Are you thinking of selling your home? Perhaps a job transfer, birth, death, divorce, unemployment, retirement, illness, move-up to a better home or a move-down to a smaller home motivates you to sell.
Because your home has probably been your best investment, you want to maximize your sale profit. But please be careful. One mistake can cost you thousands of lost-profit dollars. Here are some suggestions on how to maximize your profit:
Be sure your home is in top physical condition: No matter how well-located your home may be, if it is not in good physical condition, it will not sell for top dollar.
A few dollars spent painting, cleaning, repairing and landscaping can be the most profitable you will ever spend. Incidentally, paint is by far the cheapest improvement you can make. A few dollars spent painting the inside and outside of your home can produce thousands of dollars in increased property value.
The home sale fix-up tax rule: If you incur expenses fixing up your home for sale within 90 days before the sale date, and pay for them within 30 days after the sale closing, Uncle Sam allows you to subtract the fix-up costs from the gross sales price. However, this tax rule results in income tax savings only if you are buying a less-expensive replacement home. (The reason is that if you buy a more-expensive replacement home, all your profit tax is deferred anyway.)
For example, suppose your home sells for $100,000. You paid a $6,000 real estate sales commission and spent $4,000 on fix-up expenses. The $4,000 fix-up cost normally has no tax significance. However, because you are selling your primary residence, the $10,000 in sales costs gives you a $90,000 adjusted sale price. This means that if you buy a replacement principal residence costing at least $90,000, then all your home sale profit is tax deferred. But if you buy a replacement home costing less than $90,000, all or part of your home sale profit will be taxable.
How to set the asking price for your home: After your home is in tiptop condition you are ready to set the asking price. One method is to hire a well-qualified professional appraiser. Your appraisal cost will be from $100 to $300, depending on where you live.
You will receive an appraisal form showing recent sale prices for comparable neighborhood homes plus the appraiser's professional opinion of your home's market value.
Another method is to invite at least three local real estate agents to evaluate your home. Select them from among agents who have contacted you about listing your home for sale, agents who sell homes in your neighborhood and agents who heavily advertise homes for sale in your area.
Each agent should give you a written "competitive market analysis" form showing recent nearby home sale prices and each agent's opinion of your home's sale price.
However, be careful. Don't sign a listing agreement until you check out each agent's references of previous home sellers. Ask, "Were you satisfied with this agent and would you list your home for sale again with the same agent?" You will quickly know which agent should receive your listing.
Decide whether you should hire a real estate agent: The final decision is whether you need a real estate agent to sell your home. According to a survey by the National Assn. of Realtors, more than 80% of home sellers use a real estate agent. But of those who sell their homes without an agent, only 25% say they would again sell without an agent.
Do-it-yourself home sellers think they are saving the sales commission. But they are really earning it by hard work, such as holding open houses, answering telephone calls from unqualified buyers and helping the buyer obtain mortgage financing.
Another problem is that home buyers expect do-it-yourself sellers to share their sales commission savings with the buyer. Finally, an additional drawback of trying to sell your home alone is that you lack the power of the local multiple listing service, which distributes listing information to all its members, who may have buyers waiting for your home.
Evaluate the home sale consequences: A very practical problem of selling a home today is making certain that the buyer is aware of any defects in the property. If the seller fails to disclose problems with the home, the seller can be held liable for monetary damages.
Chances are you want to make the easiest possible home sale for the highest net sale price. In today's marketplace that usually means hiring the best professional real estate agent in your area to market your home for the top attainable price.