Selling Real Estate - My War Story

I don’t believe that anyone today truly believes that selling a house in today’s real estate market is an easy task, but I’ve been hit with some pretty mind blowing experiences in the past two months while trying to sell my place. The following are my “tips” for the war zone:



1) Have a good reason for selling your house in the first place. I have lived in my place which is a “duplex” townhome in the Congress Park neighborhood of Denver, Colorado for over 11 years. My relationship with my next door neighbors has been very strained for a long period of time and my original goal was to get into a single family house as close to downtown as possible and away from these neighbors. I completely understand that you can’t pick your neighbors, but when things go “sour” for such a long period of time, maybe it is time to move on. So, I believed I had a good reason.



2) Sell your house first, before even looking for another place. I think this was my first mistake. If you find a new place before selling your existing house, unless you have a lot of money, it puts you in the mind set to “SELL SELL SELL.” This isn’t necessarily bad, but my fear (especially in this market) of not selling, put me in a bad mind set where I don’t think I used the best judgment when the first offer came in (which ultimately failed) – which leads me to the next tip.



3) Spend the money and get a professional appraisal before you put your house on the market. I think this is smart for a couple of reasons. First, regardless of how “good” your Sales Agent is, you will most likely never get more for your house than what it appraises for since nearly all standard sales contracts have a provision that allows the Buyer to get out of the deal if the house appraises for less than the contract price, and in today’s market, this is a reality that you cannot escape. Especially if your property has unique characteristics or is in an area that comparable homes are not quite a good fit to approximate value, the value your Sales Agent comes up with, may be vastly different than what an appraiser puts the value at. In my case, most of the “comps” were for condos, and while my house has restrictive covenants with the next door neighbor similar to a condo, it actually is more like a “house.” Second, it puts you in a better position to assess just how good your Sales Agent is at recommending a good price point. In the “rush rush rush” to sell in this market, you can run the risk of giving up value. For me, I live in a very desirable neighborhood in Denver. The sales contract on my house came in within hours of the house being listed which a rocket scientist would tell you is a big red flag. Obviously, someone saw a “deal” and wanted to jump on it.  A friend of mine at work is putting her house on the market and I asked her if she was going to get an appraisal.  She said, "well, we trust our Real Estate Agent."  Well, that is all well and good, but your house might be the biggest investment you have, so why not get a second opinion?  How about trust, but verify? 


4) Get a Home Inspection Before Placing Your House on the Market. My Sales Agent thought this was unnecessary and suggested that when an offer comes in, a prospective Buyer will do an inspection anyway, so why pay for one when the Buyer will do it for you? Well, this is bad for at least one important reason: If there is a big problem discovered during the inspection, chances are you will loose the sale, and that is exactly what happened to me. Turns out I had a major problem with my sewer line that I didn’t even know about (there was a “sag” in the line that eventually would have caused my line to back up.) Even though I never had problems, the inspection (which is like a colonoscopy only for your sewer line) revealed this unfortunate issue. After spending $8,500 on repairs I still have no sale – the Buyer backed out and I would have done the same thing. My Sales Agent argued that each inspector will come up with a list of different items, but what I have found is that if there is anything “major” (which is really what these inspections are about – not “pin pricks” in the walls from hanging pictures) that most all inspectors will find the “big” stuff. So, why not find out first, get it fixed, and have a smoother transaction?   The other big reason for doing this is that when you put your house up for sale, you must fill out a Disclosure Report on your house where you are legally obiligated to disclose the condition of all major "components" of your house (this is ture in Colorado and Colorado is known as a "full disclosure state.)  An Inspector can help "fill in the blanks."



5) Work with an Attorney on Both the Sale and Purchase of your home. This I did do, and it saved me a lot of heartache, and it kept me out of the “do do.” Buying and Selling your house is probably one of the biggest financial moves you will ever make, so trying to do it “on the cheep” can get you into a lot of trouble. There are a lot of good Attorneys that will handle the review and make recommendations on your transactions for a flat fee which is affordable. When I was looking at Buying from a “large” builder, there were two provisions in the builder’s contract that were deal breakers and my Attorney insisted that they be removed. I attempted to negotiate for two weeks with the builder on this, and he refused, so I terminated the transaction. So, listen to and take the advice of a professional!



6) “Earnest Money Down” – Make Sure it is Adequate. When you sell your house, once you have signed on the line, there is next to no “wiggle” room for the Seller to get out of the transaction; however, most real estate contracts have a “liquidated damages” provision for the Buyer that allows them to walk away from the transaction even at the day of closing. What this means is that if they have put a small amount of money down like $2,500 to “tie up” your property for approximately 45 days, if they find a “better deal” they can walk away from your sale for the cost of this earnest money, or what I call an “option.” Essentially, when a Real Estate contract is initially signed that includes a liquidated damages provision, the Buyer is initially ONLY BUYING AN OPTION to BUY your house. To ensure you get a SERIOUS Buyer, make sure the earnest money that they put down on your house is sufficient to ensure they are really serious about buying your property. Looking back at what happened to me and considering the overall value of my house and the neighborhood, going forward I will not accept a contract with anything less than $10k in earnest money.



7) Transitioning into a new place. Take into account moving expenses, having to temporarily rent a house or apartment, storing your furniture, and especially if you have pets, if you will be able to keep them in a rental place until your new home is built or ready for occupancy. This point is extremely important, and you must have a good plan to accommodate your kids, pets, and family during the transition. I think this is often overlooked and is suddenly a shock when you make assumptions about temporary living arrangements that may not be true.



I still do not have a sale and my house is temporarily off the market and we are having a real "heart to heart" about moving forward on this.  I’m not sure if I have scared you into just climbing back under a rock or not, but the above points are all “realities” in today’s market. If it sounds like I am “bashing” real estate agents a bit, well, I am, but not too much. They are good people – one of my best friends has been a real estate agent for years and is very ethical and a good guy. That said, their motivation is to get your house sold and get their commission check. This is a good thing, BUT, not at the expense of NOT doing the items mentioned above.



Take care and GOOD LUCK!