Monday, July 31, 2006

Tips for Getting Your Home Sold

For most of the last four to five years, pricing properties was easy: see what the highest-priced home in the area sold for, add 20%, then add the cost of that trip to Europe, and VOILA! If lightning didn't strike right away, it would eventually sell because the market will rise to meet the price.

In the current market, it's still happening in The Hamptons for unique homes and properties, but not for everyone. The key for motivated sellers is to do your homework and to dot the i's and cross the t's on the following:

*Mechanicals - make sure plumbing, electric, etc., are in good working order. It's not a bad idea to have a home inspection done to identify the things buyers might object to before signing the contract. As many as 25% of deals fall apart after the buyer's home inspection because of what is revealed, and the parties can't come to agreement on who will pay for it. It's sad to see a $2.5MM sale fall apart over a $10,000 repair, but it happens.

*Certificate of Occupancy - Yeah, I know you were going to get that final inspection on the deck that was put in three years ago, but you never got around to it. Unless it's a cash deal and the buyer is savvy enough to deal with it after the closing (and that will cost you), be a big boy (or girl) and get the CO. Another 14% or so deals fall apart over CO issues. Ironically, sometimes the deal falls apart because the exact structure that the buyer found most attractive about the property, like a deck, patio, dock, pool or addition, was built illegally and has to be torn down in order for the closing to take place. Oy!!!

*Taxes - What will be your capital gains liability on the sale? Is it an investment property and can you 1031 the income? How does the sale affect your estate? Meeting with your accountant and attorney before you list is important. I've handled numerous estate sales where the family has been torn apart over the sale of a homestead that was deeply imbedded in their hearts, but they couldn't afford to pay the inheritance taxes on it because the elder had his or her head in the sand and was not aware of (or was intimidated or distrustful of) estate planning. Uncle Sam loves those folks. Also know that the Peconic Tax is 2% to the buyer over $250,000 for homes and $150,000 for land, and if the agent bringing the buyer didn't tell that poor, unsuspecting soul, keep an ear out for the distant screams. Another “tax” is the Mansion Tax. Any sale over $1MM is taxed 1% on the total sales price. That’s $10,000 on a $1MM sale, $50,000 on a $5MM sale and $250,000 on a $25MM sale. And that is in addition to the 2% Peconic Tax.

*Environmental - Have a buried oil tank? Any tank over 10 years old will probably be tested for leaks. Any leaks will require digging and remediation of the surrounding soil and reporting to the government. How close are the wetlands? Know and understand the implications and regulations around these issues.

*Appraisal - Know what your house will appraise for. If your buyer is looking for a mortgage, he or she won't be able to get one if the house doesn't appraise for the selling price (or close to it). Additionally, you might be under-pricing your home if you don't know what its appraised value is. I have experienced some elderly clients who did not realize how much their property value had appreciated. It’s difficult for some people to believe how much their property is worth. On the other hand, it’s difficult for others to accept that their property is not worth what they’d expected (or hoped, more likely). Many people have deep emotional attachments to their property and believe that it has a significantly higher value that the market will dictate. An appraisal should provide some objectivity to the situation.

*Listing Agent - This is not shameless self-promotion, but for goodness sakes - hire an agent that has his/her act together and can address these issues intelligently and be a resource to all parties in the deal when the proverbial speed bumps arise. I understand that your former business partner has a daughter who simply could not stand the subway commute any longer and brought her area-code-646 cell phone out to The Hamptons for a better life and got her real estate license, but your home sale is big business here. Have her over for a weenie roast if you want to make a donation to the cause.

With a median price in The Hamptons of nearly $850,000 and an average sales price of over $1MM, we’re not talking small potatoes here. Proper planning and an intelligent business approach with an experienced and professional agent who can facilitate all negotiations and coordinate all related professional services should lead to a successful home sale. md

RealEstateJournal | Five Tips for Getting Your Home Appraised Before Selling

1 comment:

Larry said...

Very helpful. I found you through Sellsius blog. Larry Cragun

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