As I wrote in Part 1, “I think of selling your house as a six part process: 1.) knowing the local real estate market, 2.) figuring out the FMV and determining a realistic sales price, 3.) developing an effective advertising plan, 4.) negotiating diplomatically but firmly to arrive at a price that pushes your buyer as far as they are willing to go, 5.) drafting the legal contracts as well as drafting unambiguous language that gets the property sold without legal problems, and 6.) avoiding the many traps for the unwary.”

Today’s Coverage: 2.) Figuring out the FMV and determining a realistic sales price.

The single most important step in the process of successfully selling your home is coming up with a true FMV (fair market value). Price your house wrong on the market, and it may get stale, and either take much longer to sell at a lower price, or not sell at all this year.

A Realtor can get a beautiful CMA (Comparative Market Analysis) from the MLS (Multiple Listing Service). If you’re not a member of the MLS, you won’t have access to all that data, so a FSBO (For-Sale-By-Owner) will have to resort to what are probably less accurate and more labor intensive methods to do a CMA.

I have a strong conviction about arriving at the listing price, whether a FSBO or listed with a Realtor. I believe it must be an accurate FMV. An experienced Realtor using the MLS can arrive at an accurate FMV, but it takes hard work to make the necessary adjustments up and down for the comparables to arrive at the best FMV for your home. Because it is so hard for a FSBO to do this accurately without a lot of training and a current data base, I recommend hiring a licensed appraiser and paying him for what is the equivalent of a bank appraisal. It is extremely effective to show a prospective Buyer how you arrived at the asking price. They can’t really argue with it. It is well documented, has color pictures of the comps, includes all the amenities and the values, and has an authoritative bottom line number.

This same appraisal is typically good for six months and probably can be used by your buyer with their own bank. While some appraisals take weeks to get done, your appraisal is already done and the Buyer can take it to the bank. What a great way to reduce unnecessary delays, especially with VA loans. The appraisal will cost $400, more or less, but just tell the Buyers that while you have done them a favor by getting it done in advance, you expect to be reimbursed at closing as it is normally their cost anyway. By the way, some special types of HUD loans or VA loans may require a bank appointed appraiser of their own choosing, but your appraisal still has all the benefit of accurate pricing to market and sell your home.

I recently listed a home that had previously been listed for six months with another broker with no activity whatsoever. I sold it in about 30 days after listing, and I would attribute this success to effective marketing AND the right listing price. The listing price was $25,000 below a current bank appraisal, and I made it clear in the marketing that price was already negotiated and firm.

Wrong pricing can be devestating. I noticed in my MLS that a 2.5 acre lot with a mountain view sold this past month for $139,000. What is interesting is that the original listing price was $239,000. Wow! What a discount! It would seem the original price was grotesquely over FMV by $100,000. Guessing what the FMV is on your property is just plain dumb. Don’t do it. Pricing is not science, but neither is it throwing dice. Admittedly there is a subjective aspect, but there is a great deal of solid mathematics involved, too. You have to know how to do the math.

It may be obvious, but another great thing you accomplish by getting the appraisal done in advance is to reduce the offer/counteroffer/counteroffer exchange. Explain that the appraisal eliminates the uncertainty for them about what the FMV of the house is, eliminates the need for the games that Buyers and Sellers often play without an appraisal, both trying to take advantage of the other. This is very effective!

Courtesy Sequim & Port Angeles Real Estate, LLC
Chuck Marunde, J.D. Owner/Broker/Realtor

I think of selling your house as a six part process: 1.) knowing the local real estate market, 2.) figuring out the FMV and determining a realistic sales price, 3.) developing an effective advertising plan, 4.) negotiating diplomatically but firmly to arrive at a price that pushes your buyer as far as they are willing to go, 5.) drafting the legal contracts as well as drafting unambiguous language that gets the property sold without legal problems, and 6.) avoiding the many traps for the unwary.

Today’s Coverage: 1.) Knowing the local real estate market.

Buyers sometimes come from outside our area, and if they are from an area where real estate is priced substantially higher, they might over pay for a property. The reality is that buyers are getting very well educated these days, and they are learning to negotiate hard. The Internet has become a very powerful tool educating both buyers and sellers, evidenced by you reading this.

Buyers are able to view many homes on the Internet and compare features and prices. By the time a buyer looks at your home, they have looked at hundreds of homes on the Internet, and physically viewed a dozen or more homes in your market. The better you know the market, the better you will be prepared to negotiate the sale.

Knowing the market involves knowing several critical components to getting your house sold. It will be helpful to know:

1. the fair market values of comparable houses;
2. the differences between those comps and your house in great detail;
3. how and why you have adjusted the comp prices to arrive at your price;
4. the shortcomings or negatives of your home–objectively;
5. considering all of this, how your home looks on the market to prospective buyers;
6. how to stage your home;
7. the market timing or the “when” of selling your home.

WHEN you put your home on the market is a very important decision. First, the market might be in a correction mode, so it could be the worst time. Second, the season or time of the year can be disadvantageous. Third, annual events often create the best and the not-so-good times to put a house on the market, like school starting at the end of August. There are many things that effect timing decisions. You will want to be aware of these, because wrong timing can mean the house does not sell within a reasonable period of time, or it could mean you take a substantial cut on the price. Ouch!

You would also benefit from having a written comprehensive plan. Do you know what you are going to do, and do you know when you are going to do it between now and closing? Chaos is not in your best interest when it comes to selling your home with so much money at stake. Write a good and thorough plan, including the contact information of key professionals you will involve, such as the title company, the escrow officer, inspector, loan officer, and so on. It’s what you don’t know that can come back to bite you. It has been said that we learn best by making mistakes, but it would be a disaster if you had to loose a lot of your money just to learn something about selling real estate. It is the intention of this series to help you avoid that kind of nightmare and to successfully sell your own home. If after studying everything you can get your hands on, you decide your want a Realtor, that is still your option, but at least you would be making a fully informed decision.

Realize that the success of a FSBO is not so much in doing something extraordinarily good: the key is not making any major mistakes. Kind of sounds like a military career, doesn’t it? It means covering all the bases, and not falling into traps for the unwary. This is why a comprehensive plan is so important. It is your road map to success. Without the map, you may not end up at closing with the net proceeds you hoped to get. And then who wants to close a transaction, and later get sued because your paperwork opens you to legal liability.

Courtesy Sequim & Port Angeles Real Estate, LLC
Chuck Marunde, J.D. Owner/Broker/Realtor

How can your save a home from foreclosure? Solutions for resolving the default range from reinstatement (bringing the loan current by catching up on past due payments), a workout with the lender, refinancing, paying off the debt in full, or selling the property, which has to be done fairly quickly to avoid the trustee’s sale. If none of the above happens by the auction date, your property will be sold to the highest bidder, and typically the bank takes the property back for the amount of the debt.

If your home is in default, you cannot afford to experiment or fool around for months learning how these things work by trial and error. As a sword swallower might say, “Don’t try this at home. You could get hurt.” If your home is in default, find a professional who knows this stuff inside and out. Attack the problem right away. Procrastination will cost you valuable time, which you don’t have right now.

To learn more about the foreclosure process in Sequim and Port Angeles, review these articles:

Short Sales and Foreclosures
Buying Foreclosures
The Legal Foreclosure Process

When you’re ready for professional help from someone who is a real estate broker and Realtor, and who practiced real estate law for 20 years, email me or call me. I’d be glad to answer your questions, and maybe I can help.

Chuck Marunde, J.D.
Broker/Owner/Realtor
Sequim & Port Angeles Real Estate, LLC
618 South Peabody St., Suite I
Port Angeles, WA 98362
(360) 775-5424
chuckmarunde@gmail.com
SequimPortAngeles.com

What is a short sale? A short sale is the sale of a home that is in foreclosure at a price less than the existing balance of the mortgage, which can only occur with the full cooperation of the bank holding the mortgage. The process is very involved, and frankly, it is a rare event, or at least it has been. We will undoubtedly see more short sales in the coming year.

The legal and procedural traps for the unwary are so significant that I would not recommend that a buyer try to purchase a home through a short sale without the professional help of an experienced person. By the way, most attorneys and most real estate agents are not experienced in this area. Due diligence in finding someone who can help you is critical to your success. Let me make the point this way: if you find someone who really knows how to help you purchase a home out of foreclosure, you will be ahead of the crowd of buyers, and you may be the only legitimate buyer as far as the bank is concerned.

Briefly, here is the process:

Buying a foreclosure will be one of three experiences: 1.) a dead end after months of frustration, 2.) a fast way to lose money because of major mistakes in the process, or 3.) a great way to pick up a lot of equity immediately at closing because your purchase price is below the true current fair market value of the home.

Read a detailed description of the Washington Foreclosure Process
See Chuck Marunde’s detailed Deed of Trust Foreclosure Checklist
See what a Notice of Trustee’s Sale looks like here.
Read more on Foreclosures on this Blog.