Things to Consider Prior to Selling

Things you need to do to prepare to sell your home extend beyond simply sprucing up the interior and exterior to make it more appealing to buyers. There are a variety of financial preparations you should make, as well as considerations to factor into your decision-making, like researching and understanding the legal and tax implications of selling your home. You should also take some time to research real estate agents rather than simply calling the guy with his face on the bus stop bench.

Do You Understand Your Home’s Value?

Determining your home’s value can be a crucial first step before you embark on any other parts of the process – including looking for a new home to purchase. Understanding what you can sell your home for can help you secure financing for your new home purchase and narrow down your house search.

It also serves to anchor your expectations. You are less likely to be frustrated by the selling process and more likely to reach a quick and successful closing if you know what your home is worth from the outset rather than listing your home for too much and becoming frustrated that no home shoppers are making offers.

Getting a comparative market analysis (CMA) from a real estate professional can help you level-set before putting your house up for sale. A CMA is essentially a list of what other homes nearby have sold for in the current market as well as those that have been listed but not sold. A CMA will consider location, property size, features and overall condition to determine an appropriate price range. 

Some real estate agents provide new clients with a CMA when they’re initially hired, but you can also reach out to a local agent and request one. Getting two or three and comparing the results may help you arrive at a more accurate assessment. Many real estate agents will provide a CMA for free in hopes of earning your business.

You can also consider hiring an appraiser. Home buyers who are getting financing will always have the home appraised as part of the mortgage approval process, but there’s no rule saying the home seller can’t get their own appraisal. Doing so can potentially provide a more precise assessment of home value and give you detailed information about features or problems that may be deflating the recommended asking price.

Financial Preparation, Legal Considerations and Tax Implications

It’s important to be aware of any small print in your current mortgage – like prepayment penalties.

Prepayment penalties are thankfully less common than they used to be thanks to the Dodd-Frank Act, which prohibits FHA, VA and USDA loans from having them at all. For mortgages that still have them, prepayment penalties most often only go into effect if the home is sold within the first three years of repayment.

These penalties are more likely to be present on ARMs that feature a low introductory rate, since lenders want to discourage homebuyers from benefiting from a low upfront rate, then getting out before it increases.

Be sure to budget for selling expenses, like the cost of home repairs, staging and closing costs. Knowing these before you list your home or put in an offer on a new one can prevent unpleasant surprises when you’re too far into the process to exit.

If you have any documents that need to be passed on to the new owner, like warranties, manuals for appliances or receipts for home improvement repairs, it’s usually better and easier to collect those things before you list your home. They may be useful during negotiations – plus it will be easier to transfer them to the homebuyer if you already know where they are.

Most states have a list of specific disclosure requirements, or potentially dangerous home attributes sellers are required to inform prospective buyers about before they sign any closing papers. Disclosure requirements are usually related to serious problems or safety issues, like lead paint, asbestos or flood histories. You aren’t required to inform them about most less-than-ideal home attributes, like an old HVAC system, noisy neighbors or homeless people camping in the alley behind your house.

You may also want to put some thought into the tax implications of selling your home. Selling a primary residence you have been living in for at least two years typically entitles you to exclude capital gains of $250,000 for single filers and $500,000 for married filers from your income. You need to be able to pass the Section 121 exclusion ownership tests and use tests, but most people selling their primary residence will be able to qualify. 

If you itemize deductions, which may be more attractive in the tax year you buy or sell a home, you may be able to deduct many of the expenses you incur when selling your house. This can potentially include home improvements you made specifically for the sale, real estate agent commissions and legal fees.

Another factor many people don’t think about in advance is property tax. Property tax is typically prorated based on the date of sale, which may positively influence your closing costs (as long as it is calculated correctly).



Get Help Preparing for Your Home Sale

Are you looking for advice or guidance in advance of selling your house? The team at 72SOLD is ready to assist. We proudly stand by our record of maximizing home sale prices and selling homes more quickly than competing local real estate professionals. Find out more about our process and why it’s worked for thousands of homeowners across the U.S.