Yes, a real estate contract is an agreement between a buyer and a seller. Once both parties sign the agreement, it is binding. Many times a buyer will have contingencies or “exits” to a contract. Examples of this would be an inspection contingency, disclosure review contingency or a loan contingency. If the property has issues upon inspection, the seller’s disclose that there are issues that were previously unknown or your loan is rejected for whatever reason, a buyer can exit the contract. Sellers typically do not have any “outs”. Once a seller signs a real estate contract, they are selling.
Everyone always asks the question, how much is my house worth? It’s not a clear cut answer. Absent a real estate transaction, where you’ve found a buyer after listing your house for sale publicly, your home’s value is only going to be an estimate, and within a range. Pricing a home is not like pricing a tablet or smartphone, where a retailer has a lot of inventories to move. If you want to know how much your house is worth, it’s best to call a local real estate agent and get their opinion of value. Realtors will provide a comparable marketing analysis at no cost to you. Agents keep on top of the market by touring homes weekly. They see the changes in the market and understand the intricacies of any one neighborhood or price. If you are going to refinance your home’s loan, the bank will order an appraiser to assess its value. Automated valuation models, like Zillow’s Zestimate, are a great way to gauge the approximate value. But, since these are “automated” and can’t consider the details of your home, they won’t be as precise as a good local agent.
Between Zillow’s Zestimate and the dozens of appraisal or automated valuation models (AVM’s) available online today, buyers and sellers want to know which website gives the most accurate real estate home appraisal? There is no right answer. These sites provide a starting point or value range only, not an exact number. The market value of a home is what a willing and able buyer and seller agree on in an arm’s length, open market transaction. The Zestimates and the automated models out there simply a starting point. Don’t forget, Zillow has not been inside your home. These models simply take publicly available information and come up with a number. If you want a more accurate valuation of your home, hire an appraiser or have a Realtor offer a comparable marketing analysis. The former will cost you a few hundred dollars. The latter is typically free.
No, Zillow’s Zestimate are not always 100% accurate but they are a good starting point to understand your home’s value. Zillow pulls tax records about your home and analyzes recent comparable sales to come up with its Zestimate, via a computer algorithm. The tax records may not always be accurate and Zillow has never been in your home. They don’t know if you’ve renovated your kitchen or if you have a beautiful view of the city. Further, they can’t know that your layout is choppy or that your hardwood floors are in poor condition. But they have millions of pieces of helpful sales and public data to help homeowners get an idea of their home’s value. The only way to know the true market value of your home is to have it listed for sale to see what a buyer will pay. Aside from that, there are a few ways to get a sense of its value range. Zillow’s Zestimate is just one of them. A formal appraisal is another, as is a comparable market analysis from a local Realtor. Sometimes the Zestimate very close, other times farther off. Take it with a grain of salt and if you are serious about selling, find a great real estate agent.
Buyers always question the Realtors. I’ve seen it a million times. The home sits on the market for months, no offers. Then, out of the blue, there is one, then another. I say that you have to trust the listing agent and take their word for it. If there is no other offer, it puts them in a very tough spot. But don’t forget, the seller isn’t obligated accept or even counter your low offer. Often, when a listing agent knows an offer is coming in, he or she will call every other interested party. Though it may seem annoying, the listing agent works in the best interests of the seller. No seller is going to give his or her home away. Often, it’s the seller who suggests calling all the other buyers because now he or she is ready to sell and want to maximize the sale price. If the home lists at $500K months ago, and everyone seems to think it is really worth closer to $450K, just because there isn’t any action on it, doesn’t mean that you can get it for $435K. The market always has a way of figuring itself out. That $450K number may even get bumped to $460K in the presence of other buyers. As frustrating as it is, that’s what ends up happening most of the time.
The seller nearly always pays the real estate commission in a residential transaction. There are some real estate agents who charge buyers for their services. In rare cases, I’ve seen agents charge by the hour or on a retainer. For the most part, buyers never have to pay a commission or any fee. And the actual listing agent does not receive the commission. Instead, the seller pays the real estate brokerage directly. From there the real estate brokerage will pay out the agent.
The real estate commission, generally paid by the seller, varies by market. It’s a negotiable item and ranges anywhere from 4%-7%. Typically, the real commission is split between the broker for the buyer and the broker for the seller. That does not mean that your agent gets the entire half. The actual brokerage company takes the commission, and the agents get a split off that, depending on how much business they have brought in for the past year or year to date. Buyers should never pay the commission in a real estate transaction. When selling “For Sale By Owner”, a seller should consider paying 2% or more to any buyer’s agent.
When your home is listed for sale, its best to not be present during a home inspection or when potential buyers, agents or appraisers come to see the home. There is nothing prohibiting you from being there whatsoever. But buyers, in particular, want to be able to roam freely and get comfortable touring your home. They may be uncomfortable in your presence if they want to look through closets, open cabinets or ask probing questions. Other agents or appraisers might feel rushed if you are present during a visit. Though you may think it is helpful, it’s best to let any questions be directed through your agent. Don’t forget, it’s a business transaction and your personal or emotional comments or reactions could stand in the way of your financial gain.
The seller’s list price is always negotiable. A smart and serious seller, working with a good local agent should price their home in line with similar comparable homes nearby. Sometimes a seller will overprice a home, in which case you will want to negotiate them down. Other times they will price it low, resulting in multiple offers and maybe even overbidding. The seller can list their home at whatever price they want. There aren’t any rules or laws requiring them to list, price or market it in any specific way. The best advice is to look at the last 6 months of similar homes in the location and compare their sale prices. A good local real estate agent should be able to provide helpful insight on the market.
There is no one magic answer. It depends on your current financial situation. While the market should be a consideration, it’s very hard to time a real estate transaction. If you want to put down roots, build equity and commit to a community for many years, the right time to buy is when you have saved for a down payment and have your financial ducks in order. In every community, no matter the time of year or type of market, there are always buyers and sellers. Life happens, people change jobs, get divorced, get married, have children and move home. Life events result in real estate transactions. What’s most important is to buy the right home, at the right price in your given market. Zillow has a great resource called the breakeven horizon, which looks at costs of a purchase and the time it would take to make your money back on a home you purchase vs. having rented the same home. The shorter the horizon timeframe the better.