Things to Consider as a Seller in 2021
We are living through an historic seller's market and frankly everyone is talking about it. For 10 consecutive months, more than 50% of closed sales in California sold above the asking price. In San Diego, the average time a property sits on the market before entering escrow is only 28 days, which is much quicker than the 90 to 120 days that are typical of a balanced market. We can’t expect multiple offers and incredibly short times to happen with every listing, but it might make you wonder, is now the right time to sell? There are a lot of things to consider, so we put together a list of what you might want to think about before listing your property.
Where do I go?
This is the question most sellers are asking themselves as they survey the real estate market. Trying to find your new home right now might feel daunting, but it doesn’t have to be. If you’re ready to purchase your next home, we detailed how to win as a buyer in 2021. One of the options is to move into a rental while you look for the next steppingstone on your journey. This will allow you to maximize the potential sale of your home while providing you a significant amount of flexibility in your search. For some, this may not be appealing. Having to move twice might create unwanted stress. Those individuals might prefer to take advantage of a popular trend in the present market, a rent back. Buyers are typically open to the idea of renting the property back to the seller for 30 to 60 days. Your agent may even be able to negotiate for it to be rent-free. Another option is to include a seller contingency that stipulates that the close of the sale is dependent on the seller finding a replacement property.
The fourth option is to get a Bridge Loan. This can put the seller in the driver’s seat. They are no longer dependent on the sale of their property and they can choose their ideal home according to their schedule. There is the added benefit of not having to move twice. The process starts with getting prequalified which will likely take 20 to 30 days to complete. Once this is done, you can make offers on potential properties. Given the average Expected Market Time of 28 days, you likely won’t need to carry the loan for very long. One of the added benefits is that you can move out of your current home, which eliminates some of the stress associated with selling your property. If that is something that sounds appealing to you, Compass with their lending partners, make Bridge Loans available to their clients. Your agent would be happy to discuss this process in greater detail with you.
Should I Fix Up My House?
Generally speaking, homes can get by with some minor touch-ups. This would consist of painting, new carpet, updating window coverings, and installing new fixtures. Unless you really know what you’re doing, you likely won’t want to take on a full remodel. Updating your bathrooms and kitchen can be a great way to improve your home but it may not be necessary in the current market. If your home needs a major facelift, something to consider is the Compass Concierge program. This program helps you finance the remodel of your home utilizing the equity generated from the sale.
Trying to determine the best way to handle repairs to your property can be tough. Often sellers ask if it’s better to give a closing credit toward future repairs or pay for work to be completed before the close of escrow. It’s generally cheaper to get the work done yourself. However, giving a credit removes any need for you to coordinate the logistics of repairs and puts the onus on the buyer to complete.
Is It Worth It to Have My House Pre-inspected?
One of the biggest concerns in this market is having multiple offers come in on a property only to see the deal fall apart after a buyer gets cold feet. Now the home is relisted and one of the potential hurdles to overcome is the perceived notion that the deal fell through because of an issue with the property. A good way to mitigate that from potentially happening is to do a pre-inspection of your property. Now potential buyers can have more information and feel more confident when making their offer. This eliminates the likelihood of a buyer backing out over something discovered during the inspection process. If the deal does fall apart, a report will be available to show to future buyers that can calm them of any worries about the property’s condition.
Pricing Your Home
This is an area that everyone is interested in particularly since the market is so competitive right now. We like to take the approach of listing a property at a price that will generate enough interest from buyers that there is the potential for multiple offers. There is a fine line between a perceived opportunity and an overpriced listing. The risk with asking too much is that buyers are turned off by the high cost and may not consider the property as a viable option. Pricing the property too low can create the headache of sifting through several offers that ultimately create more work than is necessary. Ideally, there will be between 3 to 6 offers to choose from. In this scenario, there is a sense of urgency and a desire by the buyers to make a competitive offer and to go to their highest possible price.
What Should I Look for in an Offer Aside From Price?
Everyone wants to get the most that they can for their property, but there are a few things to consider when evaluating the offers presented to you. One aspect to look for is a 3% deposit and depending on the type of loan either 20% down for a conventional loan or 30% down for a jumbo loan (over $753,250 in San Diego County for a single-family home). Another detail to consider is the strength of the buyer’s proof of funds. If it appears that the buyer does not have a significant financial cushion after the close of the sale, there’s a possibility that they will experience a financial burden before the close of escrow and elect to back out of the deal. This would obviously not be an ideal situation. So, make sure that you have a strong offer before you accept.
Should You Consult a Financial Advisor or CPA Before Selling a House?
For most Americans, real estate provides the greatest opportunities to generate wealth, and, as with any major financial decision, choosing to sell your home is not something that should be taken lightly. There are several tax and financial ramifications to take into consideration when selling a property. Some of those may not be immediately apparent to the general public and every person’s financial situation is going to be different. Therefore, it is important to consult a financial advisor and CPA prior to deciding to sell your home. Once you have a good sense of the implications, make sure your realtor, financial advisor, and CPA are all working on your behalf to execute your financial plan. Having a team on your side to guide you through the process is critical to achieving financial success.
Is Now a Good Time to Sell?
It’s true, that right now the real estate market is squarely in the seller’s corner, but that’s not the most important factor. The truly important question to ask yourself is, does it make sense with what’s going on with my life right now? Your personal situation is a critical piece of the picture. Maybe you are at a point in life where your house doesn’t quite suit your needs and it’s time to make a change. Therefore, selling your property and finding your next home is an important step to take. For others, the timing might not be perfect right now and that’s okay. Sometimes you need to wait for some of the pieces in life to fall into place. Once you have those aspects figured out, take some time to see if selling your home is the right choice for you. Remember that your specific situation is an essential component in deciding to sell your property.
Other Things to Consider
Do you have any leased items on the property such as a water filtration system or solar? This can be a headache to transfer to the buyer and is something that you will want to address early on. One option is to pay everything off prior to listing the property to fully ensure a smooth transfer. If it’s possible, you may want to pay off the leased item(s) using the proceeds from the sale of the property to alleviate any headaches that might arise.
Is your home in a trust? If so, there are additional things to consider. Properties held in a trust can sometimes be more complicated. There are aspects that likely need to be addressed to ensure there is a smooth transfer of the property to the buyer. In some cases, there are multiple people who need to sign documents such as other family members, a trustee, or an executor. This requires everyone involved to be on the same page and approve the sale of the property.
Data provided by Steven Thomas, Reports On Housing - All Rights Reserved. For regular updates on San Diego real estate trends sign up for our bimonthly email, The State of the Market.
Disclaimer: The materials are provided for informational purposes only and does not constitute legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an agent-client relationship between any agent and any other person, group or entity. Furthermore, no representations or warranties whatsoever, express or implied, are given as to the accuracy or applicability of the information contained herein. No one should rely upon the information contained herein as constituting legal advice. The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader’s facts and circumstances.