Thinking about selling your house? Shhhh – don’t tell anyone.
I’m kidding. Sort of. Here is the reality: There are more people who want to move into this area than those leaving. So, when word gets out that you are thinking about selling, here is what may happen: Your phone, email, texts, etc., will start to blow up. Your neighbors have a buyer friend who has been looking for two years, some developer from out of the area wants to pay you all cash if you sign today or real estate agents who have buyers who want to move right in so their kids can start school in the fall.
You get the idea. Once word gets out, the floodgates open. You want to be able to work through some important decisions without distraction.
For an investment a big as your house/property, you want to be fully ready to sell. Just like you wouldn’t sell your car without driving it through a car wash first, it’s the same with your house, only more so.
Assuming you have made the decision to sell, following is an outline of next steps.
Find an agent
Most houses in this area sell with the help of a licensed real estate salesperson. Agents who agree to abide by a strict code of ethics can call themselves realtors, but others cannot. You should select your agent early on, as he or she will be a valuable resource to manage the selling process for you.
Consult an accountant
Talk with an accountant to understand the potential tax implications for the sale. As a very rough guideline, the capital gains tax is calculated on the remainder of: what you sell your house for minus the cost to sell it (for example, commissions, staging, inspections, etc.) minus your cost basis (what you originally paid plus upgrades) minus your exemption ($250,000 for an individual/$500,000 for a married couple). Remember, if your spouse has passed away, the cost basis “steps up” to the value at the date of death.
If you are buying elsewhere in California, check whether propositions 60 and 90 might apply to you, allowing you to potentially reduce your property tax bill in your new house. Some counties allow you to keep your old property-tax cost basis in the new house as long as it costs less than the house you are leaving.
Where will you be moving?
Do you need the proceeds from the sale of this house to buy your next house? Could you get a bridge loan so that you could move out and make your house easier to show and sell? Do you need a rent-back after you close escrow?
Prepare to sell
Get the house ready for sale. This is the $64,000 question: What, if anything, should you do to get your house ready for the market to maximize your net return? In other words, if you spend money now fixing up your house, will it sell for at least that much more than if you had done nothing? I have some basic rules of thumb that apply to most houses:
• Don’t take it personally. Anything you do to fix up your house is done with the idea of maximizing your return – it is not a commentary on your decorating skills or your parents’ choice of wallpaper.
• Don’t do anything structural. Who knows what the buyer will want, and you might end up spending money on something the buyer doesn’t like.
• Usually houses need a fresh coat of paint inside and out, and carpets removed and replaced.
• The front of your house is often where buyers make their decisions, so invest in making the front look clean and inviting.
• Fix anything that would negatively stand out to a buyer’s eye: no cracked windows or ripped screens, no big stains on anything, fireplace cleaned out, new caulking around the tub, etc. If there are projects that are too big or too expensive for you to take on, don’t worry – get a quote or two from licensed tradespeople so that potential buyers will have an estimate of what it would cost to replace the roof, heater or water heater.
• If you don’t think you’ll net at least double what you spend on any changes or upgrades, it might not be worth the effort. Your agent will be a good source of advice on this.
Get your inspections. Typically you’ll need general home, pest and roof inspections. Add pool, chimney or mold as appropriate.
Prepare all of your disclosures. Your agent will advise you on the forms to fill out. I like to think of it in reverse: If you were buying the house, what would you want to know about it? If you have to ask yourself, “Should I disclose this?” The answer is “yes.” It is nearly impossible to overdisclose. Buyers are usually much more understanding of any problems if they know about them before they make their offer than if they find out about them later – and they will.
Once you’ve taken the initial steps, sit back and let your agent work his or her magic to get your house sold.