Seller FAQs & Free Reports

• Understanding Agency
• 5 Things to do Before You Sell
• How to Make Your House More Saleable
• 5 Ways to Speed Up Your Sale
• 10 Ways to Make Your Home Irresistible at an Open House
• 7 Terms to Watch for in a Purchase Contract
• What You'll Net at Closing
• 6 Items to Have on Hand for the New Owners
• What is Appraised Value?
• Understanding Capital Gains in Real Estate
• Does Moving Up Make Sense?
• Remodeling that Pays
• Web Site Resources for Customers

Understanding Agency

It is important to understand what legal responsibilities your real estate salesperson has to you and to other parties in the transactions. Ask your salesperson to explain what type of agency relationship you have with him or her and with the brokerage company.

1. Seller's Representative - A seller's agent is hired by and represents the seller. All fiduciary duties are owed to the seller. The agency relationship usually is created by a listing contract.
2. Subagent - A subagent owes the same fiduciary duties to the agent's principal as the agent does. Subagency usually arises when a cooperating sales associate from another brokerage, who is not representing the buyer as a buyer's representative or operating in a nonagency relationship, shows property to a buyer. In such a case, the subagent works with the buyer as a customer but owes fiduciary duties to the listing broker and the seller. Although a subagent cannot assist the buyer in any way that would be detrimental to the seller, a buyer-customer can expect to be treated honestly by the subagent. It is important that subagents fully explain their duties to buyers.
3. Buyer's Representative - A real estate licensee who is hired by prospective buyers to represent them in a real estate transaction. The buyer's rep works in the buyer's best interest throughout the transaction and owes fiduciary duties to the buyer. The buyer can pay the licensee directly through a negotiated fee, or the buyer's rep may be paid by the seller or by a commission split with the listing broker.
4. Dual Agent - Dual agency is a relationship in which the brokerage firm represents both the buyer and the seller in the same real estate transaction. Dual agency relationships do not carry with them all of the traditional fiduciary duties to the clients. Instead, dual agents owe limited fiduciary duties. Because of the potential for conflicts of interest in a dual-agency relationship, it's vital that all parties give their informed consent. In many states, this consent must be in writing. Disclosed dual agency, in which both the buyer and the seller are told that the agent is representing both of them, is legal in most states.
5. Designated Agent - This is a brokerage practice that allows the managing broker to designate which licensees in the brokerage will act as an agent of the seller and which will act as an agent of the buyer. Designated agency avoids the problem of creating a dual-agency relationship for licensees at the brokerage. The designated agents give their clients full representation, with all of the attendant fiduciary duties. The broker still has the responsibility of supervising both groups of licensees.
6. Nonagency Relationship or Transaction Broker - Some states permit a real estate licensee to have a type of nonagency relationship with a consumer. These relationships vary considerably from state to state, both as to the duties owed to the consumer and the name used to describe them. Very generally, the duties owed to the consumer in a nonagency relationship are less than the complete, traditional fiduciary duties of an agency relationship.
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5 Things to do Before You Sell

1. Get estimates from a reliable repairperson on items that need to be replaced soon, such as a roof or worn carpeting, for example. In this way, buyers will have a better sense
   of how much these needed repairs will affect their costs.
2. Have a termite inspection to prove to buyers that the property is not infested.
3. Get a pre-sale home inspection so you'll be able to make repairs before buyers become concerned and cancel a contract.
4. Gather together warranties and guarantees on the furnace, appliances, and other items that will remain with the house.
5. Fill out a disclosure form provided by your sales associate. Take the time to be sure that you don't forget problems, however minor, that might create liability for you after the sale.
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How to Make Your House More Saleable

1. Get rid of clutter. Throw out or file stacks of newspapers and magazines. Pack away most of your small decorative items. Store out-of-season clothing to make closets seem roomier. Clean out the garage.
2. Wash your windows and screens to let more light into the interior.
3. Keep everything extra clean. Wash fingerprints from light switch plates. Mop and wax floors. Clean the stove and refrigerator. A clean house makes a better first impression and convinces buyers that the home has been well cared for.
4. Get rid of smells. Clean carpeting and drapes to eliminate cooking odors, smoke, and pet smells. Open the windows.
5. Put higher wattage bulbs in light sockets to make rooms seem brighter, especially basements and other dark rooms. Replace any burnt-out bulbs.
6. Make minor repairs that can create a bad impression. Small problems, such as sticky doors, torn screens, cracked caulking, or a dripping faucet, may seem trivial, but
   they'll give buyers the impression that the house isn't well maintained.
7. Tidy your yard. Cut the grass, rake the leaves, trim the bushes, and edge the walks. Put a pot or two of bright flowers near the entryway.
8. Patch holes in your driveway and reapply sealant, if applicable.
9. Clean your gutters.
10. Polish your front doorknob and door numbers.
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5 Ways to Speed Up Your Sale

1. Price it right. Set a price at the lower end of your property's realistic price range.
2. Get your house market-ready for at least two weeks before you begin showing it.
3. Be flexible about showings. It's often disruptive to have a house ready to show on the spur of the moment, but the more often someone can see your home, the sooner you'll
   find a seller.
4. Be ready for the offers. Decide in advance what price and terms you'll find acceptable.
5. Don't refuse to drop the price. If your home has been on the market for more than 30 days without an offer, be prepared to lower your asking price.
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10 Ways to Make Your Home Irresistible at an Open House

1. Put fresh or silk flowers in principal rooms for a touch of color.
2. Add a new shower curtain, fresh towels, and new guest soaps to every bath.
3. Set out potpourri or fresh baked goods for a homey smell.
4. Set the table with pretty dishes and candles.
5. Buy a fresh doormat with a clever saying.
6. Take one or two major pieces of furniture out of every room to create a sense of spaciousness.
7. Put away kitchen appliances and personal bathroom items to give the illusion of more counter space.
8. Lay a fire in the fireplace. Or put a basket of flowers there if it's not in use.
9. Depersonalize the rooms by putting away family photos, mementos, and distinctive artwork.
10. Turn on the sprinklers for 30 minutes to make the lawn sparkle.
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7 Terms to Watch for in a Purchase Contract

1. The closing date. See if the date the buyer wants to take title is reasonable for you.
2. Date of possession. See if the date the buyer wants to move in is reasonable for you.
3. The earnest money. Look for the largest earnest-money deposit possible; since it is forfeited if the buyer backs out, a large deposit is usually a good indication of a sincere buyer.
4. Fixtures and personal property. Check the list of items that the buyer expects to remain with the property and be sure it's acceptable.
5. Repairs. Determine what the requested repairs will cost and whether you're willing to do the work or would rather lower the price by that amount.
6. Contingencies. See what other factors the buyer wants met before the contract is final, inspections, selling a home, obtaining a mortgage, review of the contract by an attorney. Set time limits on contingencies so that they won't drag on and keep your sale from becoming final.
7. The contract expiration date. See how long you have to make a decision on the offer.
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What You'll Net at Closing

To find out how much money you'll net from your house, add up your closing costs and subtract them from the sale price of the house.

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6 Items to Have on Hand for the New Owners

1. Owner's manuals for items left in the house.
2. Warranties for any items left in the house.
3. A list of local service providers best dry cleaner, yard service, etc.
4. Garage door opener.
5. Extra sets of house keys.
6. Code to burglar alarm and phone number of monitoring service if not discontinued.
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What is Appraised Value?

It's an objective opinion of value, but it's not an exact science so appraisals may differ.

For buying and selling purposes, appraisals are usually based on market value, what the property could probably be sold for. Other types of value include insurance value, replacement value, and assessed value for property tax purposes.

Appraised value is not a constant number. Changes in market conditions can dramatically alter appraised value.

Appraised value doesn't consider special considerations, like the need to sell rapidly.

Lenders usually use either the appraised value or the sale price, whichever is less, to determine the amount of the mortgage they will offer.

Used with permission from Kim Daugherty, Real Estate Checklists and Systems.

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Understanding Capital Gains in Real Estate

When you sell a stock, you owe taxes on your gain, the difference between what you paid for the stock and what you sold it for. The same is true with selling a home (or a second home), but there are some special considerations.

How to Calculate Gain
In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate this:

1. Take the purchase price of the home: This is the sale price, not the amount of money you actually contributed at closing.
2. Add adjustments:
   - Cost of the purchase, including transfer fees, attorney fees, inspections, but not points you paid on your mortgage.
   - Cost of sale, including inspections, attorney's fee, real estate commission, and money you spent to fix up your home just prior to sale.
   - Cost of improvements, including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.
3. The total of this is the adjusted cost basis of your home.
4. Subtract this adjusted cost basis from the amount you sell your home for. This is your capital gain.

A Special Real Estate Exemption for Capital Gains
Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if you meet the following criteria:

- You have lived in the home as your principal residence for two out of the last five years.
- You have not sold or exchanged another home during the two years preceding the sale.

Also note that as of 2003, you also may qualify for this exemption if you meet what the IRS calls "unforeseen circumstances", such as job loss, divorce, or family medical emergency.

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Does Moving Up Make Sense?

Answer these questions to help you decide whether moving up makes sense.

1. How much equity do you have in your home? Look at your annual mortgage statement or call your lender to find out. Usually, you don't build up much equity in the first few years of paying a mortgage, but if you've owned your home for a number of years, you may have significant unrealized gains.
2. Has your income increased enough to cover the extra mortgage costs and the costs of moving?
3. Does your neighborhood still meet your needs? For example, if you've had children, the quality of the schools may be more of a concern now than when you first purchased.
4. Can you add on or remodel? If you have a large yard, there might be room to expand your home. If not, your options may be limited. Also, do you want to undertake the headaches of remodeling?
5. How is the home market? If it's good, you may get top dollar for your home.
6. How are interest rates? A low rate not only helps you buy more home, but also makes it easier to find a buyer.
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Remodeling that Pays

Upgrading your home is always appealing, but which enhancements really get you a good return for your money when it's time to sell? The 2003 Cost vs. Value Report by Remodeling magazine and REALTOR Magazine has the answer.

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Web Site Resources for Customers

• Credit Union Consumer Facts, http://www.cuna.org/data/consumer/advice/retire_home/hometoc.html
• Energyguide.com
  Provides an easy way to assess energy use and get quick tips on saving energy.
• Environmental Protection Agency, www.epa.gov
  A one-stop shop for advice on testing for and mitigating pollutants, from lead paint to radon to mold.
• Equifax, www.equifax.com
  A source of credit reports.
• Experian (formerly TRW), www.experian.com
  A source of credit reports.
• Federal Citizen Information Center,
  http://www.pueblo.gsa.gov/results.tpl?id1=17&startat=1&--woSECTIONSdatarq=17&--
  SECTIONSword=ww
  Offers a list of consumer articles about home sales, financing, and maintenance.
• Ginnie Mae, http://www.ginniemae.gov
  Provides advice to buyers on affordability and home ownership, including calculators.
• U.S. Department of Housing and Urban Development , http://www.hud.gov/buying/index.cfm
  Offers advice to buyers on finance, fair housing, and more.
• ImproveNet, www.improvenet.com
  Provides links to contractors and architects for remodeling projects for buyers and repair services for sellers. For a small charge, buyers can use the site's Estimators to determine how much renovating a property they're considering would cost.
• Moving.com
  Helps buyers and sellers with packing tips and timetables, online mover links, and places to store belongings so that homes look less cluttered.
• REALTOR.com
  Offers consumer information for buyers and sellers as well as home listings and links to service providers.
• Real Estate Buyer's Agent Council (REBAC), http://www.rebac.net
  Offers a home buyer's kit with useful information and checklists.
• Trans Union Corporation, www.transunion.com
  A source of credit reports.
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Information on this page courtesy of National Association of Realtors®