A few days ago I went through what a buyer needs to think about and do after they have successfully placed a contract on the home. To read that post click here. Today I’d like to talk about the sellers side of the real estate transaction.
Finding a buyer and agreeing to an acceptable price and terms with a buyer is one of the high points of a real estate transaction. No more daily showings, no more uncertainty, making plans for the future, it’s exciting stuff. But then comes the realization that you are only part way to the finish line. There is still work to be done. This is a checklist of items that the seller is responsible for between contract and closing.
Order Title Commitment – In Colorado the seller is responsible to providing the buyer a title insurance policy in conjunction with a real estate purchase. The first step of this process is ordering the title commitment. The listing agent usually handles this for the seller. This is also a great time to provide to the title officer the information on your existing loans which will need to be paid off at the closing.
Homeowners Association Documents – As per the Colorado approved real estate contract the seller will provide the buyer a copy of the relevant HOA documents. This shall include bylaws, rules and regulations, financial documents, minutes from the most recent meetings. Again, this is something that the listing agent usually tries to supply (at least I do) but sometimes the information is embedded in a members only website and the Realtor might need help with this.
Gather Paperwork – The buyer will want to have any relevant documentation regarding the home. In conjunction with the disclosure requirements the seller must supply the buyer any prior inspections or reports that give insight to the condition of the home. This would also be a good time to gather any manuals and warranties and set them aside before your packing gets into full gear.
Prepare for Inspection – Just because most of the showing activity has subsided it doesn’t mean that you are off the hook for keeping the home looking good. I would argue that the inspection is your most important showing and the house should be prepared as well as possible. In addition to the general cleanliness here are a few tips to help the inspection. Replace the furnace filter and clean the humidifier filter if you have one. Move boxes and or furniture away from access points for plumbing, heating and electrical. It is common that a buyer will perform a radon test and the protocol for a radon test is that the house will be closed up for 12 hours prior to closing as well as 48 hours throughout the test. However, it is a really good idea to “air out” the lowest level of the home prior to the closed house conditions.
Make Your Arrangements – Start making arrangements for moving, storage, packing and cleaning. Consult with your Realtor so that you are sure that you understand the timing of when you need to be out and cleaned. After the inspection it is also a good idea to contact the utility companies to let them know about an upcoming transfer in service. Once the deal is rock solid, put in your change of address request to the postal service.
Inspection Items – Once the inspection has been done and the agreements surrounding the inspection has been made, some work will need to be done. My advice here is to get the work done as soon as possible, don’t cut corners and follow the letter of the agreement to a “t”. The listing agent is there to help you get this work done if you need help.
Clean and Closing – The days surrounding closing will be busy days. You will need to pack, clean and supervise work maybe at two locations. My advice regarding how you leave the home is based on two things. Look at the contract and make sure you are doing the minimum required and then consult the Golden Rule. How would you really like a home to be left for you? When the house is really left in good shape and the buyers feel that they are being treated well, the closing is much easier for all involved.
This list is based on my experience and is from the sellers perspective for a sale in Colorado. If you hire a good listing agent, many of these items will happen seamlessly and you will be left to focus on getting your stuff packed and ready to go. I have been a Realtor based in Boulder Colorado since 1991 and I love doing those small things that make it easier for you. When you are ready to list, give me a call – Neil Kearney 303-818-4055
Once you have found a home and had a successful negotiation of the offer there are still many steps that need to be completed before you can move in. Here is a primer on the steps that take place between contract and closing from the buyers perspective.
Set The Inspection– It is the buyers responsibility to set and pay for any and all inspections on the home. There are no required
Photo doesn’t have anything to do with the subject, but I took it and thought it was cool.
inspections in Colorado. As a buyers agent or a transaction broker, I provide a list of inspectors that my previous buyers have liked, but a buyer may choose and use any qualified home inspector. It’s a good idea to ask about their services and experience as well as the insurance they carry. The buyer is ultimately responsible for any damage that an inspector may do while at the home. Most inspectors now use digital photography and provide pdf reports which are helpful during a negotiation. In our area radon is common and a radon test is an additional test that an inspector will do for a fee. Read this post to learn more about radon. Keep in mind that all inspections shall be completed prior to the inspection objection deadline as stated on the contract.
Formal Loan Application – Once there is a fully executed contract your lender can then set up a file and start moving your loan forward toward underwriting approval. At this time you will have the option to lock-in an interest rate. While you may have already provided some documentation to the lender. Once they are in the formal approval process (as opposed to pre-qualification or pre-approval) you will undoubtedly need to provide your lender documentation on income, debts, tax returns etc. Please provide these documents as quickly as possible so that any delays can be avoided down the line.
Review Paperwork – The seller will be providing (in most cases through the title company) paperwork regarding the title transfer, property taxes and the Homeowners Association. Your agent and lender will also be reviewing the title documentation for anything abnormal but it is in your best interest to review them carefully yourself or hire an attorney to review them so that you understand what you are getting when you purchase this particular property. The HOA documents will tell you the rules you are agreeing to abide by as well as the financial structure and health of the association. The turnaround time on looking at this information is fairly quick so don’t put it off.
Attend The Inspection – The inspection is the best chance for you to get to know your new home in an intimate way. Following the inspector around for a few hours will give you some good insight on the overall condition of the home as well as a thorough understanding of the conditions that you may ask to be repaired by the seller. As an agent I usually just attend the summary or get the report via email. I leave the inspection itself to the experts. Keep in mind that unless the home is brand new there will be some items that the inspector will point out. It is the inspectors job to be detailed in their inspection.
Inspection Objection with Agent – The next step in the process is to decide a course of action after the inspection. A buyer in Colorado has three choices: 1) move forward as-is and don’t ask for anything; 2) terminate the contract; 3) make a list of unsatisfactory conditions on an Inspection Notice form and present those to the seller. Work with your Realtor at this stage to strategize the best negotiation scenario. It’s best to remember that in most cases focussing on the major issues and/or safety issues will allow for the most productive negotiation with the seller. In my experience, sellers get annoyed if a buyer asks for too many trivial issues. Keep it simple, be specific and hold to the major points.
Other Items – During this entire time you will be making plans regarding moving and packing. Contact your Realtor as to when is a safe time to put non-refundable money down on any services. During this time you will also need to start contacting the local utility companies. This is especially important for those who work at home or depend upon an internet connection. One of the most important things to remember is “DON”T BUY ANYTHING!” Lenders check credit again just before closing and taking on additional debt can spoil the whole deal. Wait on the furniture, wait on the appliances, wait on the new car until after closing. At closing you will need to bring good funds to the closing. This means that you need to bring either a cashier’s check or wire funds in advance to the title company. You will get the exact amount to bring a day or two in advance from the title company via your Realtor or lender.
Closing – Finally it is the day of closing. One of the last stops before going to the title company to sign papers is back to the house for a final walk through. During this final walk through you get one last look at the house to make sure nothing has changed. You make sure that the agreed upon inspection items are complete and you make sure the items that are included are still there. The closing itself lasts about an hour and the buyer does the majority of the signing. In addition to your money make sure you bring a picture ID. The closing is a time to close up any loose ends. Connect with the seller and ask about the neighbors. It is not a time to renegotiate or hold grudges about past negotiations. After an hour or so you will get the keys and you are ready to move in.
Throughout the process it is most helpful to have an experienced Realtor there by your side to help you along and negotiate on your behalf. I have been helping buyers in the Boulder Valley real estate market for over twenty years. I’d love to put that experience to work for you.
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There are many tactical ideas about real estate negotiation but in my opinion not enough is said about the emotional relationship between a buyer, a seller and an agent. Buyers and sellers don’t often meet in person. This can be a very good thing in many ways because the agents take the direct confrontation out of the process. But the downside of this lack of interaction is that buyers and sellers don’t get a chance to make a personal connection. They don’t get a chance to like each other. Their first interaction is the offer for purchase and this can be a very explosive introduction. “Hello Mr. Seller, nice to meet you. You don’t know me but I like your house but I think you are stupid to ask that much. I only think your house is worth $xxx. Oh, and by the way I want to keep your refrigerator, your window coverings and your grandma’s chandelier.” This usually doesn’t inspire an invitation to dinner.
Stephen Covey’s idea of an emotional bank account in “The 7 Habits of Highly Effective People” can be easily translated to the parties in a real estate transaction. Watch the video to see what a buyer, seller and agent can do to make friends with the other sides of the transaction. In doing so, negotiations will go much more smoothly and buyers and sellers won’t mind sitting together at the closing table (this by the way is getting less common).
Advice for Home Buyers:
Don’t make an unreasonably low offer.
Don’t ask for personal items which have been excluded from the sale.
Don’t be unreasonable and uncaring toward the seller.
Do write a personal letter so that the sellers can get to know you as a person (family).
Do compliment them on their home.
The goal is for the seller to want you to live in their home.
Advice for Home Sellers:
Have the house in tip top showing condition.
Fill out all disclosures accurately and thoroughly. Don’t try to gloss over the details. Giving more detail will earn the Buyers trust and respect.
Respond to offers quickly.
Keep the communication lines open.
Advice for Realtors:
Treat the other Realtor with respect, courtesy and go in with a win-win attitude.
Remember that you are not the one who is buying or selling. So don’t make decisions for your client. Lay out the options and let them decide.
Many times you will see “Home Warranty Included!” on a property listing. This sounds good right? But many times prospective buyers who negotiate for home warranties have the wrong idea about what a home warranty is and what it covers. Here are some answers.
A home warranty is basically a very limited insurance policy that covers certain home systems and appliances for a fixed time period. Usually when a home warranty is provided as a buyer incentive the warranty is good for one year after the closing. The cost of basic coverage is typically $275 – $400 and covers plumbing, heating, electrical, major appliances and water heater. There are limitations in coverage and plans do not cover preexisting conditions. Home warranties do not cover mold or structural damage.
Once the warranty is in place the new owner would call the warranty company first when an issue that requires a repair person to be called. The warranty company contracts with certain companies and sends them out to diagnose and fix the problem if it is determined to be covered. At the time of repair the owner pays a deductible. The owners share is usually around $50 to $60 per occurrence.
So is it worth it? Just like any insurance policy you need to weigh the probability of something happening and the severity of the cost if you didn’t have coverage with the cost of the coverage upfront. If someone else is paying it is definitely a good thing to have. If you are paying $400 year after year it may not pay off in the long run but it is an amount that is easy to budget and you won’t be surprised one year by needing a new furnace etc. The other consideration is the age of the home. If it is a newer home the chances of having a problem each year are relatively low. If you have an older home with older appliances the chances of needing repairs on a consistent basis increase.
Here are some home warranty providers in Colorado:
To read that post click here. Today I’d like to talk about the sellers side of the real estate transaction.
