Selling a home
- Do I Need An Attorney?
- Should I Use A Real Estate Broker Or Agent?
- What is the Multiple Listing Service?
- What is the Listing Contract?
- What is a Contract of Sale?
- Terms of the Contract
- Property Description
- Buyer's Financing
- What are Loan Discount Fees or Points?
- What About the Condition Of The Property?
- Finding A New Home
- What Happens at Closing Or Settlement?
- Any Income Taxes?
- More Questions
Do I Need An Attorney?
When you decide to sell your home, there are many factors to be considered. An attorney can help you most by preparing or reviewing any contract documents and advising you on any controversies which arise out of the transaction. By custom, the buyer is responsible for engaging a title attorney or company to conduct the settlement on the contract.
Should I Use A Real Estate Broker Or Agent?
Real estate brokers and their agents are professionals at marketing homes. If you list your property with a real estate broker, the broker will advertise the property, arrange for showing the property to prospective buyers, conduct negotiations on your behalf and make available preprinted forms for use in the transaction.
What is the Multiple Listing Service?
One of the biggest advantages of listing your property with a real estate broker is participation in the multiple listing system. If your broker is a member of a multiple listing service, information about your property will be entered into a computer data base which can be accessed by all other members. Typically, your broker offers to cooperate with other members of the service, and offers to compensate any other broker who produces a buyer for your property. The benefit to the seller is that all brokers participating in this multiple listing service have an incentive to find a buyer for that property.
What is the Listing Contract?
The brokerage fee is negotiable between the seller and the broker, and will be stated in the Listing Contract. Most brokers will insist upon an "exclusive right to sell" listing, which means that even if you find a buyer yourself while the property is being marketed by the broker, a commission will be due. If you have shown the property to prospects before engaging the broker, they can be excluded from the listing, but this should be in writing to avoid controversies.
What is a Contract of Sale?
The Contract of Sale is the critical document in defining the obligations of the buyer and seller. Generally, real estate contracts must be in writing, although there are some circumstances in which verbal agreements of sellers have been enforced. The seller should make certain that any verbal agreement is conditioned upon review of a written contract of sale. All terms of the deal should be spelled out in writing in detail.
Terms of the Contract
Although the sale price and settlement date are usually the two items the seller is most concerned with there are many other terms which can be important.
The description of the property should come from the seller's deed to assure that you are only offering to sell what you have title to. All owners on the deed should sign the contract of sale.
Most buyers will need to apply for financing of some sort. Because the loan approval process can take several weeks, the buyer should be obligated to apply promptly. The buyer should provide the seller with evidence that the buyer is financially qualified to pay the down payment and mortgage payments. The contract can include a requirement that the buyer obtain a statement from the prospective lender expressing a preliminary opinion that the buyer appears qualified for the loan being applied for.
What are Loan Discount Fees or Points?
The buyer may seek to have the seller pay some of the Loan Discount Fees, or Points, charged by buyer's lender. This should be considered in connection with setting the sale price. A "Point" is usually 1% of the loan amount. (If the borrower is seeking a mortgage of $100,000, each point would require the payment of $1,000.)
What About the Condition Of The Property?
Most sellers would like to sell their property "as is," with no warranties about the condition of the property. Most buyers will expect a warranty that the plumbing, electrical system and mechanical systems are in good working order on the date of closing. If there are latent or hidden defects in the property, such as a leaking roof or wet basement, the seller is best advised to put the buyer on notice and give the buyer a reasonable opportunity to investigate the nature and extent of the problem. The seller usually is required to provide a certificate that the structure is free from termites and other wood destroying insects.
Finding A New Home
If the sale of your home is contingent upon your purchase of a new residence, this should be covered in the contract. Settlement dates must be coordinate.
What Happens at Closing Or Settlement?
The buyer will select the title company or attorney to conduct the Settlement or Closing. At the closing, the buyer will pay the balance of the purchase price and the seller will sign the deed conveying title to the property to the buyer. The settlement officer will review a settlement sheet showing the various charges and adjustments. Major expenses on the seller's side will include the payoff of any liens and mortgages, transfer taxes, recordation taxes, loan discount points and brokerage commissions.
Any Income Taxes?
The settlement officer will report the sale of your property to the IRS. Unless you are purchasing a new home of greater value, there may be capital gains taxes due on the sale. You should consult your tax advisor or CPA to determine your obligations.
It is not possible for this brochure to cover all questions which might come up in connection with buying a home. If you have legal questions which arise either before or after buying a home, please feel free to give us a call. Although our firm generally does not conduct title searches -- we have found it is usually more economical for buyers to use a title company for the closing -- we can assist with any aspect of the transaction. We draft and review contracts for buyers and sellers, negotiate terms, and advise buyers and sellers at settlement. We are also prepared to go to court in those cases in which problems cannot be amicably resolved.