Seller's Guide

Selling real estate is a complex process and a lot of things have the potential of going wrong. Consultation with a real estate attorney early in the process is one of the smartest things you can do for yourself and your family. This report is intended to highlight some problem prevention tips. It is not designed to provide legal advice or to replace the advice of a real estate attorney. Only your attorney can give you legal advice and protect your interests.

With that, I offer you some problem prevention tips, and should you decide to proceed with a transaction, I’d be happy to talk to you about representing you and protecting your best interests.

1) Should I hire a real estate agent?

There are quite a few web-based programs that purport to help you sell your home without the assistance of a real estate broker. Those systems, especially in these troubled financial times, have a certain lure. Who would not like to save the 5 to 6 % agent fee that the seller will have to pay? Still, I find the advice and counsel of a dedicated real estate agent to be invaluable. Consider the following:

• Pricing: When you use an agent, you'll get the benefit of professional experience from the moment you consider selling your house. Your agent will help you establish a fair market value from his or her daily dealings in your neighborhood, giving rise to the potential of a quick sale.
  
• Real estate agents are professionals at marketing properties. They can choose the media and the message that brings interested prospects to your home. They'll interview and qualify buyers for you. They'll use their sales skills and negotiating techniques to help you receive the best possible return on your sale.
  
• Every brokerage office has a steady stream of prospects that no individual can match. National referral networks and multiple listing services also help to reach buyers from out of town -- or out of state. Many corporate relocation clients may be working with a broker before a move is made.
  
• When you work with an agent or broker, they will follow-up with other agents who have shown your property and share their constructive comments on cosmetic repairs, financing arrangements, or re-evaluating your list price.
  
• An agreement between buyer and seller is just the beginning of a final transaction. From that point on your agent or broker can handle the details and paperwork necessary to make it complete: from building and termite reports to fire insurance and closing arrangements.
  
• As an expert in real estate, your agent or broker will give you advance estimates of your closing costs and net proceeds from the sale, as well as keeping you informed of the details to assure a smooth and timely closing.
  
• Showing a house takes time, and lots of it. Ask yourself truthfully. Do you have the time to devote to showing your house to potential buyers – at their convenience, not yours? Are you so objective about the house that you can listen to complete strangers detail their misgivings about your “pride and joy’?
  
• An agent can advise you on staging the house so as to make it more attractive to buyers.
  

Tip: I have a long relationship with a number of reliable real estate agents who I have worked with on a number of successful transactions.

Do not hesitate to call me for a referral: Arthur L. Murphy: 312-427-3650.

2) Seller Disclosure.

Although you want to sing your home's praises to prospective buyers, legally you have to be just as forthcoming about its flaws, such as:

• Malfunctions in the major systems of your home such as the foundation, roof, plumbing, electrical system, heating and air conditioning, siding, windows, doors, walls and ceiling
• Damage to property due to fire, floods, and windstorms.
• Water leaks.
• Environmental hazards such as lead-based paint (for homes built before 1978), asbestos, radon gas, contaminated soil or water.

Note: Consult a real estate attorney if you have any questions. He or she can give you all the information you need before you put your home on the market. Keep in mind that if you choose not to disclose your home's defects, not only could a buyer later sue you for fraud, you could also be violating state law.

3) The Offer.

When a prospective buyer makes a formal bid on your home in the form of a purchase offer, you'll probably feel a mixture of emotions, excitement that someone wants to buy your house, along with fear that this multi-page document contains hidden legal jargon disguised to "steal" your home or cost you more money!
The offer itself can't hurt you - until you sign it. Then it becomes a legally binding document. Which is why you should ask your real estate attorney to guide you through all the elements, pointing out any contingencies, or conditions, that aren't favorable to you.

But, what if the offer will "expire" before your attorney can be reached? If you are absolutely sure that this is the case, then only sign with the clearly written condition that the deal is "subject to my attorney's approval.” Still, you must be mindful of the fact that there are certain provisions that your attorney may not be able to change, and you will be stuck with those provisions, unfavorable as they might be.

Remember the old adage “Decide in haste, repent at leisure”.

4) Price.

Since fair market value isn't one magical price but a range, smart buyers will offer a price on the lower end of that spectrum. As long as you do not set the asking price too far above the top end of the fair market value range, the gap shouldn't be too difficult to close through a round or two of counter-offers.

A serious offer will be accompanied by earnest money, or "good faith" money. The amount varies, but 5% to 10% of the sale price is typical. The money is held in an escrow or trust account by a real estate broker or your real estate attorney.

5) Financing Terms.

This part of the contract spells out how much of a down payment the buyer plans to pay and the mortgage loan terms (interest rate, points, length of loan) the buyer hopes to receive from the lender. A savvy and serious buyer will come equipped with a pre-qualification letter or pre-approval letter from a lender. A lender's pre-approval letter carries more weight than a pre-qualification letter. It's proof of the buyer's power on paper. Make sure you run all mortgage documents by your real estate attorney.

6) Contingencies.

Various contingencies will usually be built into the real estate contract. Some examples:

Financing. Also referred to as the “mortgage contingency”, this particular clause makes the contract dependent on buyer receiving a mortgage commitment by a certain date, specifying cancellation rights and requiring the return of any earnest money deposit if buyer cannot arrange adequate or acceptable financing. This is a very important clause.

Property inspection. This clause allows buyer to have a professional inspector perform an inspection of the property, at buyer's expense, so as to reveal any hidden structural or mechanical problems. If buyer is not satisfied with the property’s inspection report, this clause may allow buyer to negotiate for repairs, or if the defects are major, to opt out of the contract altogether.

Tip: The seller can opt to limit the time the buyer has to order and approve an inspection report. Seller can specify that seller has the right to exit the deal if repairs will cost over a certain amount. Seller can also specify that inspection items that may cost under a certain amount (say $250.00) will not permit the buyer to exit the deal.

Attorney approval. This allows me, as your attorney, to review the contract even after you and the seller have signed it, so as to negotiate any revisions with the seller’s attorney. There are usually limitations to what an attorney can do, however. The attorney cannot change the price, for example, and often the closing date is not subject to revision either.

Buyer's Home Sale Contingency. Sometimes you'll see a contingency which is tied to whether the buyer's present home sells. Seller must be extremely wary of this clause, as who knows how long it will take for the other home to sell? Usually this clause gives seller the right to continue to market the house and to accept a better offer – but it is more difficult to obtain buyer interest in a house that is already “under contract”.

FINAL NOTE:

Again, this report was intended to highlight some seller tips. It is not designed to provide answers to all questions or to provide legal advice or to replace the advice of a real estate attorney.

Rely upon your attorney to give you legal advice and guide you through the process.

Please feel free to call or e-mail with any specific questions.

ARTHUR J. MURPHY

312-427-3650

arthurmurphy@murphyandsmith.net