For Sale By Owner in California

For Sale By Owner in California

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For Sale By Owner in California

, California Real Estate Broker

, 11th Edition

Sell your home yourself with the plain-English legal information found in For Sale by Owner in California.  This thoroughly researched guide takes you step by step through the selling process.  Find out how to:

  • pick the best time to sell
  • set the sale price
  • complete the escrow process

Includes all the legal forms you need!

Selling your own house: The inside scoop

Paying an agent up to 6% in commissions to sell your house may seriously cut into the profit you hope to realize. On a $600,000 house, that’s about $36,000.

So why not sell your house yourself? For Sale by Owner in California will help you at every step!

It covers the entire selling process, from putting the house on the market to interacting with buyers to transferring the title. Even if you work with an agent, you’ll learn how to make the most of the relationship—and cut costs. Find out how to:

 

  • pick the best time to sell
  • set the right asking price
  • sell while buying another house
  • advertise widely and inexpensively
  • make all disclosures required by California law
  • screen buyers for financial ability
  • offer creative financing incentives
  • finalize the sale

 

Not a resident of the Golden State? Check out the Nolo books Selling Your House in a Tough Market and Nolo's Essential Guide to Buying Your First Home for real estate help in your state.

Nolo has dozens of products created just for California residents. Check out Nolo's list of California products.

 

“The best all-around guide for do-it-yourself home sellers.”-San Jose Mercury News

“Well-organized, and written in a straightforward, clear style …”-San Diego Union-Tribune

“Contains forms and instructions for the entire selling process, from deciding when to sell to closing escrow.” - Los Angeles Times

ISBN
9781413319873
Number of Pages
248
Included Forms

 

  • Quitclaim Deed
  • Moving Expenses With Tax Consequences
  • Hourly Broker Fee Agreement
  • Sign-In Sheet
  • Disclosure Of Information On Lead-Based Paint And Lead-Based Paint Hazards
  • Protect Your Family From Lead In Your Home Pamphlet
  • Real Estate Transfer Disclosure Statement
  • Natural Hazard Disclosure Statement
  • Credit Information Form
  • Promissory Note
  • Offer To Purchase Real Property
  • Deposit Receipt
  • Short Form Counteroffer
  • Counteroffer To Purchase Real Property
  • Acceptance Of Purchase Offer
  • Counteroffer Revocation
  • Seller's Demand For Removal Of Contingencies
  • Contingency Release
  • Extending Time To Meet Contingencies
  • Release Of Real Estate Purchase Contract
  • George Devine

    The late George Devine was a licensed real estate broker and a widely respected educator in the real estate field. He obtained a B.A. from the University of San Francisco, and an M.A. from Marquette University, and pursued additional studies at San Francisco State University, Seton Hall University, Fordham University, New York University, the University of California at Berkeley, and other academic institutions. Before his death in 2015, he taught real estate at the McLaren School of Business at the University of San Francisco, where he was named the Outstanding Adjunct Professor. For several years, George wrote the popular "Real Estate Handbook" column in the weekly Real Estate Guide section of the San Francisco Progress. He authored For Sale By Owner in California and co-authored How to Buy a House in California.

Table of Contents

Introduction: Your Home-Selling Companion

1. Are You Ready?

  • What Are Your Personal Reasons for Selling?
  • Is It a Good Time to Sell?
  • Is the House in Good Enough Condition for Sale?
  • Selling One House and Buying Another
  • Success Stories: Homeowners Who Timed It Right

2. Do You Really, Fully Own Your House?

  • Single Homeowners
  • Community Property
  • Joint Tenants and Tenants in Common
  • Partnership
  • Conservators, Guardians, and Trustees
  • Is Your Ownership Limited by Any Encumbrances?

3. Avoiding a Big Tax Bill When Selling a House

  • How Much Gain You Will Likely Be Taxed ON
  • Strategies for Minimizing Capital Gains Tax
  • Federal Tax Implications of Short Sales
  • Tax-Deductible Moving Expenses

4. Working With Real Estate Agents

  • Who Can Legally Sell a House in California?
  • Services Offered by Real Estate Agents
  • How California Real Estate Agents Are Paid
  • Standard Contract: Exclusive Listing
  • Modifying the Standard Contract and Commission
  • Alternative Real Estate Contracts
  • Paying an Agent by the Hour
  • Evaluating Real Estate Agents
  • Getting Rid of an Agent You Don’t Like

5. How Much Should You Ask for Your House?

  • Determine Prices of Comparable Houses
  • Ask an Agent’s Opinion
  • Hire a Professional Appraiser
  • Learn the Asking Prices of Houses for Sale
  • Take the Temperature of the Local Housing Market
  • Price Your Own House

6. How to Tell the World Your House Is for Sale

  • Marketing Your House on the Internet
  • Advertise—In the Classifieds
  • Hang “For Sale” Signs
  • Distribute Your Own Printed Property Fact Sheet

7. Preparing Disclosures About Your House

  • REal Estate Transfer Disclosure Statement
  • Natural Hazard Disclosure Statement
  • Earthquake and Seismic Disclosures
  • Water Heater Bracing
  • Smoke and Carbon Monoxide Detectors
  • Complying With Local Ordinances

8. Showing Your Home to Buyers

  • Handling Phone Calls
  • Finishing Touches Before Showing Your Home
  • Holding an Open House
  • Conducting Individual Tours
  • Protecting Your Safety and Property
  • Obeying Antidiscrimination Laws

9. Making Sure the Buyer Is Financially Qualified to Buy Your House

  • Evaluating a potential Buyer's Credit
  • How Lenders qualify Buyers for Home Purchase
  • Types of Mortgages
  • Seller Financing

10. The House Sale Contract

  • Waiting for Offers
  • Only a Written Offer Is Legally Valid
  • Offer Form Terminology
  • Types of Offer Forms
  • Understanding the Offer Form

11. Offers, Counteroffers, and Negotiations

  • Listing Your House for Sale Doesn’t Mean You Must Sell It
  • The Offer Conference
  • Revoking an Offer
  • The Art of Negotiating
  • Counteroffers
  • Accepting an Offer or Counteroffer
  • Revoking a Counteroffer
  • Backup Offers and Wipeout Clauses

12. After the Contract Is Signed: Proceeding Through Escrow

  • Opening Escrow
  • Removing Contingencies
  • Title Report and Title Insurance
  • Buyer's Final Physical Inspection of the Property
  • Closing Escrow

13. What If Something Goes Wrong During Escrow?

  • The Seller Backs Out
  • The Buyer Backs Out
  • The Buyer or Seller Dies
  • The House Is Destroyed by Natural Disaster
  • The Escrow Holder’s Role in a Dispute

Appendix: Using the Interactive Forms

  • List of Forms

 

Index

Chapter 1
Are You Ready?

What Are Your Personal Reasons for Selling?

Is It a Good Time to Sell?

Market Conditions

Will the Market Heat Up Anytime Soon?

What Time of Year Is Best to Sell In?

Is the House in Good Enough Condition for Sale?

Is Your House in Good Repair?

Hiring Professionals for a Preinspection

Dealing With Repair Needs

Alerting the Buyer to the Inspector’s Findings

When to Make Major Improvements

Making the House and Garden Look Their Best for Showings.

Selling One House and Buying Another

Check the Housing Market Carefully

Bridge Financing: How to Own Two Houses Briefly

Success Stories: Homeowners Who Timed It Right

Jon and Penny Timed a Job-Related Sale to Their Benefit

Ann Minimized the Financial Trauma of Widowhood

 

Before rushing to put your house on the market, it’s a good idea to think about whether you’re ready to sell. Many factors can affect your decision—perhaps you have no choice because you simply can’t afford your home anymore. Or maybe you’re ready to retire and move out of the area and are anxious to cash out your equity and move on.

To decide whether now is the right time for you, you’ll want to take into account your own personal reasons and the market’s condition.

What Are Your Personal Reasons for Selling?

People have many different reasons for wanting to sell their homes, such as:

Job change. You can’t—or don’t want to—commute to your new job from your old house.

Personal status or lifestyle change. You get married or divorced, move in with someone (or someone moves in with you), you have a new child, your daughter leaves for college, your spouse dies, your health argues against continuing to live in a house with stairs or in a city with very cold weather, or you’ve always wanted to try living in Hawaii.

Investment or lifestyle upgrade. You’re selling your existing home to move up to a nicer one. Your old house isn’t that bad, but now you can afford something you like more—because it’s bigger; closer to work; in a better neighborhood or school district; has a pool; is a better investment; or provides something else that’s important to you.

Financial needs. You can’t afford the mortgage pay­ments. This doesn’t neces­sarily mean you’re headed for foreclosure or bankruptcy, but it does mean that an unreasonable share of your income is going ­toward housing payments, and you have other priorities—like paying your other bills, saving for retirement, or paying school tuition.

While some reasons are more urgent than others, many situations fit into the “the sale can wait if it needs to” category. This doesn’t mean your family isn’t cramped since the new baby was born or that it wouldn’t be better for your health or pocket­book to move. But it does mean that selling your house next week, or even next month, isn’t essential if you are not likely to get the best price.

But sometimes, selling feels like a neces­sity, no matter what the market condi­tions are. If you’re moving because you can’t afford your mortgage payments anymore, consider whether you can refinance the mortgage through your bank, borrow money from other sources, or work out an alternate payment plan with your lender. You may also find help from one of various federal programs designed to help struggling homeowners. For eligibility rules, expiration dates, and other details, see the government’s website, www.makinghomeaffordable.gov.

Sell Now or Wait?

When to Sell Now

When to Wait

You need to sell your house for financial reasons—you can’t afford the mortgage payments and hope to move into a less expensive residence.

You’re financially strapped but your lender is willing to work out a reasonable payment schedule and you anticipate getting back on your feet soon.

You’re buying a new house and can’t afford to own two homes at once.

You’re buying a new home and can arrange “bridge” financing that allows you to wait on selling your home until you are better prepared or will get a good price.

The real estate market is about to peak in prices and you can make a larger profit by selling now than by waiting.

The market is sluggish but is likely to rebound with vigor in a year or two—for example, interests rates are going down, or the neighborhood value is expected to increase with a new retail complex.

You must move as soon as possible—for example, your new job is too far to commute—and you are sure you won’t return to the same location. Or, a pressing health concern requires a move.

You don’t have to move immediately, or you are not sure if a new location will work out, and the market favors buyers and looks like it will continue to do so (though predicting housing markets is never certain).

 

Likewise, remember that it’s often unwise to make major moves or decisions within at least a year or so of a serious emotional shock—for example, a sudden death in the family, divorce, or job loss—if the move can possibly be avoided or deferred.

 

Short Sales and Foreclosures

Many homeowners within recent years have found them­selves in a tough spot, as the value of their homes dipped but their mortgage payments increased. If you’re in financial trouble and must sell your house because you can’t make the payments, doing so before the bank gets involved increases the possibility that you’ll walk away with a little equity, or at the very least, without damaging your credit.

You may also be able to work with your lender to restructure your payments, delay them tem­porarily until you get back on your feet, or refinance your current loan—for example, with a 40-year, fixed-rate mortgage or a hybrid adjustable-rate mortgage that locks in an interest rate for five or so years. Though you might not want the loan forever, it may keep you in your house for now, until the market stabilizes or your income increases.

Perhaps you’re already behind on your mortgage payments, or are worried that you won’t be able to sell your house for what you owe on it. In that case, you may have considered a real estate “short sale.” This is preferable to walking away from the property, because it doesn’t do the same damage to your credit.

With a short sale, the lender agrees to accept less than the full amount owed on the property. Lenders allow sellers to do this because foreclosures are expensive, and they stand to lose even more if that seems imminent.

However, short sales aren’t always great for the seller. For one thing, it can be tough to get your lender to allow the short sale—or to make a decision at all, while you and the hopeful buyer wait weeks or months for an answer. Even if it’s approved, the lender may drive a hard bargain—you may have to fight to get permission to sell your house for what you know it can bring on the open market.

Also, any amount your lender forgives is considered “income” to you. That means the lender will likely report it to the IRS, and you’ll probably have to pay federal, and possibly state and local income taxes on it.

An exception will be made if you can prove you were legally insolvent at the time of the short sale (with your total debts greater than the value of your total assets), or if you come under the terms of the Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648). This Act applies only to certain loans made during tax years 2007 through 2012. It allows you to

exclude up to $2 million in forgiven debt if your deficiency stemmed from the sale of your primary residence (the home you live in), the loan was secured by that residence, and the loan money was used to buy or improve that residence. See a tax adviser for a personal analysis.

Finally, beware of the various scam artists whom short sales have brought out of the woods; folks who say they will take over your loan if you simply sign the house over to them, with the understanding—unwritten, of course—that they will deed the property back to you when the wolf is no longer at the door. Avoid such predators and deal only with reputable, well-established professionals whose references can be verified.

While it’s true that a short sale may be preferable to foreclosure, which can more seriously damage your credit and make it much more difficult and expensive for you to buy a house in the future, you’re better off selling on your own, if you can. Of course, with foreclosure looming, a quick sale works best—even if it means getting a little less cash. In Chapter 8, we’ll give you some tips for making your house attractive to prospective buyers so that you can try to get out of the market before turning to the bank.

 

If you’re in a similar situation, consider whether you can live without the imme­diate profit. You may be able to rent the property out for now, thus creating a steady income stream, and sell the property for significantly more later when you’re able to take a step back.

According to one of the basic axioms of the real estate business, a seller who is under abnormal pressure to act almost always accepts too little. You can limit or avoid this pressure by timing your sale correctly and carefully marketing and pricing the property. You want to avoid a situation where, for example, you price your house too high, then drop the price several months later, causing buyers to think you’re desperate to unload it. You may end up getting lower offers than you would have if you’d started with the lower price in the first place. This may not only delay your sale, but hurt your bottom line as well.

Moreover, if you anticipate financial trouble soon, and you’re sure you won’t be able to get out of it, it’s probably best to put your house on the market earlier rather than later. That’s because you have the potential to rack up more debt the longer the house sits unsold, and that will increase expenses and probably make you more anxious to sell it. Again, you’re likely to accept too little.

Is It a Good Time to Sell?

Once you know whether you are ready to sell, how will you gauge the current market conditions? First, you’ll want to look at whether it’s a buyer’s market or a seller’s market. Then you’ll want to consider whether the market will improve soon, and what time of year is best to sell a house.

Market Conditions

In an ideal world, you’ll be able to sell your house for maximum profit, right away. Unfortunately, that isn’t always possible, especially when it’s a “buyer’s market.” This happens when there are more homes on the market than there are interested buyers; in which case, buyers have the luxuries of time and choice, knowing that if they don’t buy your property, another property—maybe even a cheaper one—will come along soon enough. Unsurprisingly, when it’s a buyer’s market, prices tend to be relatively low, because competition among sellers is high.

In the opposite situation, in a “seller’s market,” there are more buyers than there are desirable properties. Prices tend to be relatively high, and sellers have more bargaining power.

In California, it’s common to find buyers’ markets in some neighborhoods or cities and sellers’ markets in others, depending on factors like local population trends, school quality, and employment opportunities.

In a buyer’s market, it can be challeng­ing to sell even the most beautiful home at a perfectly reasonable price. That’s why, if you’re able, it’s best to hold off until the market improves. You’re more likely to sell your house quickly and for a competitive price if many buyers are competing for a good deal.

Of course, it’s not always possible to wait for the market to turn, especially because it’s hard to know when that will happen. If you must sell soon, you must instead focus on aggressively marketing and pricing your home, so that it stands out in relation to others on the market. Even when that may mean accepting a slightly lower price than you might have gotten a few years ago, it can be well worth it. After all, every month that you don’t sell means another month’s worth of mortgage payments, real estate taxes, and insurance.

Will the Market Heat Up Anytime Soon?

Here are signs that the market may pick up soon, and house prices begin to rise.

1. When mortgage interest rates are low, the pool of potential buyers goes up. People are always waiting for interest rates to drop  just a little lower—or low enough that they can afford to buy. Thus, even a relatively small decrease in interest rates may mean a huge increase in the number of people who qualify and are eager to buy your house.

2. When the economic climate of your region is healthy, people feel confident about the future and the pool of potential buyers widens. Regardless of the national economy, people (and employers) may feel that your region is the place to be. But when your regional eco­nomy is slumping, it’s best to hold on to your home until conditions improve. Despite ups and downs, investment in homes contin­ues to be strong in many parts of California, particularly since they’re considered one of the safer places to put your money.

3. At times when your area is considered especially ­attractive for any reason, the pool of buyers widens and prices go up. If considerably more people are looking to buy than are looking to sell in a particular geographic area—for example, if a major recreation project or other development is planned there—prices tend to rise (often quickly) and buyers must bid competitively.

The popularity of geographic areas, cities, and neigh­borhoods can change quickly for all sorts of reasons. For example, San Jose become hot during the Internet boom, and single-family homes were suddenly worth millions.

Do some strategic think­ing of your own. There are many ways that your area might become more desirable: The large, loud, and filthy refinery nearby is about to close; new restaurants and retailers are moving in; or public transportation systems are improving dramatically. Check your local planning department for other upcoming changes. If you conclude that better times are just around the corner in your area or neighborhood, hold off your house sale if you can.

What Time of Year Is Best to Sell In?

At the times of the year when most people are apt to make a move, prices usually increase, sometimes significantly. Two generalizations apply:

Spring and summer are traditionally good times to sell. House prices usually jump in the spring, absent some major external factor such as a recession. Families with children are anxious to buy so they can move during summer vacation, before the new school year. And your garden may enhance your home’s attractiveness, if flowers are blooming.

From mid-November through mid-January, the market is slow and the pool of people wanting to move begins to shrink. Most people don’t think about buying a house during the holiday season. (Then again, those who do are likely to be serious and motivated buyers.)

Remember that the trick to selling anything, from doughnuts to jewelry to a single-family house, is to market your property when most folks are apt to buy. There can easily be good reasons for anyone to pay top dollar for your house at any time of year, especially if economic condi­tions are favorable and interest rates are low.

Is the House in Good Enough Condition for Sale?

Perhaps you’re one of the few FSBO sellers lucky enough to have a buyer lined up already, most likely a friend or relative who has always loved your home. If so, you probably won’t need to spend much time on fixups. Other home sellers, however, should at least examine the existing condition of their home, and then decide:

the extent of basic repairs required

what improvements to make, and

what further cosmetic touches will make the house look its best.

This section will cover those issues.

Is Your House in Good Repair?

The typical homeowner, particularly one who has lived in a house for many years, has let a few repair issues slide, or even stopped noticing them. Before putting your house on the market, however, you’ll want to take a hard look at its basic repair needs. Signs of deferred maintenance are a turnoff for home buyers, who increasingly prefer move-in ready homes, and worry that minor repair issues are a sign that bigger repairs have not been taken care of either. (Of course, if your house is a complete fixer-upper and will be priced accordingly, that’s another story—you may just want to clean it up and offer it as-is.)

Take a tour around your house, inside and out, examining and checking on all the systems. For example, do all the appliances work? Do the drains run smoothly? Does the toilet in the guest wing really flush? Do all the windows and doors open smoothly? Make notes on everything that could use attention: cracked windows, dead lightbulbs, curled linoleum, missing drawer pulls, and so on. Put these items on your fix-it list, to be completed before putting the house on the market.

If you don’t think you can be objective, have someone reliable—who doesn’t live there already—go with you. Better yet, seriously consider hiring a professional property inspector (often a general contractor) to examine your home’s structure and systems with an expert eye, and potentially spot problems of which you are unaware. Depending on what your basic inspector advises, you might want to engage specialty experts, especially pest control (“termite”) inspectors.

Hiring Professionals for a Preinspection

The low-budget way to approach hiring inspectors is to ask them to charge you at an hourly rate and then orally alert you to the biggest repair issues. For a more complete approach, you’d pay a flat fee (typically $300 to $500) in order to have the inspector prepare a written report describing the findings.

A thorough inspection—be it by your inspector or a prospective buyer’s inspector—should cover the prop­erty from top to bottom. The inspector will examine the general conditions of the site, such as drainage, retaining walls, fences, and driveways; the integrity of the structure and the foundation; the condition of the roof, exterior and interior paint, doors and windows, plumbing, and electrical and heating systems.

Accompany the inspector during the examination, so he or she can give you information about the maintenance and preservation of the house and answer any ques­tions you may have. The inspector should point out any problems that may need attention and tell you which are impor­tant and which are minor.

If you’ve arranged for a written report, it should identify which items are in good condition, and which need repair or replacement. It should also give you information about earth­quake protection, general safety mea­sures, insulation, and energy conser­vation. With all this information in hand, you will be more confident of the condition of your house.

To find a good inspector for your home, use the same general principle that you would use in selecting an obstetrician, accountant, dentist, or other profes­sional—ask for recommendations from people you trust. Make sure the person doing the inspection is a licensed general contractor, or is licensed to perform specific tasks, such as termite damage, electricity, or plumbing, if your inspection only covers that one area.

 

resource

A useful brochure, What You Should Know Before You Hire a Contractor, is available free of charge from the Contractor’s State License Board on their website at www.cslb.ca.gov (click “Guides and Pamphlets”) or by calling 800-321-CSLB.

For referrals to local inspectors and infor­mation on home inspections, contact a pro­fessional association, such as the American Society of Home Inspectors (ASHI), 800-743-2744, www.ashi.org, or the California Real Estate Inspection Association (CREIA), 800-848-7342, www.creia.org.

For information on pest control inspectors and termite reports, call the California Structural Pest Control Board phone at 800-737-8188 or check its website at www.pestboard.ca.gov.

Dealing With Repair Needs

You’re probably trying to save money on this home sale, so being presented with a long list of repair needs probably won’t make your day. The idea is not necessarily to do every possible fix that your house requires, but to attend to the ones that will give you the biggest bang for your buck. These are usually issues that will be most obvious or off-putting to buyers or impact the basic habitability of the home, such as a hole in the bathroom floor or a leaking roof.

Other repair issues can be left for the buyer to deal with. But you will want to be explicit about this: Explain to the buyer that you are aware of certain repair needs (it’s your legal obligation to disclose them anyway, as described next) and that you have adjusted the selling price accordingly.

Some buyers actually prefer to have repairs left for them if they involve major aesthetic choices. For instance, if your kitchen has ancient and hideous vinyl flooring, you might replace it all with fresh tile, only to disappoint a buyer who would have rather paid less for the house and installed a hardwood floor there.

Alerting the Buyer to the Inspector’s Findings

One issue that stops some sellers from commissioning inspection reports is that, once a seller knows about a problem with the house’s condition, the seller is expected to tell prospective buyers about it, whether it has been repaired or not. (That’s California law—it will be discussed further in Chapter 7.) Commissioning inspection reports can thus sound risky; a way to raise expectations and possibly lower your house’s purchase price; until you consider the following.

First, the buyers are likely to commission their own inspection reports, at their own expense, before the deal is done. A so-called “inspection contingency,” making the sale conditional upon the buyer’s satisfaction with the results of such a report, is a common and normal part of every real estate purchase contract. So the buyers will find what your inspector found, but you will have lost your opportunity to do the repairs on your own time and using contractors of your choosing. In fact, the buyer may simply insist that you lower the purchase price in light of the needed repairs.

Second, providing an inspection report to buyers can be a public relations plus. It makes buyers feel comfortable to know that, far from hiding anything, you have engaged outside experts to make sure your house is in good shape. The buyer may commission an additional report (after having signed the purchase contract) anyway, but will enter the transaction with the confidence that comes of knowing that major surprises are not likely in store. What’s more, a few buyers may even leave the inspection contingency out of their purchase contract, and rely solely on your inspection report. (This usually happens in a bidding-war situation.)

When to Make Major Improvements

Some houses need more than minor or cosmetic repairs. If your house is crying out for a new furnace, a second bathroom, and an updated kitchen, you’ll have some tougher decisions to make. Invest the money up front, in hopes that the eventual purchase price will cover the cost and then some? Or simply leave the upgrading or updating to the buyer to take care of?

There’s actually more of a science to this decision than you might expect. Certain types of home improvements are known for resulting in significantly higher selling prices, while others tend to make buyers yawn. If you do an online search for Remodeling Magazine’s “Cost v. Value Report,” you’ll find regional averages for various types of projects.

On the whole, you’ll soon discover that doing major remodeling work tends not to pay off in resale price. So unless you’ll have some time to enjoy the upgrades yourself, or can effect a huge transformation at a low cost, it’s probably best to leave the major work to the next owner.

Making the House and Garden Look Their Best for Showings

After you’ve dealt with the underlying repair needs, it’s time to think about how to spiff the place up for maximum buyer appeal. The farther in advance you get started on this, the more time you’ll have later for important tasks like marketing and showings.

Cleanup is a basic and obvious starting point. Make sure everything is sparkling—from the windows (inside and out) to the baseboards to the shelves in the medicine cabinet. This is particularly important in the kitchen and bathrooms. Dedicate some time initially to an extensive cleaning job, and then plan to maintain with regular spruce-ups (a quick vacuum and dust) each time you show the place.

 

tip

Get rid of pet evidence. If you have a pet that you can move out while you’re trying to sell the home—perhaps to stay with a friend or family member—consider doing so. It will save you the hassle of picking up after the pet every time a prospective buyer takes a tour, and it also prevents turning off the potential buyer who’s allergic to cats or afraid of dogs. At very least, keep pets out of the home for open houses, and clean thoroughly before every potential buyer’s visit.

A fresh coat of interior paint is also practically de rigueur. Choose soft, neutral colors. Curtains, bed coverings, and rugs should also be neutral.

Here are some other ways to get a head start on making your house attractive to prospective buyers:

• Go for curb appeal. Lots of buyers make quick judgments or decisions before even getting out of their cars—so the curbside impression counts for a lot. Sweep the sidewalk, mow the lawn, prune the bushes, weed the garden, and clear papers, debris, kids’ toys, and the like from the yard, front steps, and porch. Remove cars from the driveway.

• Make the entryway welcoming. Be sure that the doorbell works and the front door doesn’t creak. Buy an attractive new welcome mat.

• Prune and trim. Overgrown, overhanging trees or shrubs may be darkening portions of your property or making them look smaller. In particular, prune any trees or shrubs that are blocking light from entering the windows. A professional arborist may be worth the investment to avoid that scalped look.

• Add greenery and garden color. Consider going the extra mile and sprucing up the front door with blooming potted plants. If you’re willing to spend a bit more, landscaping your property (particularly the front yard) yields great returns in home value. It also gets buyers excited about your home before they step in the door. And if you have a front porch or other front yard space, consider creating an attractive seating area with a couple of welcoming chairs and decorative cushions.

We’ll talk more about putting the finishing touches on your décor in Chapter 8, including whether to hire a stager or handle this yourself.

Selling One House and Buying Another

If you plan to sell your home and buy another, questions of timing inevitably arise. Is it better to sell your old house before buying a new one? Or should you focus primarily on buying, even if it means that you may have to sell your present house quickly to close on the new one?

 

skip ahead

If you’re not buying another house, you can skip this section. Also, homeowners looking to sell who can afford to own two houses at once (even if for just a short period), don’t need to worry about perfectly timing their purchase and sale transactions and can go on to “Success Stories: Homeowners Who Timed It Right,” below.

If you sell first, you’ll be under time pressure to find another house quickly. This is stressful, and rarely results in your finding a truly good new house at a reasonable price. Even if you do find a great house, you’re likely to overpay in an anxious effort to avoid spending time in a hotel.

On the other hand, buying a new house first and then scrambling to sell your old one is no fun ­either—especially if you’re trading up substantially and need to sell your old house for top dollar to make the down payment on the new one. Selling a house fast and getting the best possible price are normally mutually exclusive concepts. Too often, people accept a lower-than-optimum price on the old house so they can make a quick sale.

Here are some constructive steps to minimize the financial and psychological downsides of selling one house while buying another.

Check the Housing Market Carefully

Before you put your house on the market or commit to buying a new one, carefully investigate the selling prices of houses in the areas where you’ll be selling and buying. It’s essential that you have a realistic idea of how much you’ll get for your house, and how much you’ll pay for the one you buy, so you can figure out how to sell high and buy low. (See Chapter 5 for more information on accurately pricing a house.)

Also focus on whether each of the two markets is cold (favoring buyers) or hot (favoring sellers). Understanding market conditions is impor­tant to buyers and sellers, and is crucial for people who are both. Your dual position lets you adopt a strategy of pro­tecting yourself in your weaker role while letting your stronger role take care of itself.

Strategies in a Buyer’s Market

In a cold, buyer’s market, where the supply of houses outstrips the number of buyers who can afford to purchase them, you’re in a stronger position as a buyer than as a seller. Consider protecting yourself by making your offer to buy a new house contingent upon selling your current one. A seller having a hard time finding a buyer is likely to accept this contingency, even though it means waiting for you to find a buyer for your house.

Strategies in a Seller’s Market

If homes are in high demand in the communities where you both own and plan to buy, it follows that selling your current house will likely be easier than buying a new one. Thus, you want to compete aggressively in purchas­ing a new house, while insisting on maximum flexibility as to the date you move out of your present house.

You can guarantee yourself this leeway by stipulating that the sale of your current house be contingent upon your finding and closing on a new house. When a buyer makes an offer on your house, include a provision spelling this out in your written counteroffer. Although few buyers will agree to an open-ended period, some will be so anx­ious to buy your house that they’ll agree to delay the closing until you close on a new house or until a certain number of days pass, whichever comes first. (See Chapters 10 and 11 for more on offers and counteroffers.)

Strategies When the Two Markets Differ

In an ideal world, your current home would be in a hot, seller’s market, and you’d be buying into a cold, buyer’s market. That would give you the option of either putting your house on the market now, knowing that it won’t be hard to find an affordable house as soon as you accept an offer on the current one; or of waiting to sell until you’ve found a house to buy, knowing that you can sell quickly. (Though if you want the double protection of having your purchase contingent upon selling your current house, a seller eager to close the deal will probably agree to this.)

The worst possible situation is if your current home is in a cold, buyer’s market, but you’re moving to an area where the market is hot and you’ll be facing a lot of competition to find a house you like and can afford. You’ll still want to try and get a buyer to agree to make the sale of your current house contingent upon finding and closing on a new one, but you’ll have less negotiating leverage. You may end up owning two houses at once, as discussed below.

 

resource

How to Buy a House in California, by Ralph Warner, Ira Serkes, and George Devine (Nolo), contains practical, up-to-date information about the financial realities, legal rules, and real estate customs of buying a house in California. It covers homebuying from start to finish, including defining your home needs and budget, finding a house, working with a real estate agent, arranging financing, making an offer, negotiating, going through escrow, and dealing with potential problems. You can purchase the book at www.nolo.com, which also contains free resources for homebuyers.

Bridge Financing: How to Own Two Houses Briefly

Unfortunately, no matter how carefully you time things, you may be unable to perfectly dovetail the sale of one house with the purchase of another. You may own no houses for a time, in which case you’ll have money in the bank and need a temporary place to live. Or, you may own two houses at once, in which case the following suggestions should help you:

Raise as much money as possible for the down payment on a new house. Many people rely on the profit from the sale of their old homes to make down payments on their new homes. But if you have any savings, you may want to apply that cash, even temporarily, toward your new purchase. If your savings put the second house within reach, you can maximize your cash by charging living expenses or getting an advance from your employer. Of course, you’ll only want to utilize this strategy if you’re confident your existing house will sell quickly, because interest rates on credit cards are usually high and you don’t want to accumulate such debt indefinitely.

Borrow down payment money from family or friends. Point out that you need help for only a short period, and offer a competitive interest rate. Keep in mind that it’s easier to borrow short-term money than to borrow a large sum for 20 or 30 years. If, for ­example, your parents have money put aside for retirement or your sister is saving to take a year off from work, either may be willing to tap savings to help you for the short time it will take to buy one house and sell another.

If you follow this approach, give the lender a promis­sory note, secured by a second mortgage (deed of trust) on your new house. You can set this up so that no monthly payments are due until your first house sells and thus there’s no negative effect on your debt-to-income ratio.

Get a bridge loan from a financial institu­tion. If you have no other choice, you can potentially borrow money from a financial institution to “bridge” the period between when you close on your new house and when you get your money from the sale of your old one. This loan is a short-term home equity loan on your existing house that you’ll repay when your first house sells.

We say “no other choice” because bridge loans can be expensive. Lenders often charge a host of up-front points or fees for things like credit checks, appraisals, loan origination, or inspections. Interest rates are generally high, too. This wouldn’t be unreasonable if you needed the money for a long time and spread the cost over many years, but it’s very expensive for a loan that will probably last only a few weeks or months.

Money-Saving Strategies When Shopping for a Bridge Loan

•  The lender from whom you obtain your financing for your new house may offer you a less expensive home equity bridge loan than other lenders. Ask about this possibility before committing to a long-term mortgage.

•  When applying for a bridge loan, ask the lender to waive inspection and appraisal of your existing house and to not charge points. If the equity in your existing house is much larger than the bridge you need, the lender may be willing.

•  If you purchased or refinanced your existing house only a few years ago, find your paperwork. Some lenders will accept a recent appraisal, physical inspection, or title report in lieu of charging you for new ones. Many, though, consider the information out-of-date if it’s more than six months old.

•  If you don’t know whether you’ll need a home equity bridge loan until the last minute, see if you qualify for a stand-by personal line of credit. Although interest rates are higher than on a bridge loan (and interest paid may be nondeductible), up-front costs are minimal.

•  Consider working with an experienced loan broker—a person who specializes in matching house buyers and appropriate mortgage lenders. If your situation is com­plex, be ready to pay for the service.

 

Success Stories: Homeowners Who Timed It Right

Here are a few examples of homeowners who used creative solutions to take advan­tage of market conditions.

Jon and Penny Timed a Job-Related Sale to Their Benefit

Jon was transferred by his company to Eureka in the mid­dle of November, a thousand miles away from his former job in San Diego. Jon and his wife, Penny, realized that houses often sell for less in the winter and thought that because the economy was stagnant, interest rates were likely to fall in the spring. They guessed that their San Diego house might go for $15,000 to $20,000 more in May or June. Also, they didn’t want their kids’ schooling interrupted. So Jon and Penny decided to put off the sale until spring.

Fortunately, when Jon explained the prob­lem, his employer was willing to help, including putting him up in a company-owned condo­minium in Eureka for very reasonable rent, and agreeing to pay for his airfare to visit his family in San Diego on alternate weekends. This not only allowed Jon and Penny time to pick out a home in Eureka, but also let them wait until March to put their existing home on the market. When their house sold in April, with a June closing, Jon and Penny got a very good price. Although not every employer is as cooperative as Jon’s, your boss may be willing to help take some pressure off you.

Ann Minimized the Financial Trauma of Widowhood

Ann was widowed unexpectedly. Her first impulse was to sell the home she and her husband had lived in for many years. “I had to get away from the memories,” she said. Ann’s counselor advised that it is usually a mistake to make a major decision like the sale of a house within so short a time of such a shock. Her counselor even showed her one of several studies indicat­ing that ­human beings’ decision-making abilities seem to be short-circuited by grief and shock for at least a year—often two. Nonetheless, Ann felt that living in her house was too much to bear.

After checking with her tax adviser concerning the timing of her transaction, Ann rented her home to a friend’s son and lived elsewhere for several months. Then, when she was ready to cope with business details, she sold the house and got at least $20,000 more than she would have had she sold immediately after her husband’s death. 

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