Provide the buyer a list of closing costs.
You would be surprised at how many deals fall through because buyers fail to factor in settlement costs. Many times the buyer simply does not have enough cash to close, even though they badly want the house. A good mortgage broker will be happy to provide an estimated list of settlement costs that you can show to prospective buyers.
Do not forget about repairs arising after inspection.
Allow for the cost of repairs that might be required after inspections. The kitchen sink or garage door opener might fail inspection, for example. These repairs would have to be made by the seller prior to closing.
Consider paying the buyer’s closing costs.
Instead of accepting an offer that is less than your asking price, consider offering to pay some of the buyer’s closing costs instead. If the buyer is tight on cash, paying some of the buyer’s closing costs could make the deal go through.
Consider paying “points” for the buyer.
Instead of negotiating on asking price, consider paying “points” for the buyer instead. One “point” is one percent of the loan paid to reduce the borrower’s interest rate. Seller-paid points are tax-deductible for the buyer, so the buyer hits a double by getting a lower interest rate and snagging a tax deduction.
Buying down the buyer’s interest rate can be of more benefit than simply paying the buyer’s closings costs. If you pay $5,500 towards the buyer’s closing costs, the buyer benefits by exactly $5,500. But if you take that same $5,500 and buy down the buyer’s interest rate (from 6% to 5.375%, for example), let’s ballpark how much the borrower would benefit.
Assuming the borrower kept the loan for 7 years, the savings benefit on a $250,000 loan with a 30-year term would be in the neighborhood of $11,000! And that does not include the fact that the points are tax deductible for the buyer.
Every dollar counts.
You would not believe it, but sometimes hundreds of dollars can make or break a deal. There are a lot of sellers who have walked away from negotiations when they were so very close to striking a deal. Listen carefully and ask a lot of questions to find out what the buyer really needs to make the deal work.
Consider getting a professional appraisal.
Any realtor will tell you that it is better to price a house right the first time rather than lowering the price later on. A new house for sale generates attention from potential buyers, but those buyers will look and move on if the price is too high.
Those potential buyers might not return for a second look after you lower the price. Under pricing a house (even by just a little bit) could cost tens of thousands of dollars. A $500,000 house priced 3% below market value amounts to $15,000!
A professional appraisal will cost $300-$500, but it is better to spend a few hundred dollars than to leave tens of thousands on the table or to lose a potential buyer and be forced to make extra mortgage payments. The best way to price a house to sell is to obtain a professional appraisal.
In addition to pricing the house to sell and sleeping well at night knowing that you are not leaving money on the table, there is another huge benefit to getting a professional appraisal. Perhaps the greatest benefit to obtaining a professional appraisal is that you can show it to every potential buyer who dusts their shoes on your welcome mat.
Each and every potential buyer will be able to review the actual appraised value arrived at by a professional appraiser. This will give your buyer an assurance that he or she is not paying too much for the house. Paying too much for a house is every buyer’s primary concern.
A professional appraisal will also give your deal a better chance of making it to closing. A lot of deals fall apart prior to closing because of “buyer’s remorse,” a condition that often stems from second thoughts about the purchase price.
Do not forget about seller’s closing costs.
There are costs involved in selling a property. Some of these costs include: fees associated with repaying the seller’s mortgage and clearing liens on the property, transfer taxes, documentary stamps, title insurance, courier fee, credit to the buyer for unpaid real estate taxes, attorney’s fees (if you choose to use an attorney), condo/co-op move out fee, association transfer fees, upside down loans (you owe more than you will receive in proceeds at closing), document preparation, mortgage prepayment penalty, escrow fee, home warranty premium (if buyer insists on having one), and certificate of zoning compliance. If you had used a real estate agent, that agent would provide a break down of seller settlement costs. If you sell the home yourself, you will have to estimate the costs yourself.
If there is a busy cross street at the end of your street, talk to your neighbor about permission to put a sign in their yard pointing to your home.
Sell in spring if you can.
Spring is the optimal time to sell your home. If you can list your home in the spring, you will have a better chance of selling quickly as well as selling at a better price.
Do not be offended by lowball offers.
When buyers see a house that is for sale by owner, they will think that they can get a steal on the home. Expect lowball offers, and do not be offended when they come. Do not forget that lowball offers often turn into sales at reasonable prices.
When I sold my second home, the buyer had originally presented a lowball offer. My home was listed for $459,000, but the original offer was for $425,000. Months after the original lowball offer, the same person appeared somewhat out of the blue, and we eventually agreed on a sales price of $450,000.
Basing your selling price on a professional appraisal will ward off a lot of lowball offers. It also helps to make your counter offer because you can point out that any counter offer you make is below market value.
Simple negotiation tip.
Virtually every buyer is going to expect you to come down on your asking price. Let’s pretend that your home is listed for $400,000. Just between you and me, let’s say that you are willing to take $390,000.
If a buyer makes an offer of $390,000, consider the following counter negotiation strategy. Explain to the buyer that dropping the price by $10,000 only drops the monthly payment by approximately $60 dollars per month (at around 6% interest).
That’s not much. Instead, offer to give the buyer $7,500 CASH at closing to use on home improvements, decorating or to apply to the first 3 mortgage payments. At a rate of $60 per month, the buyer would have to own the home for TEN years to get the actual financial benefit of handing them $7,500 CASH.
The beauty of this negotiation tip is that it’s a great way to get a buyer excited, and it allows you to pocket $2,500 over what you wanted to get for the house. If you have asked a lot of questions, you will already know what the buyer doesn’t like about the house.
If your house does not have a fence, for example, you could use that as a negotiation strategy. Instead of dropping the price by $10,000, offer to give the buyer $7,500 cash at closing to spend on adding a fence to the property. Negotiations are all about finding out what is important to the buyer and making a counter offer that will get your buyer EXCITED!
Encourage prospective buyers to get pre-approved.
Explain to prospective buyers that sellers take offers more seriously when the buyer is pre-approved because the seller has a reasonable degree of surety that the deal will go through.
Help the prospective buyer understand that if a seller gets two offers — one from a buyer who is pre-approved and one from a buyer who is pre-qualified — the seller is much more likely to accept the offer from the pre-approved buyer.
You simply never know who is going to buy your house. You might offer this piece of advice to a couple who is waiting for their own house to sell before making an offer. If you give them this friendly advice and they go through the pre-approval process, it could speed things up if they wind up wanting to purchase your home.
Keep a list of people who have looked at your home.
Fifty to eighty percent of FSBOs wind up listing with real estate agents. If you wind up listing your home with a real estate agent, you will need a list of prospective buyers who looked at the property prior to the listing date so that they will be exempted from your contract with your real estate agent.
Consider relocating your pets while your home is on the market.
Pet owners do not like to hear this, but pets scare off a lot of potential buyers. A lot of people are uncomfortable with pets, some buyers are allergic, and a few are actually terrified of animals. At a minimum, keep pets and pet toys out of sight during showings. If possible, arrange for your pet to stay with a friend or relative while your home is on the market.