How to Sell a House

In an earlier post, I noted that my brother and I were selling a house in Pennsylvania.

Well, in mid-June we closed on the sale.

It was interesting to be on the other side of the table so soon after purchasing a home.  The process suffered a bit in the same way it did as when I was a buyer - lack of communication.

Because it is a negotiated deal that isn't complete until the buyer has the keys and the seller has the proceeds, neither side wants to show their cards.  When I was a buyer, I became terribly frustrated by the lack of responsiveness from the seller.  It was also impossible to know whether the seller was ignoring me, whether it was the seller's agent or lawyer that was behind the silence, or whether people weren't on the same page in terms of pace and reading / responding to e-mails.

Getting an offer
As the seller, I ran into this again.  We received an offer that we felt was low but we had at least one or two other potential buyers set to see the house before that offer would expire.  We didn't want to counter the low offer without knowing if we might have another offer coming in.  We'd also had a few other showings (although not the volume we'd have hoped), but often the agent for the other side wouldn't leave feedback.  This left us wondering if there was real interest in the house or if people were just using up a sunny Saturday to go "window shopping" through open houses.

In the end, the other interested parties either weren't interested, or cancelled their showings.  So, we were left with a low offer and not great prospects.  If we had regular showings, we might be inclined to think we could let the low offer go since another might be coming.  What really got us moving though was that the current renters let us know they were planning on moving out.

Countering
We eliminated the option of accepting the low offer which left us with two options: #1 Counter the offer with a number that we would be more acceptable or #2 No counter and keep the house on the market.

Our agent was careful to advise us that even if our higher counter offer was accepted, the agreement was still conditional and the Buyers could come back with requests for repairs and such to bring the effective price down.

We countered the offer and were happy yet cautious that it was quickly accepted.

The Sale Process
Pennsylvania thankfully has a standardized template for a sales contract so we didn't need to hire a lawyer.  The Buyers had agreed to our price, but the offer was conditional on an inspection and approval of their financing.

The Buyers also wanted to move in rather quickly, so we needed to have the current renters vacate so that the house would be ready.

The inspection did turn up several items in need of attention.  Some were "musts" - the bank would not approve the loan if they weren't remedied, while others were items where the Buyers were looking for us to pay for or help pay for repairs.

We had supplied the Buyers with our own inspection at the beginning of the process so we were less than keen on the idea of paying to replace the roofing shingles when they should have known they were old before putting in an offer.  We also knew they wanted to move in quickly, so this gave us leverage in terms of what we were willing to budge on.

We did have to pay for termite inspection and treatment, as well as treatment and pumping of the septic system, and for some old lead paint to be removed from window frames.  These were all required items.

The Buyers, given the time squeeze, didn't have much of an option - they could either accept where we were willing to budge or hold out for more, but potentially delay closing.  Again, because of lack of direct communication, I'll never know if they were perhaps furious at us for not budging on these types of repairs, or maybe they just thought they'd try and see what they could get.

Another breakdown in communication did end up delaying closing and I believe the Buyers were out of their previous house and had to stay in a hotel for a few days.  Pamela and I had to deal with this and understand how much of a hassle it is.  Their inspector had pointed out the lead paint on the windows needed to be removed and repainted.  Somewhere between their inspector, our agent, and the handyperson who we hired to do the work, the detail got lost that both the inside and outside of the window frames needed to be treated.

Their inspector came back a few days before closing to do a final walk though and pointed out the inside had not been dealt with.  We got our handyperson to go back, but the inspector couldn't return for a few days which delayed the bank's ability to close on the loan file.

On to Closing
Neither my brother nor I had to attend closing.  We had our agent attend and sign the final documents for us.  It was very straight forward for us - we got a statement the day before with the final numbers (which had a mistake), then we got a call after closing from our agent to say that it was complete.  We got a direct deposit of the net proceeds the next day.

Step #8 - Onto Closing!

As you work with your broker / banker to get the final "clear to close", I would advise that you keep an open channel of communication with the seller's team.  They will be quite anxious themselves - it has probably been weeks since you signed the contract and there isn't a lot of information flowing back and forth.  I think it helps all parties to say "just fulfilling the final conditions; we are still on target for our scheduled closing date".  Surprises near closing are never good.

On or About
The closing date you've put in the contract of sale is referred to as an "on or about" date.  That means if you can close early, great.  If not, neither party should be surprised..  There will likely be language in the contract that will put some brackets around that date giving both sides room if delays occur.  Unless you have penalties written into the contract, there isn't much that can be done to force someone to close.


In our case, while we were ready to close on time (and ahead of our lease expiration), the seller wasn't ready.  This can happen for a host of reasons - is the seller closing on a purchase of his/her own new home?  Are they packing up and traveling far away?  Or, perhaps the seller doesn't want to begin packing the house up until he/she knows there is a deal in hand.

If you have some sort of inflexible timeline, such as a rental lease expiring, my first advice is to schedule a closing well in advance.  You'd love to have your lease end and move into your new home the same day, but as in our case, how big of a challenge will it be if you have to move out of your apartment but you and your belongings have no where to go?  What if the seller says he/she needs an additional two weeks?  You could make all sorts of empty threats about walking away, but #1) you won't and #2) depending on your contract, you might lose your deposit if you do so.

In that situation, you'd be livid about the injustice of it all (oh, I know), but there isn't anything you can do about it.  When drafting your contract of sale, you should discuss with the lawyer the idea of putting penalties in place if the closing is delayed outside of the brackets.  More often though, those delays will be the buyer's fault, so be careful.

Scheduling
Closing will require the presence of the buyer, seller, and their respective teams (agent, banker, lawyer).  This can also lead to slight delays, but everyone at this point wants to close the deal and get paid.  A few days before closing, you'll get your Closing Statement - this will be the final tally of closing expenses.  You'll need to get a certified check in this amount.  Take a good look over these expenses and have every item explained to you.  Most of these expenses should be the same as what you've seen on your Good Faith Estimates.

One area that can be a surprise is taxes.  You are required to reimburse the seller for the taxes that they've paid that cover the period beyond closing.  So if the seller paid a tax bill in June that covers July through December, and you close at the end of July, you'll have to reimburse the seller for August through December.  The amount you have to reimburse the seller depends on how many times per year your municipality collects taxes.

Once you've scheduled closing, I would suggest telling your cable / internet company of your planned move.  You can always cancel your request if closing gets pushed back or called off.  In our case, we waited until just before closing and then found we'd be without TV and internet for almost a month!

What Happens the Day of Closing?
On the day of closing, you'll first do a final walk-through of the house.  This is your last chance to spot anything amiss.  If the seller (accidentally or not) took an appliance that was part of the contract, and you don't notice for a few days, you are out of luck.  You'll want to look for the key items in the contract such as washers, dryers, and water heaters, and anything that was specifically written into the contract as an inclusion.  You'll want to check that all the appliances are in working order too.  Check the house to look for any damage caused when the seller moved out, and look for any damage that was maybe hidden by a piece of furniture or decoration.

After you have completed the final walk-through, you'll head to your lawyers office to sign the documentation.  It turns out banks won't lend you hundreds of thousands of dollars without asking you to sign an enormous stack of paper.  Depending on the type of mortgage you've applied for, document signing can take several hours.

At closing, there can be final negotiation of any outstanding items.  Sitting down and discussing things face to face can help bridge any gaps, although there is always a chance that the opposite could happen.  The others in attendance though are very close to getting paid and will likely help to push the two sides together.  In some cases, Realtors have agreed to reduce their commission if there is a small dollar difference on an issue that seems irreconcilable. 

Once the paperwork is signed, the seller should hand you the keys to the house.  Make sure to have the seller explain which key goes to which lock.

At this point, the house is yours!  You've just purchased a house and locked yourself into a mountain of debt.