Nicole Brekelbaum - REALTOR®️, NWAREALESTATE.COM 479-366-2658
Buying a home requires a lot of time, money, knowledge and professional help. But, it doesn’t need to be complicated! A little prep work will lay the foundation for a smooth and successful home buying experience. In this step we'll review the overall home buying process in NWA and share ways to prepare yourself mentally and financially for the steps ahead.
DO YOUR HOMEWORK
FAMILIARIZE YOURSELF WITH THE STEPS OF THE SELLING PROCESS
Selling your home is a large undertaking, but don't despair. We've broken the task into 9 manageable steps for you.
Scan through this entire sellers guide to familiarize yourself with the process of selling a home in NWA. Knowing what to expect as you move through the steps "for real" will make the overall experience more enjoyable.
FAMILIARIZE YOURSELF WITH THE REAL ESTATE INDUSTRY
It's probably been awhile since you've worked with real estate industry professionals or peppered your vocabulary with real estate terminology. Plus, the last time you were involved in a real estate deal you were a buyer, not a seller.
FAMILIARIZE YOURSELF WITH THE NWA REAL ESTATE MARKET
The NWA area is growing rapidly so it's likely the real estate market today is quite different from when you purchased your home.
CHALLENGES OF SELLING & MOVING
Selling your home is actually just a small part of an even larger moving process, a process that involves a slew of other challenges you'll face while simultaneously selling your home.
Sellers often underestimate the amount of time, money, brain power and physical labor selling their home and moving actually take.
These demands will affect your day-to-day life for the next 3-6 months. So, be aware and recognize the extent to which each of these challenges will take a toll on you and your family.
Then, make a plan to prevent them from having a negative effect on the sale of your home.
MOVING TAKES TIME
Set realistic expectations for the amount of time required to work your way through the selling process. Much of your current free-time will now be spent meeting with your agent, reviewing contracts, keeping your home show worthy and making countless trips to Lowes (#repairs).
Speaking of time, you may also want to ask yourself if this is a good time for you and your family to take on the challenges of selling and moving. Is there a better time of year where your schedules are less demanding? Are the current market conditions favorable for selling your home now?
MOVING COSTS MONEY.
Consider the larger financial picture of selling your home and allocate funds now to eliminate the surprise factor of unforeseen costs.
Budget plenty of extra cash for movers and home repairs your buyer may request. Determine what things you can do yourself and what things you need to hire out. Factor in unexpected costs too, such as a hotel stay or rent if there will be a gap between the sale of your home and the purchase of a new one.
MOVING IS MENTALLY & EMOTIONALLY TAXING
It can be hard to separate yourself emotionally from your house and see the sale of your home as a business transaction. However, if you let your emotions overrule your logic during negotiations you may make decisions you'll later regret.
Focus on the big picture, your reason for moving, and use this as the litmus test to mentally check whether the decisions you make move you closer to your goal.
To determine if you are emotionally ready to sell your home, ask yourself: Am I willing to rearrange my furnishings and take down personal pictures to help it sell? Am I ready to let people tour my home? Will I be offended by a low offer or negative buyer feedback?
MOVING TAKES MUSCLE POWER
The selling process is physically demanding. Deep cleaning, pre-packing to declutter, making home repairs and rearranging furniture are just some of the symptoms that cause seller fatigue. Oh...did we fail to mention the need to eventually pack and move all your belongings out of your house and into another? Moving is a sweaty business.
Before you begin the selling process, honestly evaluate your physical capabilities. If you are not able to do the activities required to prepare your home for sale or move yourself then make a plan to hire the necessary help and budget accordingly.
Are you ready to sell? Awesome! Fortunately, you don't have to do this alone. Let's find you the perfect listing agent next. Move to step 2…
Once you’ve determined you’re ready to move, the next step is to engage a real estate agent. And, with more than 3,500 real estate agents in Northwest Arkansas, you can be quite picky when choosing your listing agent! In this step we'll cover what a real estate agent is and does, the agency relationship, how agents get paid and how to find and hire the right agent for you.
WHAT IS A REAL ESTATE AGENT
A real estate agent is a licensed professional who can negotiate and arrange every element of the sale of your home. Your agent will legally represent you throughout the sale, so it’s important you select someone whom you can trust and feel comfortable.
Real estate agents are independent contractors. They work for themselves, have the ability to choose which firm they work for, and can move between firms at will.
Most agents in NWA are REALTORS. A REALTOR is a licensed real estate agent who belongs to the National Association of Realtors, the largest trade group in the country. Members of this group are held to high ethical standards and must adhere to a REALTOR Code of Ethics.
A real estate agent must work under the supervision of a broker. A broker is a real estate agent who has completed specific requirements granting them the ability to start their own real estate company and hire, supervise, and train agents to work under them. However, not all brokers wish to start their own companies. Therefore, your local real estate firm could have one principle broker and multiple executive brokers who can all oversee transactions and train new sales agents.
WHAT IS AGENCY
When you hire a real estate agent, you and your agent will enter into a relationship known as agency. By consenting to the relationship, you both agree to uphold your duties to one another throughout the business transaction of selling your home.
Agency relationships are fiduciary relationships, meaning they require a high level of trust and confidence. In this relationship the actions of your agent creates legal obligations for you so they must be trusted to make decisions based on your best interests.
Agency can be expressed or implied, and in some cases an agent may represent both a buyer and a seller in the same transaction as a duel agent.
HOW DO AGENTS GET PAID
The majority of agents in Northwest Arkansas are paid on a commission basis.
Your agent will get paid at closing when the sale of your home is finalized. The most common real estate commission fee in NWA is 6% of a home’s sales price.
The full amount of commission is charged to the seller (deducted from the seller’s net at closing) and the full commission is then split between the buyer agent and the listing agent.
Did you know that real estate agents often make a commission on referrals? Let's say you meet John Realtor through a friend. You feel like he is trustworthy, but you're worried he doesn’t know much about your Bentonville neighborhood.
Most REALTORS have a network of agent contacts who specialize in other markets. Therefore, you can ask John to refer you to an agent who is familiar with your specific neighborhood. And, if you use his contact, John can still receive a nice percentage of the commission on your home when it sells.
Additionally, if you are moving to another area in Arkansas or out of state, your NWA agent can interview and help you find a REALTOR to help you buy a house when you get where you're going. Your NWA agent will then get a referral fee from your buyers agent when you close on your new home.
HOW TO CHOOSE THE RIGHT AGENT
NOT ALL AGENTS ARE CREATED EQUAL. While some aspects of an agents' job - like commission percentages and signage requirements - may be regulated by their broker, most services offered to clients by their agents are determined by the agent themselves.
As independent contractors, agents decide how much they work and how much they spend on marketing campaigns etc. Therefore, services and the quality of services can vary from agent to agent, even within the same firm.
Additionally, it is often difficult to know an agents expertise from their title. For example, it's possible that an agent who has been in the business for 20 years has more experience than a broker who has been in the business for 4 years.
MOST AGENTS HAVE A SPECIFIC NICHE. A real estate license gives an agent the ability to help their clients buy or sell most any type of real estate, from large commercial warehouses to small residential starter homes. Therefore, many NWA agents focus their attention on a specific type of real estate, client, and/or market.
Ever wonder what the acronyms next to a real estate agents name mean? These stand for various real estate designations which show that an agent is specialized to help clients in a particular niche. An agent with the SRS (Seller Representative Specialist) designation, for example, may be a more seasoned listing agent who works primarily with sellers.
As you can see, not all real estate agents are created equal in experience or service. Don't settle. Take the time to find the right agent for you and the property you plan to sell.
FIND THE BEST FIT. It’s common for sellers to simply hire an agent that was recommended by a friend. Referrals from friends and family are a great place to start, but before you commit make sure they are the best fit for the property you wish to sell. After all, an agent who helped your friend sell a $400,000 home in Bentonville may not be as familiar with the market and features of your $200,000 home in west Fayetteville.
LOOK FOR AN AGENT WHO:
Remember, the agency relationship created with your REALTOR puts your agent in a position to create legal obligations for you and have intimate knowledge of your finances, so take care with this important decision. To find the right agent for the job, treat it like a job. interview 2-3 potential candidates before you hire.
SEAL THE DEAL
Once you’ve selected an agent, it’s important to complete the agreement in writing before getting started. To do this, your NWA agent will ask you to sign a document called an Exclusive Right to Sell. This is a contract between you and your agent’s firm outlining the terms of the listing agreement and making your agent's firm the legal representative for the sale of your home.
By signing the Exclusive Right to Sell you are creating an expressed agency relationship with your agent and agreeing to perform the duties required of you throughout the course of the transaction. One of these duties includes your responsibility to pay the agreed upon commission, no matter who the eventual buyer of your property is or how the sale is procured (unless an individual or other entity is specifically exempted in the agreement).
In order to complete the agreement, you will need to know the answers to the following items:
Found the perfect agent? Once you’ve found and solidified an agreement with the RIGHT agent, it’s time to find the RIGHT price for your home! Move to step 3…
Getting the price of your home right is important. It sends a message to buyers and agents, and you want to ensure the message you're sending is the the right message.In this step we'll take a look at the major factors to consider when setting your home's list price.
EVALUATE YOUR COMPS
In real estate, the word “comps” refers to recently sold homes that are “comp”arable to your home.
Your best comps are homes that are similar to yours in:
It is preferable to evaluate homes that have sold within the last six months and are located in the same neighborhood or school district as your home.
Your agent will scrutinize the data from recent comparable sales to come up with a suggested market value for your home. Your agent will also evaluate these comps to look for any factors that could have affected these sales – like how long they were on the market or their condition - in order to determine how much weight a particular comp should be given.
PRICE PER SQUARE FOOT
In NWA, agents often refer to comps in terms of price per square foot. The price per square foot is the calculation derived by dividing the sales price of the house by the square footage of the home.
Real estate square footage is based on heated and cooled habitable spaces. Therefore, garages and detached outbuildings on a property are not included in a home’s square footage.
OTHER FACTORS TO CONSIDER
A home appraisal is conducted by a licensed, professional home appraiser and is an unbiased estimate of the fair market value of what your house is worth.
Your agent is not an appraiser. While your agent can provide you with a likely sales price based on collected data, only an appraiser can give an official determination of value.
When your home is under contract, the buyer’s lender will typically order an appraisal of the house to ensure the amount of money the borrower is requesting for the purchase is appropriate.
While not necessary, it can be beneficial to get your home appraised prior to listing. Getting an appraisal early in the process will:
RENOVATIONS & IMPROVEMENTS
What are the updates and renovations to your home worth? This is arguably one of the biggest surprises and points of contention for sellers when pricing their homes.
While there are some home improvements that deliver a better return on investment when selling your home, you should not expect to recoup the cost of home renovation projects dollar for dollar. Because, while aesthetic changes may make a difference to buyers, they generally make little difference to appraisers.
Let’s say you've updated your home with granite counter tops and recently painted your walls to match current home fashion trends. You may think your home will be worth more than your neighbor's home (which is similar in size and style) but has not been updated. Unfortunately, this is not always the case.
When an appraiser looks at a house they are checking to ensure your home has counter tops and painted walls, the type and color are personal preference and do not vastly affect the value of the home.
While it can be disappointing to discover that recent updates may not increase the value of your home, it's important to remember that property improvements help attract buyers and help your home sell faster!
Put yourself in the shoes of the buyers. Although it’s not an official measurement of property value, it's a good idea to research and take into consideration other homes currently on the market when pricing your home. These homes will be your "competition" so you want to make sure your home stands out as the best option when buyers look up properties similar to yours in type and price range.
YOUR PERSONAL SITUATION
Do you need to sell quickly? If so, this may be a factor to consider when you determine your list price. You may want to attract interest and increase your pool of buyers by offering your home with a list price at the lower end of the comps.
Are you willing to make necessary repairs and/or renovations before your home goes on the market, such as replacing stained carpeting or broken deck boards? If not, you may want to consider adjusting your list price accordingly or offering potential buyers an allowance to cover these items after the sale.
Is it the summer – a busy time of year for real estate – or the winter? Is it a seller's market, where buyers are fighting over homes, or a buyers market?
Real estate is a business of supply and demand so it's important to recognize that the time of year and current health of your local real estate market will influence the sales price of your home.
Have you finalized a list price? Once you've determined a price for your house, it’s time to get your house ready for market. Move to step 4…
Buyers look for home they can envision themselves living in, and they will pay more and make offers quicker on homes where this task is made easy for them.
In this step we'll discuss how the overall presentation of your home affects your sale and what you can do to get your home show worthy.
SHOW. DONT TELL.
When shopping for homes, homebuyers are in the midst of making a large financial and personal decision while also trying to envision whether a home fits their lifestyle and needs. Therefore, the way buyers tend to make decisions and their ability to "see" themselves in your home are important factors to consider when trying to attract buyers for your home.
Therefore, let's take a look at the science behind American decision making tendencies and conceptual capabilities.
According to Nobel Prize recipient Dr. Roger Sperry, humans can be classified as predominately
Sperry's research concluded that only 10% of Americans are predominately right-brained.
Why is this important?
Because it means 90% of buyers aren't inherently conceptual! They can't see past your clutter and decor to envision the overall space of your home. They will make a logical choice to purchase or not purchase your home based on what they actually see in front of them, and not what could be.
Therefore, it's up to you to show buyers your home's potential now!
HERE'S WHAT TO DO
Approximately 12 weeks before you plan to list your home is a great time to start preparing your house to be marketable.
Look at your house from the buyer's perspective and put in the effort to prepare your house to make an amazing first impression.
You can help potential buyers envision what it would be like to live in your home by following 4 simple steps: clean, clear, prep and stage.
First, clean everything. And we mean everything, both inside and outside. Dust fan blades. Wipe down light switch covers. Trim hedges. Deodorize the dog bed. Make everything you can see, touch, and smell is as clean and new as possible.
These seemingly small changes not only make your space more appealing, but they communicate to potential buyers that you care and have maintained your property well.
Remember in Step 1 when you decided you could emotionally detach from your home and were ready to sell? This is where you prove it.
It's time to organize, simplify your spaces and get a jump start on packing now, beginning with excess decor, personal items and furniture.
Not sure what to remove or keep? A good default is to make each space in your home mimics the feel of a generic hotel room. Another trick is to view your home as a buyer. They wouldn’t want a picture of you in their home, would they?
You should also address any real and personal property items that need to stay or go during this clearing stage and make any adjustments now. For example, if you plan to take your drapes or the dining room chandelier, you should remove/replace them. Doing this now will eliminate any potential conflict over real and personal property during future negotiations.
Consider neatly storing your newly packed moving boxes in the garage, or better yet, in a rental storage facility until you're ready to move them to the next location
Tackle any unfinished projects and repairs. Pay particularly close attention to anything that people touch – like doorknobs and toilets. Tighten loose knobs and replace broken items.
Depending on how you decided to price your home, this is the stage where you should replace carpeting or paint your walls to update and freshen up your spaces.
Getting ahead of any projects or repairs now will not only affect the value and pace of the overall sale, but also increase the likelihood of a positive inspection report. A positive inspection goes a long way in building buyer confidence in their choice of home and alleviates any concerns they may have regarding residual home maintenance costs or lack of upkeep.
Did you know?
Every $100 you invest in staging has a potential return of $400?
Staged homes sell for an average of 17% more than non-staged homes?
Staged homes sell 87% faster than non-staged homes?
Staging your home is the act of making your home appealing to the highest number of potential buyers. It is the process of rearranging furnishings and decor to highlight the best features of your house and show buyers how each space is intended to be used.
Although it may be inconvenient for a short while, or create an environment that doesn't feel “home-y” to you, you'll get the greatest return on your home by making sure your dining room is set up as a dining room and your office is set up as an office etc.
Even if your home in vacant, you can still benefit from staging by hiring a professional stager, renting furniture, or using virtual staging software.
Is your house show worthy? Your house is in great shape and ready for buyers. Good work! Now it's time to market your property to attract the RIGHT buyers. Move to step 5…
In this step we'll discuss common real estate marketing methods used in NWA and which tactics to use to get your specific property seen by the right pool of buyers.
COMMON MARKETING METHODS IN NWA
When developing a marketing plan for your home, first consider what options are available to you. In NWA, commonly used marketing methods include:
MLS (MULTIPLE LISTING SERVICE)
Your agent will enter your home into the MLS database for Northwest Arkansas.
Having your home on the MLS system means your listings will be:
The MLS is the main resource used by agents and buyers to view available properties online.
An MLS listing provides essential information buyers can use to superficially evaluate if your home is a good option for them. It tells them the basics like price, how long your home has been on the market, acreage, number of bedrooms, and square footage.
Your MLS listing is also the place where buyers will form their first impression of your home. Therefore, you want to make sure your MLS listing is top notch.
Great MLS listings include great:
·In today's online world, most buyers flip through the pictures of a home listing first to determine whether they want to know more, or whether they want to move on to the next listing.
·Your goal is to stop buyers from aimlessly flipping and encourage them to spend more time on your listing.
Online Visuals = First Impressions
VISUALS ARE THE MAIN METHOD FOR ATTRACTING BUYER INTEREST ON SOCIAL MEDIA.
Therefore, it is worth some investment to create a stunning visual package of your home that can be used to market your property through social media platforms and campaigns.
IMAGE QUALIY IS KEY.
While high quality images and videos can attract buyers, blurry images or shaky videos will often have the opposite effect.
Let's take a look at the ways you can capture buyer interest and show off your home:
Don’t forget about the basics! For Sale signs, flyers and open houses remain tried and true ways to tell drive-by traffic that your home is for sale.
Just like in any purchase, incentives help. Offering price incentives, seller concessions or buyer agent bonuses are some creative ways to draw attention to your property.
MLS listings do have some shortcomings, such as word limits and rules regarding pictures. Therefore, you may want to consider other ways to get your property in front of buyers online.
Some free options include social media and emails. Most real estate agencies have a subscription list of agents and buyers who receive daily or weekly emails highlighting the company's new listings.
Some paid options include Facebook ads, property websites and ads on specialty real estate websites like NWA Democratic Gazette, Lakehouse.com, or right here on nwarealestate.com.
Which marketing methods are best for you?
While there’s no right or wrong way to market your home, different strategies work better on some homes than others. To determine which marketing methods are best suited for your property, consider the following factors:
YOUR TARGET BUYER
You want to get your home seen by the buyers who will be the most interested in what you have for sale.
Therefore, ask yourself: Who is the most likely buyer for your property? Where are they? How do they communicate?
Let’s say your home is a great starter home for a young family. Since most Millennials today primarily hang out online, a newspaper ad would be money wasted. Instead, you'd want to consider Instagram, Facebook and other social media outlets as the best way to reach your potential buyers.
THE COMMISSION RATE OR FLAT-FEE PACKAGE YOU CHOSE
Typically, marketing in NWA is paid for by your agent who is then reimbursed through their commission when your house sells.
However, the extent of your marketing campaign, and how your marketing campaign is paid for, should have been agreed to when you hired your agent.
YOUR HOME'S PRICE POINT
When implementing a marketing strategy, consider your home's price point and how competitive the current market is for this price point. The budget and efforts needed to market a large estate will likely be greater than those needed to market a starter home.
THE TYPE AND LOCATION OF YOUR PROPERTY
Your marketing efforts should make sense for your specific property.
For instance, if you own a house on a very quiet country road then creating fancy flyers for drive-by traffic may not be the best use of advertising dollars. Likewise, the location of your home will often determine how successful you should expect an open house to be.
THE DEGREE TO WHICH YOU CONQUERED STEP 4
If you did a thorough job of cleaning and staging your home, then taking advantage of visual marketing tactics will be a great way to attract potential buyers. On the other hand, paying for professional pictures of a messy house may not be money well spent.
Have you created buyer interest? Your listing is live and attracting attention. Now it's time to explore what's happening while your home is on the market. Move to step 6…
With all the prep work that goes into listing your home, it can feel like there's a lull in the process once your home is on the market. However, while the next set of events may be sporadic, there's still a lot going on and required of you. In this step we'll discuss the buyer showing process, tips for showing day and how to evaluate your buyer feedback.
HOW ARE SHOWINGS SCHEDULED
The showing instructions for your property should have been discussed in detail with your agent when you hired him/her.
Showing instructions tell buyer agents whom to call to make an appointment, how many hours advanced notice you require before a showing, and how to access your property.
Any special instructions, such as the presence of a security alarm or the need for buyers to be pre-approved, should also be communicated clearly on your MLS listing.
It is appropriate to require all buyers to make an appointment to view your home.
When a buyer wishes to tour your home their real estate agent will look up your listing on the MLS to access your showing instructions before making a showing appointment.
Should a potential buyer knock on your door, kindly request them to make a showing appointment through their agent.
Once a request has been made for a showing, your agent (or a hired showing service operator) will contact you to see if the desired date and time is convenient for you. If so, the appointment is confirmed and the buyers and their agent will tour your home on the scheduled date and time.
Although the typical buyer will spend only 10-20 minutes in your home for an initial showing, appointments are made in one hour increments. The hour-long appointment slot allows for buyers to see multiple homes in a day while accounting for traffic and any unforeseen delays.
In NWA, most agents will access the keys to your property from a Supra Box. This is an electronic box, often placed on your front door by your listing agent. The buyer's agent is approved to unlock this box with a code and blue tooth technology. Supra Boxes work from 8am-8pm and you can expect most showings to be scheduled between 9am-7pm.
10 SIMPLE WAYS TO IMPRESS BUYERS & IMPROVE THE BUYER EXPERIENCE ON SHOWING DAY
CLEAN. Make your home sparkle and shine! We assume you did a deep clean prior to listing your home, but a quick pick-up to clear counters, sweep and wipe fingerprints off windows and appliances is in order before your "guests" arrive.
Remember to maintain the outside of your house too. Buyers often congregate in front of your home while waiting for their agent to arrive or open the front door. So, spruce up the yard and sweep the porch and walkways to give buyers a positive first impression.
DEODORIZE. Buyers find strong or unsavory odors, especially smoking, unappealing. Perform a sniff test to ensure your home not only looks fresh and clean but smells fresh and clean too.
Plus, it never hurts to heighten the buyer experience with the comforting scent of baked goods.
DO A SAFETY CHECK. Make your home safe for buyers and agents (as well as yourself). Remove and/or lock up prescription drugs, guns, weapons, money, valuables and jewelry.
CREATE AMBIANCE. Make your home welcoming. You want buyers to spend their time visualizing themselves living in your home, not fumbling around for light switches. Therefore, leave the lights and lamps on in all rooms, leave doors to interior rooms and closets open, and set the thermostat to a comfortable temperature.
LEAVE THE HOUSE. You want to let buyers visualize themselves as the owners of the home and not you. Plus, your presence WILL make buyers uncomfortable. Therefore, leave your home before potential buyers arrive and stay gone until they have left.
If you are are uncomfortable with strangers in your home, plan to use surveillance cameras and/or have your trusted listing agent attend the showing instead of you.
BE FLEXIBLE. Your time is valuable, but try to be as flexible as possible on showing day. Buyers may be running a bit early or late for your appointment due to visiting multiple homes or unexpected traffic.
REMOVE PETS. Give buyers the most comfortable and stress free experience possible. Although you may see your pet as a member of the family, buyers may be allergic, afraid, distracted or completely deterred by the presence of an animal.
Take your pets on a drive or to a neighbor's house while your home is being shown. If that's not possible, crate or confine them to a single room and inform the buyer's agent of their location.
REMOVE CARS. Buyers and agents today often drive separately to showings. Make sure there is room for at least two cars to park comfortably. Removing your cars will enhance curb appeal, improve first impressions and help buyers see the size and condition of your garage more easily.
PROVIDE A LISTING BINDER. Provide buyers with copies of important documents to review, such as your property disclosure, average utility bills, a survey, before and after pictures of renovations, and relevant community/POA information.
LEAVE NOTES. You can communicate with potential buyers by leaving notes in the house to:
BUYER SHOWING ETIQUETTE
You've worked hard to put your best foot forward for the showing. And, you can expect potential buyers to be respectful while they are guests in your home.
If buyers are interested in your property they may schedule a second showing. This is generally a good sign that they are seriously considering an offer.
The purpose of the second showing is to give buyers an opportunity to spend a longer period of time in the house and look more closely at it's layout, features, and condition. It is common for buyers to bring a measuring tape, additional family members or even a contractor to a second showing.
GET & EVALUATE BUYER FEEDBACK
After each showing, your agent will request feedback from the buyer’s agent. Your agent will work hard to answer any follow up questions the buyers have and get a feel for how likely the buyers are to make an offer.
It is common for buyer agents to leave a business card in your home, but don't call the buyers or the buyer's agent yourself. Give this card to your agent and let them follow up for you.
Be patient. Buyers may need time to process their day, especially if they visited multiple homes. Therefore, your agent may not receive feedback the same day as the showing.
You and your agent can use showing feedback and constructive criticism to improve the buyer experience at future showings. For example, based on feedback, you may wish to update your online listing with answers to commonly asked questions you've received, or consider a price adjustment.
Do you have some great offers? That's great! Let's take a look at the process of evaluating offers...Move to step 7..
Yippee! You received an offer!In this step we'll take a look at the parts of the residential real estate contract and the negotiating process.
UNDERSTAND THE PARTS OF THE CONTRACT
The Residential Real Estate Contract, used by REALTORS in NWA, is a legally binding document with a lot of moving parts. The document is changed and updated on a yearly basis so it may look and read differently from the last time you saw it. Plus, it's likely the last time you reviewed this document you were a buyer.
So, take a moment to familiarize yourself with the major parts of the NWA Residential Real Estate Contract.
Terms and Topics to Know
Remember, agents are authorized to fill in the blanks of this form but are not able to make changes to the contract itself nor interpret the contract for you. Only an attorney can do that.
Therefore, we suggest you ask your agent for a blank copy to review prior to receiving offers. This way, if you have questions about the terms of the contract you can seek legal counsel now before you are under a strict offer expiration deadline.
6 Questions to Consider when Evaluating an offer
WHEN DOES THE OFFER EXPIRE?
Look at the expiration date and time (located on the last page of the contract). This will tell you how much time you have to evaluate and respond to the buyer. This is important to look at first because the time you have to respond could range from mere hours (in a hot market) to multiple days.
In order for a contract to be valid, the buyer needs to receive your response before the offer expiration. Therefore, when planning out your response, remember to factor in the time it will take for all parties (you, your agent, and your broker) to sign an acceptance, or create and sign a counter-offer, and get it successfully to the buyer's agent before the deadline.
WHAT IS YOUR NET PROFIT?
Of course, the first thing you’ll want to do when you get an offer is go directly to Section 3 of the contract and look at the offered purchase price! Everybody does!
But, before you get too excited (or disappointed) with the offered price, be sure to read through the entire offer. There are many other parts of the contract that can affect the amount of money you’ll net from the sale.
Therefore, look at the offered purchase price in conjunction with any requested seller concessions to assess what the actual offer is from the buyer.
Any conditions outlined in the contract that require a seller to do something, or pay for something, is called a seller concession, such as when a buyer asks you to help pay some of their buyer closing costs or provide them with a home warranty.
Your net profit is the total amount of money you will walk away with at closing once all transaction expenditures have been accounted for. Your net is derived by taking the purchase price on the contract and subtracting the price tag of any concessions (+) your current loan payoff (+) any additional seller paid closing costs (such as real estate fees).
You can use this handy Seller Net Calculator to see if the terms of the offer meet your overall financial goals for the sale of your home.
IS THE OFFER VIABLE?
While an offer is nice, you want to know if the buyer is serious and can afford to purchase your home. If you need additional information or support documentation to evaluate the strength of an offer, then request it from the buyer's agent.
Did the offer come with a pre-approval letter showing that the buyer can get a loan for the amount offered? If the offer is for cash, does the potential buyer have proof of funds? If the buyer has a contingency, how likely is it that the contingency can be removed in a timely manner?
WHAT OTHER DETAILS OR TERMS MATTER TO YOU?
How strong you feel an offer is, and how much weight you give to each section of the contract, ultimately depends on your circumstances and what's important to you.
Do you need to close quickly? If so, perhaps you are willing to accept a slightly lower purchase price from a buyer who can close ASAP.
Are you willing to complete lender required repairs if necessary? If not, then you may think twice about accepting an offer from a buyer who is getting an RD, VA or FHA loan.
Have you already moved out of state? Perhaps a buyer who is willing to accept your home as-is and eliminate the need for you to manage long distance repairs is a great fit.
ARE YOUR EMOTIONS IN CHECK?
Evaluating an offer can be an emotional experience. It can be exhilarating to receive a great offer, overwhelming to receive multiple offers, or equally frustrating to receive a low offer.
Think of an offer as a list of conditions under which the buyer would like to purchase your home. It’s their wish list, but it doesn’t mean you need to accept them, especially if their wishes are not in line with yours. It’s common for buyers and sellers to enter into multiple rounds of negotiations, so thoughtfully evaluate every offer, even if your goals seem too far apart.
Remember, it's quite common for buyers to point out some of the flaws of a home in order to justify why they are offering a lower purchase price. However, few buyers intentionally wish to offend the seller they are trying to buy a house from.
Therefore, do you best to keep your emotions at bay, keep the lines of negotiation open with all parties, evaluate offers as business transactions, and respond appropriately.
WHAT DO THE BUYER'S NEED?
Contract negotiation is the process of bringing two opposing parties into agreement. However, it's likely you will never meet the buyers of your home. This can make the negotiating process a challenge because you know very little about the person on the other side of the table.
Therefore, if you plan to send a counter-offer, it's nice to have your agent do a little research to see what parts of the contract are most important to the buyers. If you can present a counter that is a win-win for both sides, the buyer is more apt to accept.
Remember, your agent puts deals together all the time. He/she is an expert in dissecting contracts for buyer clues and negotiation strategies, so rely heavily on him/her to lead the way.
UNDERSTAND THE NEGOTIATION PROCESS
RESPOND TO THE BUYER
After you’ve evaluated the offer, there are 3 ways to respond.
If the buyer agrees to your counter, your home is under contract. If the buyer does not accept your counter, he/she can either submit a brand new offer to you (which you can then accept, reject or counter) or move on to a different property.
As you can see, this process can end quickly or go on for multiple rounds.
Your house is under contract…now what? You have an offer you are happy with, or better yet, excited about. Now it's time to execute the terms you've agreed to. Moe to step 8…
Congratulations! Your home is under contract! You've entered what is called the “pending” period. If your buyer is getting a loan, this period will typically take 30-45 days in NWA. This is a time of collaboration between you and the buyer. You need to know what you agreed to, follow through and adhere to the strict timelines in the contract.
THE CONTRACT EXECUTION PHASE: WHO'S DOING WHAT?
WHAT YOU'RE DOING
Throughout the pending period, your major tasks as a seller include:
Are you buying another home?
If you're purchasing your next-step home upon the sale of this home, then you'll need to simultaneously complete the necessary buyer steps for your new property during this time period.
For specifics on buying a home in NWA, check out our buyer's guide here.
WHAT THE BUYER IS DOING
The major buyer responsibilities include:
WHAT YOUR AGENT IS DOING
Throughout the pending period, your agent is a busy bee – s/he is:
ADHERE TO THE CONTRACT TIMELINES
The length of the execution phase is set by the closing date stated on your contract. However, there are multiple time allotments set within the contract that must be adhered to.
This is a time of collaboration between you and the buyer. You need to know what you agreed to and follow the strict timelines in the contract to get to closing on time and without problems.
BLOG – Adhere to contract deadlines
Let’s take a closer look at the various processes happening simultaneously during the execution phase of the contract:
Once the title company receives a copy of your contract (from your real estate agent) they will begin researching your property to confirm that it is free of any liens or disputes.
Title process infographic
If your contract is contingent on an inspection, it's likely your buyers will hire a licensed home inspector to take a detailed look at the operating features, overall safety and maintenance aspects of your home. Based on their findings it may be necessary for buyers to bring contractors or repairmen to the property to get quotes.
Inspections typically take 3-4 hours, or more, depending on the size of your home. You should properly prepare your home for the inspection so the inspector can easily access all areas of your home. And, it is best practice for you to leave your home for the inspection (just as you did for showings).
Seller's Pre-Inspection Checklist
It will be to everybody's benefit for the following items to be addressed prior to the home inspection.
Make sure all utilities, water, electric, and gas are on and all pilot lights are lit.
Write notes to the inspector about any special concerns such as pets, locking up the home, thermostat settings, or repairs or replacements that may already have been made or planned.
Make sure all rooms / areas of the home, garage, and outbuildings can be unlocked so the inspector can get into them.
Move any boxes or storage to allow for a clear view of the walls, especially in basements and garages.
Replace any light bulbs that aren't working.
Arrange items under sinks to allow for adequate inspection of the plumbing and the floor of the cabinet.
Make sure we have access to inspect the attic; water heaters; electrical panels; furnaces; AC, sump pumps, etc.
Fireplaces / Wood stoves: Make sure old ashes are cleaned out to allow for inspection.
Share any information you think might be helpful to the buyer.
Inspection day is usually the last time your buyer will visit the home until the final walk-through. For this reason, many buyers choose to use the inspection day to invite family members, take measurements for furnishings and look at the home in greater detail.
Once the buyer receives and evaluates the inspection report from their inspector, the buyer may choose to formally request some home repairs be completed prior to closing. Repair requests are made using a document called the IRSA (Inspection Repair and Survey Addendum).
Although you have already negotiated the contract, the inspection process opens up another round of negotiations with the buyer regarding what repairs you are, or are not, willing to make to your home.
In some cases, your home may be subject to repairs required by the buyer’s lender (This topic is covered fully under the section: appraisal process).
Once you and the buyer have agreed on repairs it is your responsibility to complete those repairs prior to the buyer's final walk-through.
Did you know you actually need to sell your home twice?
Not only does the purchase price of your home need to be found agreeable to a buyer, but it must also be justifiable to an appraiser.
Home appraisals are conducted by licensed professional home appraisers, and are an unbiased estimate of the fair market value of your home. During the mortgage loan process, your buyer's lenders will order an appraisal as an objective way to assess your home's value and ensure the amount of money the borrower is requesting is appropriate.
LENDER REQUIRED REPAIRS
Depending on the type of loan your buyer is securing (FHA, VA or RD), your property will be scrutinized by the appraiser for more than just price. Homes being purchased with these types of loans are subject to specific requirements that ensure the home is in working order for the new occupant. Typically, items like broken windows or roof leaks will have to be repaired before the buyer’s lender will agree to the loan.
The inspection by the appraiser is separate from the buyer’s home inspection and may come much later in the execution phase. So, while you may have already negotiated repairs with the buyer based on the home inspection, it is possible that the buyer’s lender will require additional repairs.
Although the home loan is not something you are directly involved with as a seller, it is still a good idea to understand the lending process. This way you can track the progress of the buyer's loan and rest assured that the loan is being processed smoothly and you are on track for closing.
While you're focused on executing the terms of your real estate contract, you'll also be busy moving out of your house. Many sellers like to wait until the inspection negotiations are complete before starting this process. Remember, you’ll want to leave enough time to get the house ready for the buyer’s final walk-through, too.
It’s a great idea to create a safe location now where you can collect items you need to give the buyer (i.e. keys, garage door openers, operation manuals etc.), so they don’t get packed away. Additionally, keep a copy of the contract handy and adhere to promises regarding personal property so nothing is mistakenly packed and/or left behind that shouldn’t be.
MAKING CHANGES TO THE CONTRACT
Sometimes changes need to me made to the contract during the execution phase. If so, these changes will be made on the appropriate NWA real estate forms and signed by all parties. The two most common forms used to make changes are the General Addendum and Closing Date Addendum.
There are a lot of moving parts to the contract which require the collaboration of multiple people from many industries.
Although everyone involved is working hard to fulfill the terms of the contract on time, there may be set backs that are simply out of your control. For instance, the underwriting process could take longer than projected, or repairs could take longer than expected.
Are you clear to close? It's time to take the final steps to selling your home and getting your check! Move to Step 9…
Title work is complete and all aspects of the contract have been fulfilled! It's time to make your sale official and collect your check!
REVIEW THE SETTLEMENT STATEMENT
You will receive a HUD-1 (Housing and Urban Development) ALTA (American Land Title Association) statement from your title company three days prior to closing. This summary will break out the expenses pertaining to the sale. You want to check to make sure all the calculations on the form are correct.
BUYER WILL CONDUCT A FINAL WALK-THROUGH
The buyers will conduct a final walk-through of the property. This typically occurs the day before closing and gives the buyer the opportunity to ensure any repairs have been completed, the home is in the same condition it was when they made the offer, and that your personal belongings have been removed.
GATHER IMPORTANT ITEMS FOR BUYERS
Collect any operation manuals, keys, garage door openers, neighborhood contact information and codes the buyer will need. Leave these in the home where the buyer can easily find them.
Closing will take place at the title company at a time pre-arranged by you, your agent and your closer. Closings occur on weekdays between 8 a.m. and 5 p.m. and take approximately 30 minutes.
If you and the buyer used the same title company, you may close together, or one after the other. But, it's also possible for you to close at different times and through different title companies. Therefore, it is possible (and common) to never meet your buyer at all.
The title company must receive the funds from the buyer before distributing pay. Therefore, if you close before the buyer closes, you won’t receive a check at the closing table.
If you can not attend the closing in person, a long distance closing can be prearranged and conducted via FedEx in front of a notary. Or, a trusted friend can sign for you via power of attorney at the title office.
BE SURE TO BRING:
EVERYTHING IS SIGNED, WHAT'S NEXT?