Sellers, be sure to avoid these four common mistakes in today’s market.
Today I’m addressing four of the biggest mistakes that home sellers make in today’s market:
1. Showing a home at its worst. People are often so in love with their homes that they don’t see the flaws. But buyers do. Buyers make up their minds within seconds about whether a home is showing well or not. We’re emotional creatures; when we walk into an untidy house, we don’t see the house, but rather all the ‘stuff’ like dirty laundry, unclean litter boxes, dirty dishes, and so on.
An unkempt house affects a home seller’s bottom line, even in a red-hot real estate market. A $1 million house could go down in value by as much as $100,000 if it’s unkempt, causing the owner to unnecessarily leave money on the table. Ideally, owners would move out of the house during the showing period, which would then be staged to highlight its best features. For sellers, listing is only the beginning of the process—they need to be prepared to show their home throughout the process until it closes.
2. Not planning for capital gains taxes. If the seller’s home has appreciated in value, the profits from the sale could be subject to capital gains taxes. Certain home improvements could potentially reduce their tax bills, but only if the sellers have documentation showing that improvements increased the home’s market value or prolonged its useful life.
I knew a widowed client who sold her home and moved into an assisted living facility. Her home had been purchased decades before for $64,000, and it sold for $457,000. The profit exceeded the IRS’s capital gains exception of $250,000 for individuals and $500,000 for married couples. That meant the client faced a hefty tax bill. The seller, who had Alzheimer’s Disease, had scanty records on improvements that had been made over the years. Luckily, her deceased husband had financial records that documented a new roof, a remodeling project, and a deck extension; that proof allowed her to avoid capital gains taxes entirely.
“An unkempt house affects a home seller’s bottom line, even in a red-hot real estate market.”
3. Mishandling the sale of an estate. The impact of a mistake isn’t felt just when the owner is alive. If a homeowner doesn’t provide a detailed estate plan and have clear communications with heirs, then disputes over the estate can delay or even scrub a home sale after the homeowner dies. I once had a client who wanted to buy a rural property listed for about $500,000, but in investigating the title, the firm realized that the property was involved in a legal dispute among the siblings. In that case, there was a strong chance that the client could find themselves in a lawsuit, fighting claims that the sale to him was improper. As a result, potential buyers walk away from deals. Similarly, homeowners who bequeath the home to heirs in hopes of keeping it in the family often fail to provide funds to cover the annual cost of maintaining it. That might lead the heirs to feel pressured to sell, even if a down market prevents the house from getting top dollar.
4. Fudging facts and flaws. How many sellers have thought that buyers wouldn’t notice if, say, the roof showed signs of water damage, even though sellers are required by law to disclose any known deficiencies in a home? Buyers typically will uncover any deficiencies during a home inspection anyway, so being proactive by repairing or disclosing those items will help the transaction move forward.
If you have any specific questions about selling your home, reach out to us by phone or email. We look forward to helping you in the future.
