The Basics of Selling Real Estate in British Columbia
One of my early ideas for something to write about back in 2007 was a “Tips for Sellers” series. In it, I talk a lot about the dangers of overpricing which is so important yet counter intuitive that I bring it up in that series and periodically throughout this blog. There are other culprits too, but the following post is not my restating these points which you can already read on this blog, but instead I want to offer you a post that explores the basics of selling. It is worth your while to read this post and the other posts I link to above.
This post is a general map of the process of selling your home, from your perspective as a client. Not long after I started this blog I wrote a post for the other side of the coin, The Basics of Buying Real Estate in BC, which has become something I have shared with every Buyer ever since. It helps them stay on track and keeps them calm because they have some idea of what lies ahead. So, it’s high time for me to offer something to Sellers that gives them a general guide to the process of listing and selling their home. I will start at the beginning of the process.
**I am speaking of typical experiences here but specific cases mean that some of the details below may change. It’s all stuff I will guide you through so don’t panic!**
Talk to your Mortgage Broker/Lender:
If you’re selling, chances are you have a mortgage. This means that you have a term laid out in a mortgage contract with some kind of lender. You have agreed to pay the lender a certain amount of interest on what you borrowed for a certain amount of time. A five year term is typical, but it can be anything you agreed to. By selling your home or otherwise paying off the mortgage even a little early means that they will not be getting the interest money promised to them in the contract. So, these contracts will typically have a penalty for settling up early. The amount might just be a few months of interest payments or it may be thousands and thousands of dollars.
Therefore, the first step in the selling process is finding out what you would owe them for settling up early and build it into your plan. You may find that selling now is great timing or you may find the opposite. Regardless, I am continually impressed by the many clever ways that Mortgage Brokers can put a plan together that makes it all easy. They will likely have some kind of way of structuring things that make the transition doable or even financially stressless for you. Always worth the chat.
Talk to me and work out a price and an overall plan:
The big thing Sellers are generally thinking about is the price. Which is totally understandable. As someone who appreciates the responsibility being bestowed upon me as your agent, I am careful to do my research before telling you a firm opinion on price or anything else for that matter. Sure, I could price it at whatever you want and have you sign some papers and put it on the MLS. Some Realtors do that. But that wouldn’t be making much use of my knowledge and experience would it? Doing the job right requires a certain attention to process, teamwork and attention to detail. Doing my job right gets my clients as much money in their pocket as possible while minimizing stress and other hassles.
From the moment I arrive at your property for the first time I am working on solving problems we don’t yet have. I am thinking about pricing, yes, but more than that I am trying to see how much more money we can squeeze out of the sale and how to make it all go smoothly with minimal drama. When I look around for the first time I will think like a Buyer and tell you all the pros and cons of the property from the average Buyer’s eyes. I realize it’s your home and it’s a personal thing to you so I try not to be mean but I’m trying to find, and point out, things that you can do to easily and cheaply spruce up your home to appeal to more Buyers. You definitely want to do this before it goes on market rather than when it’s already on market. It takes time to get these tasks done and since the first week or two of being on market are when the most eyes are on it, it’s important to have your home gussied up before she goes on stage. So, polishing it up by the time we get it on market becomes part of the plan. A lot of what needs to be polished is specific to the property but I also have a few general tips you can consider.
We also talk about price. Something I say often on this blog as it bears repeating is price it right and it will sell for top dollar. You make the decision of what is acceptable to you price wise at the beginning of the listing process so I urge you to price is wisely to maximize your payoff. You can change the price later, sure, but the bottom line has already been affected at that point. (See the listing tips alluded to above.)
A quote which I think sums it up brilliantly is:
“Selling your home is both a beauty pageant and a price war, and we have to win both.”
In a Seller’s market the pricing conversation I have with Sellers are more likely to be along the lines of them saying “Oh yes, that’s what I thought it was worth.” if not “Oh wow! Really? That’s great!”. In a Buyer’s market, when it’s even more important to price competitively, I often feel like I am trying to talk someone down from a ledge because I know that if they ask for too much it will sting them financially in the end because the place will take a long time to sell and sell for less. The whole reason they want to ask for more is because they are stressed about money, so it’s a tough conversation especially since I know that there are always other Realtors who live by the motto of “You can’t reduce the price of a listing you don’t have.”Those are not people who have your back, they are taking advantage of you. In your biggest financial transaction of your life, what kind of person do you want at the helm?
Ok, that’s enough of my ‘price it right’ nagging which you can easily find more of throughout this blog in case you haven’t had enough. I had promised not to get into it here so I will stop.
At this early stage we will also talk about timelines and various other things that we will need to organize to make it all go smoothly. And yes, I will explain my marketing plan and arrange for professional photographers to come through as well. Lots of paperwork is signed, filled out, handed in, possibly revised, I also take measurements, arrange for signs and advertising and a variety of other behind the scenes things which I will arrange and do for you. I will gladly explain these in person as these are beyond the scope of this blog. The paperwork will include a listing date which tells us how much time you have to get it polished and ready for market.
Have your home showing ready:
Just before it goes on market you should have gotten a chance to clear out clutter, put some finishing touches on this or that, do some gardening, and a thorough cleaning. Seeing your home through fresh eyes and thinking about space in a property are good things to keep in mind while you prepare. It’s not easy getting your home to look its best, it takes more than most people expect.
Rest assured, this all makes a very big difference in the kind of price your property will be able to command. For example, you and I both know that painting the ugly out of that purple bathroom is only an afternoon’s worth of work and probably less than $120 of paint and related equipment. However, most Buyers just can’t see past that ugly bathroom. If the home doesn’t feel warm and cozy then it won’t feel like a home they want. Logic is typically secondary to emotion in these matters. Even if they can see past these minor fixes they often have the attitude of being willing to spend more for something that doesn’t need work instead of paying less for something that does need work. Ask yourself which Buyer you’d rather attract.
The following is a bit of a tangent but the following illustrates my points made above:
I recently bought a home with an ugly purple bathroom among other hideous things. It really stank too. The carpets needed to be pulled up and thrown out and the laminate flooring needed to be redone and there were other lesser details I won’t bother with. The place had originally been listed at a much higher price and sat on the market for many months in a really strong Seller’s market. After quite a few price reductions, it still sat there unsold because it was gross. I could see it had a good floor plan and that the problems were mostly paint and flooring. These things that are not that hard or expensive to remedy. Places like this are what I want to find as a Buyer. The Seller could have probably sold it for another 60k had they polished the place up themselves. I spent about 15-20k doing it and the extra value I created by polishing it up became equity for me.
It goes on market!:
Once the home is looking its best, photos have been taken, paperwork is done, and a very long list of things have been set up behind the scenes, it starts to get advertised. On listing day it will show up on various websites and be advertised in other ways which I won’t get into here but suffice to say that there will be lots of eyes (definitely hundreds, possibly thousands of eyes) on your listing and if the price makes sense to Buyers we will be getting showings.
Showings and Tuesday tour:
We want as many people to come through as possible, but better still is getting showings from people who have the money and want to spend it on a property like yours. The interactions between myself, other Realtors and their clients are designed to maximize the potential of a showing turning into a solid offer backed by money. During the first few days of a listing being on market, there are more eyes on it than at any other time. Every Buyer and their Realtor are hunting for the hottest new listing and trying to get it before someone else does. Whether it be a Seller’s market or a Buyer’s market, the hot listings are the center of a feeding frenzy that results in higher prices.
The marketing is multifaceted, one of the things that’s a good way to get the attention of the Realtors is having it on Tuesday morning tour. With a quick look through the house the Realtors that come can decide whether they have a Buyer that may be interested. I have found some good deals quickly this way while working on the Buyer’s side of this equation and gotten the feeding frenzy I wanted on the Seller’s side too. Also, you get some pretty quick feedback from Realtors about the property in other ways too. Even negative feedback is valuable after all, it’s just that it stings a bit.
Depending on how things go, mainly due to pricing and market conditions, your property may attract lots of showings right away and hopefully an offer comes from one of those. Worth noting here is that the highest price tends to come along with a shorter time on market which is a lot more convenient for you in addition to the extra bucks. Some Realtors say “The biggest fish usually bites first.” You see, the sense of urgency for a Buyer to grab your property before someone else does, or having to compete in a multiple offer situation(also good for you) is what drives them to offer a higher price so the offer gets accepted without a long negotiation. After all, during the negotiation period other parties can make offers as well. If they feel there is a fire under their seat to grab the place then they will generally offer more, if they don’t feel that way they will generally offer less. This is why the lowball offers come in once a place has sat on the market for a while. If we are not getting much attention we will at some point need to talk about your property’s price because I can guarantee that I have given it my all to bring in as many qualified Buyers and offers as I can before I bring this up. That’s my job and my duty to you.
Offer comes in:
If the above things are in order an offer will come in. I want you to know that some offers get a reaction of “Yay! That’s great!”, which happens more often in a Seller’s market, but most of the time the Seller is a bit annoyed that the price isn’t higher. Don’t worry. Negotiations are a kind of a dance we go through for every deal. Most of the time that first offer is the Buyer’s attempt to see how you will react, if they are working with a decent Realtor, the Realtor will try to get them to try a more measured approach like I describe in this post about negotiations. I am a fan of talking it out. Sometimes offers are in fact a waste of paper but most of the time what seemed like an insult at first turns into a good situation for both parties involved. After all, balance is the magic formula for any deal. It has to be something both parties are interested in.
Subject removal process:
Once we have agreed on price, dates and subject clauses among other things we will have an accepted offer. This is a milestone in the selling process. It’s okay to get excited, but it’s not quite celebration time yet as the subjects still need to be removed before the deal is firm.
In almost every offer there will be subject clauses. Subject clauses are basically a to do list of things the Buyer has to verify and get in order before they can confirm purchase of the property. Typically there are five or six clauses with a 10 to 14 day period to get them done in. (I describe them in this post’s counterpart here.) At this stage the ball is mostly in the Buyer’s court under the guidance of their Realtor. I will be in contact with them to check in but mostly we are waiting on them.
Oftentimes there are what I call ‘speed bumps’ at this stage. That is, something needs to be done or decided that will be the make or break of the deal. I am here for guidance on this too as it gets complicated sometimes and requires some fancy footwork on my end of the equation. There’s a lot of laws and procedures to know about. If all goes well we get to the next stage.
This is the happy moment when the next stage of paperwork (subject removal) has been signed. I give you the happy phone call, congratulations and a sincere thank you for working with me. I’ll put a sold sign up not too long after that and although you are mostly done with my services at this point I will touch base with you here and there and be available to answer any question you may still have.
Paperwork with Lawyers and Lenders:
There is a certain amount of time between subject removal (sold) and completion (when you get paid and then officially move out). During this time there is a need for getting things in order with Mortgage Lenders and Lawyers/Notaries. They need things. Lots of things that prove things. My office staff and I will send them the contract info and related documents that I handled but they will want things from you as well. My advice here is to just be proactive and organized so you don’t create last minute stress for yourself.
At this point you should be in the process of packing in preparation of moving out. I will have asked earlier on whether you needed my services in helping you purchase the next place or if you need a my help finding a good Realtor outside Nanaimo. Regardless, it is at this stage that you will need to be working on the move so that the home is vacant and clean for possession. If it’s a rental property, then something else will have been decided in the contract and we of course follow that plan.
You get money, yay!:
In the contract there is a completion date and a possession date. Typically, the former is a day before the latter. The completion date is the day all the money changes hands and you get another happy phone call from me and/or your Lawyer/Notary saying that it’s all done.
And now that they actually own the house you will need to say goodbye to the home and relinquish the keys so I can hand them over for possession. You’ll still have the memories. Now you can go on with your life and hopefully you have made enough money in the transaction to make that life a little bit easier.
Some related posts for further reading: