There are a lot of considerations about the Martha’s Vineyard real estate market that must be made when you are selling your home here on the island. Depending on whether the home is a year-round home, summer home or investment it important that you consider all aspects of the sales process prior to deciding who you want to sell your home or when to sell. We have assembled a number of considerations that we feel are important for you to think about and hope you will find this information helpful when thinking about putting your home on the market.
- Understanding Agency Relationships
- What is Appraised Value
- 6 Things to Do Before Selling Your Home
- Quick Fixes to Increase Value
- Five Feng Shui Concepts To Help Sell Your Home
- How to Prepare Your Home for A Virtual Tour
- Simple Tips for Better Home Showings
- Understanding Capital Gain
Understanding Agency Relationships
It’s important to understand what legal responsibilities your real estate salesperson has to you and to other parties in the transaction. Ask what type of agency relationship your agent has with you:
Seller’s representative (also known as a listing agent or seller’s agent)
A seller’s agent is hired by and represents the seller. All fiduciary duties are owed to the seller. The agency relationship usually is created by a listing contract.
Buyer’s representative (also known as a buyer’s agent)
A buyer’s agent is hired by prospective buyers to represent them in a real estate transaction. The buyer’s rep works in the buyer’s best interest throughout the transaction and owes fiduciary duties to the buyer. The buyer can pay the licensee directly through a negotiated fee, or the buyer’s rep may be paid by the seller or through a commission split with the seller’s agent.
A subagent owes the same fiduciary duties to the agent’s customer as the agent does. Subagency usually arises when a cooperating sales associate from another brokerage, who is not the buyer’s agent, shows property to a buyer. In such a case, the subagent works with the buyer as a customer but owes fiduciary duties to the listing broker and the seller. Although a subagent cannot assist the buyer in any way that would be detrimental to the seller, a buyer-customer can expect to be treated honestly by the subagent. It is important that subagents fully explain their duties to buyers.
Disclosed dual agent
Dual agency is a relationship in which the brokerage firm represents both the buyer and the seller in the same real estate transaction. Dual agency relationships do not carry with them all of the traditional fiduciary duties to clients. Instead, dual agents owe limited fiduciary duties. Because of the potential for conflicts of interest in a dual-agency relationship, it’s vital that all parties give their informed consent. In many states, this consent must be in writing. Disclosed dual agency, in which both the buyer and the seller are told that the agent is representing both of them, is legal in most states.
Designated agent (also called appointed agent)
This is a brokerage practice that allows the managing broker to designate which licensees in the brokerage will act as an agent of the seller and which will act as an agent of the buyer. Designated agency avoids the problem of creating a dual-agency relationship for licensees at the brokerage. The designated agents give their clients full representation, with all of the attendant fiduciary duties. The broker still has the responsibility of supervising both groups of licensees.
Nonagency relationship (called, among other things, a transaction broker or facilitator)
Some states permit a real estate licensee to have a type of nonagency relationship with a consumer. These relationships vary considerably from state to state, both as to the duties owed to the consumer and the name used to describe them. Very generally, the duties owed to the consumer in a nonagency relationship are less than the complete, traditional fiduciary duties of an agency relationship.
What Is Appraised Value?
- Appraisals provide an objective opinion of value, but it’s not an exact science so appraisals may differ.
- For buying and selling purposes, appraisals are usually based on market value — what the property could probably be sold for. Other types of value include insurance value, replacement value, and assessed value for property tax purposes.
- Appraised value is not a constant number. Changes in market conditions can dramatically alter appraised value.
- Appraised value doesn’t take into account special considerations, like the need to sell rapidly.
- Lenders usually use either the appraised value or the sale price, whichever is less, to determine the amount of the mortgage they will offer
6 Things to do Before Selling your Home
To run a successful marketing campaign that will sell your home faster here are some helpful tips that will help:
- Have a pre-sale home inspection. Be proactive by arranging for a pre-sale home inspection. An inspector will be able to give you a good indication of the trouble areas that will stand out to potential buyers, and you’ll be able to make repairs before open houses begin.
- Organize and clean. Pare down clutter and pack up your least-used items, such as large blenders and other kitchen tools, out-of-season clothes, toys, and exercise equipment. Store items off-site or in boxes neatly arranged in the garage or basement. Clean the windows, carpets, walls, lighting fixtures, and baseboards to make the house shine.
- Get replacement estimates. Do you have big-ticket items that are worn our or will need to be replaced soon, such your roof or carpeting? Get estimates on how much it would cost to replace them, even if you don’t plan to do it yourself. The figures will help buyers determine if they can afford the home, and will be handy when negotiations begin.
- Find your warranties. Gather up the warranties, guarantees, and user manuals for the furnace, washer and dryer, dishwasher, and any other items that will remain with the house.
- Spruce up the curb appeal. Pretend you’re a buyer and stand outside of your home. As you approach the front door, what is your impression of the property? Do the lawn and bushes look neatly manicured? Is the address clearly visible? Are pretty flowers or plants framing the entrance? Is the walkway free from cracks and impediments?
- Inspect the Septic System. If you have any doubt at all that the septic system could potential fail, you should get a septic inspection done even before setting the price if necessary. Upgrades to septic systems are extremely costly and once you have negotiated the price (depending upon how the offer is worded) you could in some cases be expected to upgrade the septic system at your own expense which could reach into the thousands for a brand new system. Septic inspections are good for a total of 24 months which should be sufficient time in which to sell your home and is well worth the investment.
Quick Fixes to Increase Value
To attract buyers, sellers must up the ante to convince them that their property offers what many want most — top value for dollar expended. Here are eight fast fixes:
- Buff up curb appeal. You’ve heard it before, but it’s critical to get buyers to want to look on the inside. Be objective. View listings from the street. Check the condition of the landscaping, paint, roof, shutters, front door, knocker, windows, house number, and even how window treatments look from the outside. Add something special — such as big flower pots or an antique bench — to help viewers remember house A from B.
- Enrich with color. Paint’s cheap, but forget the adage that it must be white or neutral. Just don’t let sellers get too avant-garde with jarring pinks, oranges, and purples. Recommend soft colors that say “welcome,” lead the eye from room to room, and flatter skin tones. Think soft yellows and pale greens. Tint ceilings a lighter shade.
- Upgrade the kitchen and bathroom. These make-or-break rooms can spur a sale. But besides making each squeaky clean and clutter-free, update the pulls, sinks, and faucets. In a kitchen, add one cool appliance, such as an espresso maker. In the bathroom, hang a flat-screen TV to mimic a hotel. Room service, anyone?
- Add old-world patina. Make Andrea Palladio proud. Install crown molding at least six to nine inches in depth, proportional to the room’s size, and architecturally compatible. For ceilings nine feet high or higher, add dentil detailing, small tooth-shaped blocks used as a repeating ornament. It’s all in the details, after all.
- Screen hardwood floors. Buyers favor wood over carpet, but refinishing is costly and time-consuming. Screening cuts dust, time, and expense. What it entails: a light sanding, not a full stripping of color or polyurethane, then a coat of finish.
- Clean out, organize closets. Get sorting — organize your piles into “don’t need,” “haven’t worn,” and “keep.” Closets must be only half-full so buyers can visualize fitting their stuff in.
- Update window treatments. Buyers want light and views, not dated, drapes that darken. To diffuse light and add privacy, consider energy-efficient shades and blinds.
- Hire a home inspector. Do a preemptive strike, since busy home owners seek maintenance-free living. Fix problems before you list the home and then display receipts and wait for buyers to offer kudos to sellers for being so responsible.
5 Feng Shui Concepts to Help a Home Sell
To put the best face on a listing and appeal to buyers who follow feng shui principles, keep these tips in mind.
- Pay special attention to the front door, which is considered the “mouth of chi To put the best” (chi is the “life force” of all things) and one of the most powerful aspects of the entire property. Abundance, blessings, opportunities, and good fortune enter through the front door. It’s also the first impression buyers have of how well the sellers have taken care of the rest of the property. Make sure the area around the front door is swept clean, free of cobwebs and clutter. Make sure all lighting is straight and properly hung. Better yet, light the path leading up to the front door to create an inviting atmosphere.
- Chi energy can be flushed away wherever there are drains in the home. To keep the good forces of a home in, always keep the toilet seats down and close the doors to bathrooms.
- The master bed should be in a place of honor, power, and protection, which is farthest from and facing toward the entryway of the room. It’s even better if you can place the bed diagonally in the farthest corner. Paint the room in colors that promote serenity, relaxation, and romance, such as soft tones of green, blue, and lavender.
- The dining room symbolizes the energy and power of family togetherness. Make sure the table is clear and uncluttered during showings. Use an attractive tablecloth to enhance the look of the table while also softening sharp corners.
- The windows are considered to be the eyes of the home. Getting the windows professionally cleaned will make the home sparkle and ensure that the view will be optimally displayed.
How to Prepare Your Home for a Virtual Tour
With more buyers shopping for homes on the Web, photos and virtual tours are a must. There are many things you can do make your home shine on camera.
- Understand the camera’s perspective. The camera’s eye is very different from the human eye. It magnifies clutter and poor furniture arrangement. To make a home shine in a virtual tour or video presentation, cater to the lens.
- Make the home “Q-tip clean.” Because the camera magnifies grime, each room must be spotless. Don’t forget floor coverings and walls; a discolored spot on the rug might be overlooked by prospects during a regular home showing, but that stain becomes a focal point for online viewers.
- Pack up the clutter. But leave three items of varying heights on each surface. For example, on an end table you can place a lamp (high), a small plant (medium), and a book (low).
- Snap pictures. This will give you an idea of what the home will look like on camera. Closely examine the photos and list changes that would improve each room’s appearance: opening blinds to let in natural light, removing magnets from the refrigerator, or taking down distracting art.
- Pare down furniture. Identify one or two pieces of furniture that can be removed from each room to make the space appear larger.
- Rearrange. Spotlight the flow of a space by creating a focal point on the furthest wall from the doorway and arranging the other pieces of furniture to make a triangle shape. The focal point may be a bed in a bedroom or a china cabinet in a dining room.
- Re-accessorize. Include a healthy plant in every room; the camera loves green. Energize bland decor by placing a bright vase on a mantle or draping an afghan over a couch.
- Keep the home in shape. You want buyers who liked what they saw online to encounter the same home in person.
Simple Tips for Better Home Showings
- Remove clutter and clear off counters. Throw out stacks of newspapers and magazines and stow away most of your small decorative items. Put excess furniture in storage, and remove out-of-season clothing items that are cramping closet space. Don’t forget to clean out the garage, too.
- Wash your windows and screens. This will help get more light into the interior of the home.
- Keep everything extra clean. A clean house will make a strong first impression and send a message to buyers that the home has been well-cared for. Wash fingerprints from light switch plates, mop and wax floors, and clean the stove and refrigerator. Polish your doorknobs and address numbers. It’s worth hiring a cleaning service if you can afford it.
- Get rid of smells. Clean carpeting and drapes to eliminate cooking odors, smoke, and pet smells. Open the windows to air out the house. Potpourri or scented candles will help.
- Brighten your rooms. Put higher wattage bulbs in light fixtures to brighten up rooms and basements. Replace any burned-out bulbs in closets. Clean the walls, or better yet, brush on a fresh coat of neutral color paint.
- Don’t disregard minor repairs. Small problems such as sticky doors, torn screens, cracked caulking, or a dripping faucet may seem trivial, but they’ll give buyers the impression that the house isn’t well-maintained.
- Tidy your yard. Cut the grass, rake the leaves, add new mulch, trim the bushes, edge the walkways, and clean the gutters. For added curb appeal, place a pot of bright flowers near the entryway.
- Patch holes. Repair any holes in your driveway and reapply sealant, if applicable.
- Add a touch of color in the living room. A colored afghan or throw on the couch will jazz up a dull room. Buy new accent pillows for the sofa.
- Buy a flowering plant and put it near a window you pass by frequently.
- Make centerpieces for your tables. Use brightly colored fruit or flowers.
- Set the scene. Set the table with fancy dishes and candles, and create other vignettes throughout the home to help buyers picture living there. For example, in the basement you might display a chess game in progress.
- Replace heavy curtains with sheer ones that let in more light. Show off the view if you have one.
- Accentuate the fireplace. Lay fresh logs in the fireplace or put a basket of flowers there if it’s not in use.
- Make the bathrooms feel luxurious. Put away those old towels and toothbrushes. When buyers enter your bathroom, they should feel pampered. Add a new shower curtain, new towels, and fancy guest soaps. Make sure your personal toiletry items are out of sight.
- Send your pets to a neighbor or take them outside. If that’s not possible, crate them or confine them to one room (ideally in the basement), and let the real estate practitioner know where they’ll be to eliminate surprises.
- Lock up valuables, jewelry, and money. While a real estate salesperson will be on site during the showing or open house, it’s impossible to watch everyone all the time.
- Leave the home. It’s usually best if the sellers are not at home. It’s awkward for prospective buyers to look in your closets and express their opinions of your home with you there.
Understanding Capital Gains in Real Estate
When you sell a stock, you owe taxes on your gain — the difference between what you paid for the stock and what you sold it for. The same holds true when selling a home (or a second home), but there are some special considerations.
How to Calculate Gain
In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate, follow these steps:
Purchase price: _______________________
The purchase price of the home is the sale price, not the amount of money you actually contributed at closing.
Total adjustments: _______________________
To calculate this, add the following:
Cost of the purchase — including transfer fees, attorney fees, and inspections, but not points you paid on your mortgage.
Cost of sale — including inspections, attorney fees, real estate commission, and money you spent to fix up your home just prior to sale.
Cost of improvements — including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.
Your home’s adjusted cost basis: _______________________
The total of your purchase price and adjustments is the adjusted cost basis of your home.
Your capital gain: _______________________
Subtract the adjusted cost basis from the amount your home sells for to get your capital gain.
A Special Real Estate Exemption for Capital Gains
Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if you meet the following criteria:
You have lived in the home as your principal residence for two out of the last five years.
You have not sold or exchanged another home during the two years preceding the sale.
You meet what the IRS calls “unforeseen circumstances,” such as job loss, divorce, or family medical emergency.
Reprinted from REALTOR© magazine (REALTORMAG.org/realtormagazine) with permission of the National Association of Realtors© Copyright 2008. All Rights Reserved.