADING BATHROOMS. Ditto.
EFFECTING THESE CHANGES CAN MAKE A 10%
INCREASE IN THE BUYER’S PERCEPTION OF VALUE AND CAN CERTAINLY EXPEDITE THE
RECEIPT OF OFFERS.
3.
Determination of Property Value and Marketing Price.
This is a very sticky and vitally important part
of your transaction. Price tags are either deterrents or enticers. You want
yours to say “reasonable” to the buyer yet be the first step to the maximum
achievable price for your sale.
A few things to keep in mind about pricing:
- Realistic Pricing will obtain the maximum price in a
reasonable time.
- Your cost or profit desires are irrelevant. The
market determines price.
- Improvements you may have made may or may not be
recovered or profitable depending on quality, general desirability to
most people, market conditions.
- Properties that have been on the market for a “long
time” get fewer showings and those are mostly for the purpose of selling
other homes.
- A property that is priced right at the beginning
feels like value to buyer, often attracts competitive offers, and
always achieves the best proceeds.
“Fair Market Value” had been defined as the highest
price estimated at which the property will sell when it is exposed for sale
in the open market by a willing seller, allowing time to find a willing
buyer, with neither party acting under compulsion, both having full
knowledge of all the uses and purposes to which the property is adapted and
for which the property is capable of being used.
Take special note of the italicized words. Fair market value is not an
“average”, it is the highest reasonable price. And, since all buyers do
thorough investigations, anything not repaired or disclosed up front will
automatically re-open negotiations and do so with a suspicion lodged in the
mind of the buyer.
There are two primary sources of information relevant to pricing. The first
is recent (no more than 3 months old!) and relevant sales, properties in
escrow, and to a much lesser degree, current active competition. Actives
have no proven sales value until they are contracted. The second is the
opinion of the professional agents working in the area. An obvious caveat is
to be wary of the agent who poses a inflated price with no evidence
substantiation, hoping to garner your favor. But most of the time I find
that in competitive situations, we all say pretty much the same thing.
Agents are in position to recognize trends or movement in the market which
may affect your price tomorrow. Frankly and sadly I find appraisals very
seldom helpful. Appraisers are restricted to the sticks and bricks data and
unable to know first hand the market attitude. Most of the time their only
exposure to “comps” is multiple listing data, they do not visit all the
properties as agents do, and condition, floor plan and lighting can make
enormous differences in value. Even interviewing buyers of closed homes or
agents does not give them the first hand information an agent has available.
Range Pricing has become fairly common in Southern California. It
means that rather than offering a home at a single price, which everyone
knows is a negotiable “asking price” that may be pushed up or down by market
circumstances, a home is offered in a range, such a $100,000 - $125,000. The
theory is that more buyers will be encouraged to view the home and make
offers. Frankly, I believe a single price is a stronger negotiating posture.
You have one chance to make a strong first impression. All buyers know price
can be negotiated. It don’t think it serves a seller’s initial possibilities
to suggest that he is already unsure of his value.
4. Marketing.
Marketing is everything done to attract buyers including
property preparation and price election, through all the elements of
exposure and presentation, the negotiation process, to the closing.
Marketing is
- Definition of product
– defining the distinguishing qualities, why this!?
- Positioning –
competition awareness, attention, standing out
- Presentation - product
and materials
- Delivering the Message
– everywhere Buyer’s look and are influenced
- The first step in
negotiations
- The process of seeking
the ideal buyer:
The ideal buyer is financially qualified.
The ideal buyer is knowledgeable about market and conditions, and is
informed enough to make a decision he and you can rely on to close escrow.
The ideal buyer has motivation to buy, so that you don't have to provide
motivation by offering him a "deal".
The ideal buyer sees value in YOUR product, shares the same priorities,
rather than compromising on what he really wants and wanting to compromise
your dollars.
The ideal buyer is emotionally ready to make a decision, having resolved his
"why" and resolved his apprehensions.
The ideal buyer pays your best price.
5. Offer negotiations.
Negotiation has two parts, Reason and Emotion, both yours
and theirs. Emotions can be very helpful if they are positive, and a
consideration for the other party’s experience of appreciation, autonomy,
common ground, and status recognition. A successful real estate negotiation
will be armed with authoritative data regarding relevant property sales and
be ready to hear and deal with the other concerns of the parties such as
timing, control, personal property, condition issues. Generally the offer is
delivered by the buyer’s agent to the listing agent, along with verification
of pre-approval from the buyer’s lender, and in the best case information
about the buyer. He may request and the seller’s may agree that he be
allowed to present his offer in person to the sellers with the listing agent
hosting the presentation. In the best case the agents share information
about what is most important to each party and where compromise is possible.
The sellers then review the offer with their agent and determine whether
acceptance or counter offer is appropriate. The seller’s agent delivers that
response to the buyer’s agent with explanation or additional information if
relevant. A good agent will understand that their primary job is to work
with their client to keep the door open.
6. Escrow Periods and Procedures, and 7. Closing.
In California contracts for purchase are “closed” over a
period called Escrow. Rather than concluding the transaction at a closing
table, where agents, attorneys and the buyer and seller meet to finalize
their agreement, an independent third party, called an “escrow company” is
given a copy of the purchase agreement and the authority to take the
administrative steps to bring the purchase to a close. They order the title
report from the title insurance company specified, arrange for pay off of
any existing liens, prorate rents and property taxes, homeowner association
fees, prepare transfer documents, and prepare appropriate paperwork and
documentation to execute the intent of the contract. Finally, when all that
is accomplished, the buyer deposits his cash balance and loan proceeds, if
any, and the escrow hands the deed and mortgage documents to the title
company to be recorded, then reports the recording to the agents or parties,
and distributes the final monies to all due recipients.
During the first 17 days of the contract, unless a different time period is
agreed, the buyer has a “contingent” agreement, and the right to receive all
required disclosures, reports and information, to conduct whatever
inspections he wishes. On or before the 17th day he may a) request repairs
or credit for same, b) cancel the contract with no forfeit of his deposit,
or c) accept the condition as is or subject to a repair agreement with the
seller and sign a release of all contingencies. At this point the seller has
a sale he can depend on. If the buyer defaults on the purchase beyond this
point, the seller would be entitled to retain the buyer’s earnest money
deposit. From this point the seller may confidently complete any repairs or
work he has agreed to, and the buyer can make his moving plans. On the
scheduled date of close, both will receive confirmation of recording, and a
transfer of keys, etc. will be managed by the agents.
A Few Basic Questions
Should I have a lockbox?
Yes: The easier your home is to show, the most
possibilities for buyers to see and purchase. Our electronic lockboxes today
record date, time and ID code of each user as a precaution against security
violations, theft. Agents can be instructed on the Multiple Listing entry to
call you for appointments or permission and can be given additional
information about pets or other concerns prior to accessing the property.
Realtors are professional and have a career at risk when entering other
people’s property, so you can generally expect sincere consideration.
No: If you have a great fear of people being in your
home without your or your agent’s presence. It is also wise to make sure if
yours is that very rare insurance company that will not pay for loss or
injury if there is a lockbox on the premises. You must weigh the benefits of
easier sale –vs- your peace of mind.
Should I be present when prospects are viewing my home?
Yes, if there is a strong reason why you
cannot leave, but you should be aware that your presence invites questions
and may expose you to unintended but hurtful remarks or misrepresentation of
their opinion by buyers too polite to say anything but kind words. Generally
a seller’s presence is a distraction to the buyer, and their emotional
involvement is a very important element of a purchasing decision.
No, if you can possibly vacate during the showing. Remember all
buyers will be accompanied by an agent, who is familiar with their values
and what is most important to them. Remember, if you are on the premises,
you may be considered fair game for all kinds of questions. Those questions
could be better answered through a filter, with forethought, or by someone
who understands the matter more thoroughly. Unanswered questions may seem
like you are hiding something. If you are afraid a buyer won’t see what you
think is important, you can be sure it is put into the MLS entry, put up a
sign near the item, or some such. But don’t worry. Buyers who are interested
will discover it!
Should I have open houses?
Most agents push open houses, because they are very good
tools for meeting and making new prospects. It is an opportunity for the
public to see how you work. Open houses have always been a very effective
medium for me! And it is an opportunity for the public to enjoy the beauty
and service of your property.
It is also an opportunity to violate your security and, more related to the
sale of your property, may open some other risks. Such as that prospect who
is still in his exploring stage and doesn’t give the host agent an
opportunity to explain the price range perspective, and misses the “value”.
Such as a prospect overhearing other guests demean some feature they don’t
appreciate (so many people are affected by external opinions). Such as real
prospects not having the objective guidance and sales support to turn your
yellow into their green dream. Open house agents work blind, and with the
steady stream of traffic, take their best guess at who might be fruitful and
who is a “tourist”. It has happened that pre-buyers go through open houses
and dismiss them, because they do not have an educated perspective, and
later, when they begin to work with a Realtor for serious purchase, the
agent is told not to show them that house because they have already seen it,
and even if the agent sees it as the best prospect, seldom will an agent
argue with a new client, and the house gets eliminated by ignorance.
On the other hand, any real prospect for your property, especially in a
healthy market, will be shown the home by a normal appointment, after being
appropriately qualified by an agent. Most often by their own agent with whom
they have a trust relationship, which more easily fosters buying. Sometimes
by the listing agent, who can then make the showing with appropriate
preparation as to finances, timing, and preferences (for selling
priorities).
How often should I talk to my agent?
This one is easy! Every time you have a question, worry,
concern, comment, suggestion, idea, need. The more preparation your agent
has been able to do up front, the less frequent your need will be. The more
communication your agent initiates, the less frequent your need will be. The
more carefully you and your agent planned your pricing and marketing, the
less frequent your need will be. It is YOUR property and YOUR peace of mind
at stake. You should be comfortable. Be helpful and tell your agent what you
need, sometimes we don’t know what information fell through the cracks!
What can I do if I am NOT comfortable with the marketing and
representation of my home?
Occasionally this comes up, and since the sale of property
is usually timed to some event or need, wasting time and waiting for a
listing to expire may not be wise. It also should not be necessary. Assuming
you have taken Step 1 and discussed your issues with your agent to no avail,
Step 2 is to talk to your brokerage’s manager. It is his job to foster an
environment for success, and without your satisfaction, there is no success.
You should find yourself in friendly, concerned hands. A good manager will
not be defensive, but will listen, explore and offer solutions, even as
drastic, perhaps, as changing agents within the office, or if you are
irreparably discontent, releasing you from your listing agreement. Step 3,
failing the first two, contact your local Board of Realtors. Again, their
purpose is to foster the professionalism and excellent image of Realtors,
and to help the public be excellently served. Most listing agreements have
Mediation and Arbitration clauses these days, should legal recourse be
needed. Of course, a real estate attorney can advise if needed.
How do I know When Negotiations are Fair or Appropriate?
A tough question but a necessary one. We real estate
agents are not selling peanuts. And we are seldom selling our own product.
Therefore, part of our job is to provide you with enough information and
data that you can make successful and confident decisions. Yet, there is a
lot of “black hole” in this business. In respect for people’s privacy a lot
of issues are not disclosed. We do not reveal the specifics of offers except
to the principals, we do not always reveal a client’s motivation, and, of
course, we should not ever break a confidence.
Therefore, since you are the C.E.O. of your transaction, do ask for any
information you need, and listen to your instincts. Remember your agent is
working for you, and should be happy to cooperate in making these
resolutions as clear as possible for you.
So many questions, so little time. Please feel welcome to call on me, or any
professional, if you have questions not addressed here.
Typical Costs Of Sale
EVERYTHING IS NEGOTIABLE. However, most situations break down to what
is customary and typical, and when one steps outside of what is normal and
customary in the eyes of the other party, doing so may also open questions
even suspicion. Therefore, when one negotiates for something un-typical, it
is wise to provide the other party with a reasonable explanation to allay
those fears.
ESCROW FEE. The “settlement
agent” who holds your Deed and the buyer’s money, and who administers the
requirements of the transaction until all agreements are complete, then
collects the balance of monies due, balances the account, records the deed
and pays out the proceeds to the seller, is generally called “The Escrow” in
Southern California. Fees vary slightly and increase with the value of the
property, roughly approximating .0025 x Sales Price. When the purchase
contract is fully accepted, escrow can quote an exact price, subject to
change should the transaction become more complicated during its life for
any reason.
TITLE INSURANCE. Normally in
Southern California a seller provides title insurance guaranteeing that he
has conveyed valid “marketable” title to the buyer. The Buyer, in turn,
provides title insurance to his lender that his lien rights are in the
priority agreed. A seller’s basic owner’s policy or “ALTA-R” extended
coverage is calculated roughly at Sales Price x .004. If the seller is
insuring within 5 years of receiving his policy, either for purchase or
re-financing, he may qualify for a 20% “short term” discount. Many buyers
today are requesting a broader policy coverage, which will carry them
through vesting into a trust and cover much greater exposure, and this
policy, called variously “Eagle” Policy or “Golden Policy” or some other
brand name by the various insurers, costs an approximate 10% more than the
basic or ALTA-R.
TRANSFER TAX. This is a San
Diego equivalent to the historical “tax stamps” so many municipalities back
east impose, and is calculated at $1.10 per $1000 of Sales Price, rounded up
to the nearest $500.
PRORATIONS.
Property Taxes: The tax year in San Diego County
runs from July 1 through June 30. Escrow will always verify the paid-to date
of the taxes, and will charge the seller up to the current payment due, then
charge and credit seller and buyer appropriately for the difference between
the paid-to date and the close of escrow. If the taxes are paid in advance,
the seller will receive credit from the buyer for the portion paid that will
be under the buyer’s title. If the taxes are not yet payable, as happens
between July 1 and when the bills come out in September or October, the
escrow will credit the buyer for the seller’s ownership portion of that
period.
NOTE: AFTER close of escrow, the taxes will be newly assessed to reflect the
sales price, as provided by California law. Since the new tax rate becomes
effective on the date of sale, buyer will receive a “Supplementary Tax Bill”
for the period from close of escrow to the issuance of the next regularly
reassessed bill. If YOU have recently purchased the property you are
selling, and have not yet paid YOUR Supplementary Tax Bill, it will remain
your responsibility regardless of this sale.)
Condominium Homeowner’s Monthly Fees: The Homeowner’s assessment will
be paid in full through escrow if not current, and prorated to the date of
close between seller and buyer.
Rents: If a property has rental income and the
tenant is not vacated during the escrow, the rent will be prorated to the
date of close between seller and buyer. Any security deposits will be
credited to the buyer for his refund to the tenant when appropriate.
1099 PROCESSING FEE. Some escrows charge a $50-60
fee for calculating and reporting the sale to the IRS, as the law requires
them to do.
DOCUMENT DRAWING FEE. To remain competitive, escrows sometimes keep
their primary “escrow fee” a certain rate then charge for additional
services such as preparing deeds, paying more bills through escrow, holding
funds after close, and handling the sign-up for loan documents. The only way
to ascertain these costs is to ask the escrow.
REAL ESTATE FEE. Sometimes called “commission”, this is the fee to
the real estate broker contracted in the listing agreement. Commission are
NOT set by law, they are negotiable and reflect the quality and amount of
service and expertise a seller chooses.
WATER CONSERVATION RETROFIT CERTIFICATE. The City of San Diego
charges a $10 fee for collecting and maintaining records on the compliance
certificates filed by homeowners. Compliance may be by either buyer or
seller, but usually is contracted as a seller responsibility. All toilets,
faucets and shower heads must comply with low-flow fittings. Cost of
retrofitting varies with home and type of appliances, just as the cost of
compliance with strapping the water heaters and installing smoke detectors
varies from home to home.
ZONE DISCLOSUE REPORTS. These are disclosure reports on fire hazards,
earthquake and geologic risk ratings, flood hazards and other geographically
specific information. They are provided by several companies and cost
$95-130 in general.
MISCELLANEOUS FEES: These are additional charges which may or may not
be included in any transaction as appropriate to the structure of the sale.
LENDER PAYOFF: If a loan exists on a property, the
seller will be charged principal balance plus interest to delivery of payoff
(usually 1-2 business days after closing escrow) plus administrative fees
for lender’s issuance of the “Demand” and “Reconveyance” documents. Demands
and Recons usually add up to $100-150 per loan on top of the principal and
interest.
CONDOMINIUM TRANSFER AND DOCUMENT FEES: Most condominiums (or their
management companies) charge a fee for producing and delivering all the
documentation required by law of a seller to give to a buyer and for
changing their records. These are budgets, financial records, reserve
studies, copies of minutes of meetings, copies of Covenants, Conditions and
Restrictions, copies of Rules and Regulations, and statements of owner
occupancy percentages, delinquent dues, and a breakdown of the monthly fee.
SURVEY. Not typical in our area, since most property lines are just
“assumed” by neighborly custom, but cost is $500 to $2000 generally,
dependent on how extensive the required monuments and paperwork, and how
distant are the nearest survey markers.
HOME WARRANTY. A 1-year warranty on systems (electric, plumbing,
heating and water heater, etc.) in the building and built-in appliances,
does not include structure or termites or roof. Generally seen as protecting
the seller from those annoying “after close it doesn’t work” calls. Average
cost is $250-330, can be increased by including coverage on air
conditioning, refrigerator, washer and dryer, pool or spa equipment.
REPAIRS. As requested by buyer in original offer or subsequent to
physical inspection. Cost reflects type of repairs and quality of work and
certification required. Your repair contractor may accept payment out of
escrow instead of at time of work. Can’t hurt to ask.
TERMITE. It is generally typical for contracts to require the seller
to provide a termite clearance and pay for any Section 1 (existing
infestation or damage, as opposed to Section 2 which is preventative)
repairs, fumigation and treatment. This is NOT law, it is negotiable, but
99% of the time sellers do so.
THE COMMISSION GOES WHERE?
*Commissions are
not set by law.
*Commissions are negotiable between seller and broker.
*I charge 6% commission unless there are special circumstances.
6% Commission
-3% to Buyer’s Agency
-1% (+/-) to Brokerage
=2% (+/-)to Agent
And this 2% has to cover Agent Remuneration AND Multiple
Listing Service fees
Advertising, printing, photography and processing, graphic design, copy
writingInternet sites - publishing, access, advertising
Signs, brochures, materials
Assistants, situation hires – salaries and benefits
Promotions and materials
San Diego/California/National Association of Realtors memberships
Other Associations, meetings, accreditation groups
Auto maintenance, fuel, insurance
Office overhead – computers, software, mobile phones, printers, supplies and
Materials for the conduct of marketing and business
Education courses
Postage, telephone service
E&O Insurance
And --- miscellaneous
Note. An agent’s commission is gross. They do not receive
Health insurance for themselves or family
Life insurance for themselves or dependents
Salary bonuses
Retirement plans or bonuses
TAXES AND REAL ESTATE
In the state of California, “Proposition 13” made it law that property taxes
shall be assessed as the purchase price paid by a buyer for the property,
and the taxes may not be increased more than 2% per year. (yes, there are
exceptions for exceptional situations, but you are not likely to be one.) So
you do not have to learn different tax rates for different communities.
Long term capital gains taxes for property sales are 15% federal and just
under 10% for California, with an exemption of $250,000 of the gain
($500,000 for a married couple) for the sale of a primary residence that has
been owned and occupied by the seller for at least 2 of the last 5 years, or
less if it has been rented.
Example: If you purchased the home for $200,000, plus $10,000 in purchase
costs, made $45,000 in capital improvements to the home, then sold the home
for $850,000, paying $62,500 in selling expenses, your gain tax liability
could look like:
| |
$200,000
+ 10,000
+ 45,000
$255,000 Basis |
|
$850,000
- 255,000 basis
- 62,500
$532,500 gain
-250,000 exemption
$282,500 taxable gain (X your tax rate) |
You do NOT need to reinvest your proceeds in another
property as in the old tax rules, just qualify for the exemption. If you
were married, and both occupied the property as required, the exemption
would be $500,000, and your taxable gain only $32,500.
This is important, because before you spend your proceeds, taxes must be
obeyed!
Investment properties have different rules. Ask me.
RELOCATING?
TIPS TO EASE YOUR MOVE
Your move probably indicates either a job offer or a company that values you
sufficiently to accept a great portion of moving you, so congratulations!
Nevertheless, it is not an easy adventure for a family. But there are things
you can do to make it easier and more successful for all involved.
- Research. Start with good research, and
if you have children, involve them in both the research (they are
possibly better on the internet than you!) and frequent discussion
meetings. Family dinners are very helpful at this time.
School system and options.
Employment or business opportunities for your spouse or partner. Request
introductions and assistance from your company’s HR department and/or
relocation company. See if the current employer here has contacts,
recommendations.
Recreation – everyone’s favorite activity and things they wish they
might try. Where are they, how big are
they? What do they cost, are there requirements, how do you contact
them?
History so that everyone has a sense of the adventure. What
are the best NEW things your destination has that
do not exist where you are now?
Services and resources – how do things work there? Where is the best
dentist, veterinarian, etc – nothing is as
reliable as personal recommendations. Feel welcome to interview them!
Crime activity and what is being done about it.
Taxes are different everywhere, what will yours look like?
Utilities and citizen paid costs – will changes affect your budget
significantly?
Insurance, seasonal maintenance, and automobile registration – will
these affect your budget significantly?
- Talk with, about, and listen. Encourage
your family to talk about their research findings, feels about what they
have learned, pose ideas about various options. See if you can arrange
for the children to have penpals or email-pals contact them from the
destination to give them a heads up and hand-in toward their new place.
If there are organizations, activities that you and your wife or partner
enjoy, try to arrange contacts before the move so, again, there is some
personal contact. Schools, your Realtor, and company employees already
in the new place may be of great assistance. And constantly involve
everyone and invite them to share their
honest concerns and suggestions.
- Start preparation. Gather school and
medical records. Create a resource book in which you all file the
research you have gained. If schools require uniforms, start the
shopping, move on. If new activities are on the agenda, start learning
or collecting gear. Move on. Pack what you will take and plan a moving
sale with kids keeping money for the sale of their belongings for what
you don’t want any more, and to pay for new things on the other end of
the journey. Unless your bank has a branch where you are going,
investigate and set up your new accounts, so when you move money is not
another thing to do!
- Use your professionals! Get the best
Realtor in the area and depend on him/her to guide you in the entire
move process. They have resources and access to almost everything you
will need, and can help you with many things beyond just the location,
purchase and closing of your new home. If your relocation recommends an
agent, know you may also find one on your own. Relocation will take part
of their commission, and usually has their own people, but often these
are agents who need to work part commissions because they don’t have
enough of their own business stream. Is that the agent you want? If you
don’t have a personal recommendation, I can make one for you. I can
learn a lot more as an insider than general research in most cases.
Talk to the people in office at the organizations you and your family
are interested in joining.
Talk to the school guidance counselors about graduation rates, student
assistance, problems and successes in the school. Ask to talk to the PTA
president and ask if there is a website, and do the students have a
student website?
If you belong to a church or synagogue or any other house of worship,
ask for a referral to the new location, and talk to the pastor, priest,
rabbi and/or church members.
HELPING YOUR CHILDREN MAKE THE MOVE.
Today’s psychology no longer suggests moving only
during the summer vacation to allow children to finish their school
year, although pre-college considerations may still hold that as true.
It is felt that often the summer is too long for young children to worry
about what their next school will be like, who are the students they
will be with, will they be prepared to handle the classwork. So many
more moves take place during the school year these days.
Routine is comfortable, but change can make us alert, and give us a new
start. Children can learn this during a move. Especially if they are
taught to focus on the “to” and not only the “from”. Tell them as soon
as it is sure, so they don’t find out by accident. Tell them why the
move is taking place and what good things are making the move happen.
Discuss the benefits. The “do over” for anything they want to change,
how easy it is with internet to keep the old as well as build new
friends, how to prepare for that first day in a new school. ASK what
their concerns are and try to find answers. Make time for them to work
on their best new first impression. Can you or their new school provide
a pre-move “buddy” for them to meet and ask questions of?
Provide change of address cards for their friends.
Make a “first to unpack” box for them for the new home including a few
special “more grown up” surprises.
Get as much information from the destination about your child’s favorite
activities, perhaps talk with their new teacher.
While it is important to get the house settled, it is also important to
find wonderful new things to explore and enjoy about the destination.
Remember life is about the experience, not the things.
