Avoid These Costly Mistakes When Selling a Home

You've decided to sell your home. You have advertisements paid for and buyers lined up at your door. You are ready to accept an offer and sell your home today!

A piece of cake, right? Not so fast. You could end up losing the sale or, even worse, getting sued by an angry buyer who misunderstood what was advertised or what was said.

Here's a list of 'don'ts' to help you avoid the pitfalls that can prevent a successful sale.

1.   Don't sell before you get qualified to buy your new home

If you sign a contract to sell your house before you are qualified to buy another, you're asking for trouble. Here's why: Your financial circumstances may have changed since your last purchase, and you might not be able to qualify for a loan, or you might not be able to sell at a price that allows you to buy the type of replacement house you want. You could end up renting or buying something that is far from ideal.

Before you decide to sell the house, get pre-approved by a lender you trust, and research the housing market in the area where you wish to live so  you have a good idea how much it will take to buy a replacement. Make plans in case you have to move right away.

2.   Don't guess your loan payoff

Call your lender to check the payoff for your current home mortgage.

And make sure there are no penalties written in your contract for early payoff. Some lenders have a pre-payment penalty for paying off your loan to soon.

3.   Don't guess on the sale price of your home

Determine your home's fair market value. Real estate agents will usually help you determine value as a courtesy, but you might take it a step further and order a fair market appraisal. Not an appraisal for the purpose of a full loan amount, but an appraisal for the true market value. There is a difference!

Nothing loses potential buyers faster than an overpriced home. Then, when you lower the price it makes it look like you're getting desperate to sell.

On the flip side, you don't want to lose money by selling too cheap. It might get you a fast sale, but you might miss out on several thousand dollars, too. Learn how to price your house for sale the right way.

4. Don't go it alone

Selling a home can be one of the most stressful events in your life. Answering calls, setting appointments, cleaning house, and boxing up memories can be overwhelming.

If you're working with an agent, it's the agent's duty to track many of the day-to-day details that involve the buyers and taking phone calls.

5. Don't underestimate your closing costs to sell

Don't forget to calculate the following items:

• Real estate commission, if you use an agency to sell.
• Advertising costs, signs, other fees, if you plan to sell by owner.
• Attorney, closing agent and other professional fees.
• Excise/gains tax for the sale, if applicable.
• Prorated costs for your share of annual expenses, such as property taxes, homeowner's association fees, and utilities.
• Any other fees sometimes paid by the seller (appraisals, inspections, buyer's closing costs, etc.).

Real estate agents deal with transactions every day and can give you a very close estimate of seller closing costs.

6. Don't let your emotions take over

Keep a cool head during the entire selling process, especially during and after a home inspection. Be realistic and assume there will be issues. No home is perfect, especially older homes. It's not unusual to have to take care of some repairs yourself. Don't let the buyer's demand to do a small repair kill the deal.

On the other hand, don't commit to fixing anything in advance, unless you're sure you can handle it emotionally and financially. Decide what type of repairs you can realistically tackle, then stick with the decision. Some repairs can get out of hand and end up costing you big money.

7. Don't panic if the appraisal comes in low

At least not at first. There are some things you (and your agent) can do to correct the problem. Study your options.

8. Don't show your home unprepared

Get everything ready in advance. Be sure to address 'eye-sores' and any repairs that may scare buyers away. Get rid of any water leaks, stains, broken windows/doors, bad smells, etc. You don't want to lose a potential buyer.

9. Don't follow buyers around when showing

Whenever possible, don't be home when showing. If you're listing with a real estate agent, they'll often ask you to leave when the house is shown.

Why? Because lurking sellers make buyers nervous — they don't feel comfortable inspecting the house when they feel they are intruding. It's easier for buyers to visualize the home being theirs when they have a chance to critique and discuss the home among themselves.

If you must be home, try to stay out of the way and answer questions only if asked.

Unless there's a real reason for it, don't ask your agent to be present for all showings either. That's the kiss of death for showing activity. Other agents want privacy with their buyers, and they don't usually have time to work around your agent's schedule.

10. Don't waste your time with non-qualified buyers

Why show your home to someone who can't even buy it?

11. Don't get too friendly with the buyer

It's great to be friendly, but don't get into too many long discussions with the buyers, because personality conflicts often cloud judgments.

Remember, this could be their new home. You're no doubt excited about moving. But buyers will start second guessing -- everyone does. A casual statement about 'gettin' out while the gettin's good' might be enough innocent chatter to kill the deal.

12. Don't write an offer for the buyer

The buyer should write the offer themselves, or with the help of their agent. Hire your own agent whenever possible to protect your interests.

Remember, a listing agent works for you. So avoid letting your listing agent act as a limited broker who will become neutral to both sides.

13. Don't ignore inspection requirements

Know what is expected of you and take care of it. For instance, a buyer getting an FHA loan will have an FHA inspector who may require some repairs to process the loan. That's something you may have to handle yourself if the buyer can't manage it.

Answer inspector questions and provide required paperwork as quickly as possible — selling your home depends on it.

14. Don't spend earnest money given to you

Don't assume the earnest money deposit is yours until the deal has closed and been recorded. Also, give the buyer a receipt. There are many stories about sellers who spent the deposit money prior to closing. When the transactions didn't take place for valid reasons -- such as financing or repair issues -- the buyers had to fight or sue for a refund.

Whenever possible, give the money to your broker or a neutral party who will hold the deposit for you until closing day and make sure your contract dictates what happens to the funds if the transaction doesn't close.

15. Don't go to closing unprepared

Do not go to closing without your 'HUD Estimate' which is provided by your title company. It will outline your costs and give you a good idea of how much money you will be getting or will need to bring at closing.

Also, make certain you speak with your agent and/or title officer to get a more exact figure and to make sure no surprises have arisen. Because title insurance is a large part of closing costs, it's always a good idea to choose your own title company and get some quotes.

16. Don't forget to cancel or switch utilities and insurance

That sounds simple, but you'd be surprised how many people forget to tell utilities they are moving or apply for utility service at their new home.

Call the utilities and your insurance company as soon as you have a contract. Find out how many days lead time they need to switch or cancel, then get back with them when you have a firm closing date.