The housing market in the Greater Toronto Area is on a tear. With increasing prices, historically low interest rates for buyers, and the approaching spring sale season, you might be considering selling. To get the most money out of your home, it pays to do everything right. Your biggest advantage is that the market is on your side. The latest MarketWatch data from the Toronto Real Estate Board clearly points to a seller’s market. According to the latest report, of the 5,188 properties that were sold in January 2017, on average they were sold at 4% above the list price. With only 19 days of home inventory in the market, homes are selling fast. In spite of the strong market, it is important to be aware of the most common pitfalls so you don’t make costly mistakes in the sale of your largest investment. We’ve put together ten of the most common (and most avoidable) seller mistakes. Learn to identify and eliminate all of these, and you can save yourself thousands – even tens of thousands –of dollars.
Here are the 10 Home Selling Mistakes you must avoid:
1. Misalignment of your motivation and selling strategy
Your motivation to sell is the determining factor in how you will approach the selling process. It affects everything, from what you set your asking price at, to how much time, money and effort you’re willing to invest in order to prepare your home for sale. For example, if your goal is for a quick sale, this would determine one approach. If you want to maximize your profit, the sales process might take longer, thus determining a different approach.
The reason(s) you are selling your home will affect the way you negotiate its sale. It is important that you keep your motivation to yourself and your real estate professional. Don’t disclose your motivation and provide ammunition to your prospective buyers. For example, should they learn that you must move quickly, you could be at a disadvantage during negotiation. When asked, simply say that your housing needs have changed. Remember, the reason(s) you are selling is only for you to know.
2. Mispricing Your Home
Over-pricing or underpricing is a huge money-losing mistake. It’s so critical to know your market and get familiar with comparable homes currently for sale (and those that have recently sold) to understand exactly what price tag your home needs. If your home is overpriced, the market will figure it out. Your house may also be perceived as a “problem” property by both agents and buyers. Your house will not sell and you will waste your valuable time preparing the property for sale and showings. Pricing has a significant impact on the number of showings of your home.
If the house is priced right, it will sell quickly and close to the list price. If priced right, you can negotiate firmly as pricing was systematically developed using market facts. Ask your real estate agent to give you a price range of +/-3%. If you are trying to meet a strict deadline, you may definitely want to list it at the lower range. If you are not in a rush to sell your home then you may list it at the higher range of the price suggested by your agent.
3. Not Hiring the Right Professional to Sell Your Home
No one wants to pay a 5% commission when selling their house. Typically, 2.5% of the commission goes to your agent and the other 2.5% goes to the agent who brings the buyer for your property. But before you make the decision to hire a realtor or sell the house yourself it is important to understand the dynamics of the home selling process. The fact is that you need a buyer to sell your home. Statistically speaking, most potential buyers for your house are likely working with a real estate agent. If you are not offering any commission to these buyer agents, they have little incentive to market your property to their clients. Instead, they will market other properties that are offering ~2.5% commission. To summarize, if you are listing your home without offering commission for the buyer’s agent, you are seriously limiting the marketing opportunities for your property. Your agent advises you on everything from decluttering, staging, getting house issues fixed, taking room measurements, listing your property on MLS®, arranging showings, conducting open houses, negotiating offers, and eventually closing your property. Your agent is doing all this work in the anticipation of getting your property sold. If the agent is not able to sell your house he or she does not get paid. Your agent is also experienced in selling properties. If you want to go through the hassle of all the tasks listed above and are good at entertaining offers and negotiating for the property, then sell the home yourself. If you want a hassle free experience, hire a good agent. The agent will price your home properly, negotiate a better deal, and take the anxiety and hassle away from selling your own home. The numbers also don’t lie: home sellers who try to do it themselves often end up taking longer to sell and sell for far less than homeowners who work with an agent. According to the National Association of Realtors, nearly two-thirds of the people surveyed who sell their own homes say they wouldn’t do it again themselves. Primary reasons included setting a price, marketing handicaps, liability concerns, and time constraints.
When it comes to hiring a professional you should interview at least three agents to see who can do the best job for you. Ask them about their experience of selling the type of home you own, in your neighbourhood. Ask them about their marketing strategy. Some agents market only on a limited channel to either save money or to maximize the chances of attracting a buyer for your property themselves so they can keep both sides of the commission. Such agents are thinking of their own interest first and not yours. In the GTA, ask if the agent shares listings openly with CREA’s DDF (Data Distribution Facility). This listing source is used by thousands of real estate websites, allowing consumers to view listings without registration. Make the agent sign a service guarantee that forces them to keep you up-to-date with the progress of selling your home. Ask for a bi-weekly update. Have a written guarantee to impose commission fines (e.g. $500 per missed weekly update) for any service issues. Also make sure that the realtor is charging you the going market commission and not more. Ask for testimonials from the recent 5 home sales he/she has made. That way the realtor cannot cherry pick the testimonials. Evaluate each candidate carefully on the basis of their experience, qualifications, enthusiasm, and personality. Be sure you choose someone that you trust and feel confident that they will do a good job on your behalf.
4.Neglecting Necessary Repairs & Refusing to Declutter
Don’t forget about basic cleanup and decluttering. It is important to have prospective buyers visualize themselves in your home. You’ll want to have your home in tip-top shape before holding an open house, and clutter eats equity and kills deals. One of the least expensive improvements you can make to your home is to declutter and create a sense of spaciousness throughout, from the kitchen countertops to the overstuffed closets to the trophy-lined shelves in the den. It costs you nothing to get rid of all that ‘stuff,’ yet it reaps big rewards. See the 30 day plan below to get your home ready for sale.
Repairs: You will lose money if you don’t take care of repairs before the house goes on the market. It’s always going to cost you less out of pocket to fix things than to get things fixed when they are identified by the buyer or during home inspection.
Curb Appeal: Make your home look appealing from the street. Fix peeling paint, mangled gutters, and roof and siding issues. Landscaping should be considered. It’s important that homes look inviting from the outside.
Paint, Refinish, and Shine: Once inside, buyers will first notice the walls and flooring, so you’ll want to get them looking nice and neat. One simple trick you can do to freshen up your house is to apply a new coat of paint. Painting is the number one, low-cost fix that a seller can do. A fresh coat of neutral colour paint will do wonders to make the home look cozy and inviting – just don’t go stark white.
If you have hardwood flooring, sand and refinish it to give it a welcoming shine. Replace areas of tile or laminate flooring where it looks damaged, cracked or worn. For carpets, clean and stretch new ones, and making sure they are stain-free. If the stains won’t come out, it’s best to have them replaced.
Update Your Interior: We recommend going through the house and replacing outdated light fixtures, noting it’s an inexpensive solution to give a home a modern look. Don’t forget the bathrooms either—you might need to replace a rusted medicine cabinet or a cracked mirror.
Fix small things like burned out light bulbs, running toilets, broken light switches, leaky faucets, broken window blinds, and loud exhaust fans. Not only will buyers remember these small things, but minor repairs can add up for a buyer, so getting those out of the way early can make your home more appealing. When you have replaced and updated the house to your liking, leave a few pieces of smartly positioned furniture in the house. You don’t need a house full of furniture if the home is vacant, but a few strategically placed pieces can give a buyer perspective.
Some homeowners consider doing upgrades to their home months before listing their home to make their house look attractive to the perspective buyers. Appraisal Institute of Canada has come up with research on what percentage of your renovation cost will likely be recovered when you sell your home after upgrades. Other than painting your house, other upgrades do not provide enough ROI for your investment. For example, if your appliances are outdated but you don’t want to spend the time replacing them, consider offering a credit instead of buying new ones.
5. Selling Your House Empty
Selling an empty house makes buyers feel the same way: empty. Chances are, you have plenty to choose from already. Decluttering may just leave you with the perfect number of furnishings for a simply staged home (space is your friend, after all). If your home is empty, don’t worry, you won’t need to go out and buy new furniture and accessories. We highly recommend making the small (but critical) investment in a local stager to give the for-sale home a new look that will charm potential buyers. Many agents include staging as a part of their service offering.
6. Letting Your Ego Get in The Way When Negotiating
Too many sellers take negotiating personally and lose out on creating a win-win deal. Remember, this is a business transaction – perhaps the biggest one of your life. Take your ego out of the equation and put your head back into it. Think with minimal emotions and be patient if you want to maximize the financial and logistical outcome from your home sale.
We recommend that you look beyond the price while evaluating offers. While your home’s sale price will generally be the focus of negotiations, often both you and the buyer will have specific needs such that the terms of purchase can significantly influence the final deal. Additionally, it is in relation to the terms – which can represent thousands of dollars in value – where you can get most creative when it comes to resolving the obstacles to transacting. Here are some elements in the purchase agreement that you and the buyer might want to consider:
- An all-cash offer by the buyer
- Your offer to provide financing or an interest rate buy-down to the buyer
- The amount of earnest money deposit the buyer provides
- Closing and possession dates
- The inclusion of furniture, fixtures, etc., not considered part of the property
- Payment for repairs required by the buyer’s lender
- Payment of taxes, utilities, and rents
- Payment of title search and insurance
- Payment of survey, transfer taxes, and recording fees
- Payment of general and termite inspections
- Payment of attorney’s fees
- A decorator’s allowance
Make sure you fully understand the contract you have drawn up so you can in turn explain details and ramifications to the buyer and make any amendments to the sale that are necessary. The contract you use should be thoroughly examined by your real estate attorney. Some real estate brokers may be willing to help you do this. While this is going on, manage the buyer’s interest in your home so that it doesn’t wane during negotiations.
Keep your patience. Studies show that around 32 hours after the offer is made is the best time for reaching a deal.
7. Failing to Complete a Full Set of Disclosures Prior to Closing
Whether you have owned your home for a few years or a few decades, you know its quirks, best features, and flaws. When you decide to sell your home, you need to be aware that your experience with your home is something you may have to share with potential buyers. It is critical that you make full set of disclosures about your property prior to closing. As a seller, you must also follow provincial and federal regulations regarding disclosure of known facts about your property’s condition. Too many sellers pay big bucks because they didn’t reveal it all. Being upfront and forthcoming about any of your home’s issues will save you lots of money and time, especially if the buyers end up uncovering problems themselves.
Some sellers get home inspection done before they list their home. The idea is to fix any major issues that may make the deal fall through at a later state. If you learn about a problem as a result of a home inspection, do the correct due diligence and fix the problem. Do not conceal this from a future buyer. Let the buyer know and have them check it out with their own home inspector.
If you do not disclose issues, your property buyer’s home inspector is likely to find problems and the buyers will be less favorably inclined to negotiate with you if they feel you have withheld information. If a flaw is found after the sale is complete and the buyers have reason to believe you were aware of the problem, you could face a lawsuit.
8. Using Lousy
Photos Don’t just list your home—market it. You will be surprised to know how many awesome homes have horrible camera phone photos in their sale listings. Now, more than 90% of all buyers start their home search online, so you’d better make sure you and your agent nail your home’s close up! You won’t ever get a second chance to make the perfect first impression. Experienced interior photographers can find the best angles and lighting for your space.
Gorgeous photographs, video walk-throughs, perfect floor plans—buyers want it all. You need an agent who can develop a full-blown marketing plan, including social media. People are doing so much more research ahead of time, going through listings online, and weeding out properties before they see them. That’s especially true of millennial first-time buyers, who have grown up with information on demand.
9. Sell First, Then Buy
If you are planning to sell your home and buying a new one (up-sizing or downsizing), you may want to sell your current property before buying a new one. In today’s red hot market, any fairly priced property is attracting multiple offers. The one thing you don’t want to do is try to buy a new place with the contingency that you have to sell your old place first. Nothing kills a deal faster, especially if you’re up against other bidders. In general, it’s smarter to sell before you buy—there’s nothing worse than having to carry two mortgages at once. You may be able to rent your house from the buyer for a few months, or at least find a short-term rental elsewhere.
10. Mistiming the Sale for Maximum Tax Benefits
If you are selling an investment property, the timing of your sale may play a significant role in the taxes you pay for the year. If your yearly income fluctuates, you may benefit by timing your property sale to when you anticipate lower yearly earnings. Even a sale mischeduled by one day can cost you tens of thousands in extra taxes. Don’t be left a day late and many dollars short. Make sure you talk to your accountant to find out if any long-term capital gains tax breaks apply to you, and check your calendar to determine when they come into play.