Selling Your Home

Congratulations! You have decided to put your home/condominium on the market for sale. Whether you plan to buy a larger house or retire to a sun-filled state, you should be aware of what is involved in selling your current home. Here are a few suggestions.

LISTING AGREEMENT

There is no requirement that you use a real estate broker to sell your home. However, if you chose to do so, he/she will want you to sign a listing agreement. Any agreement says that they will be responsible for marketing your home, listing your house in the Multiple Listing Service and holding open houses for the public in exchange for a commission once the house is sold.

You should read the agreement carefully. Listing agreements can last from 2 to 6 months. They can be renewed if the property has not sold during the first agreement. If you decide you do not want to sell, can you terminate the listing agreement? If the broker finds a buyer, according to most listing agreements the broker is entitled to a commission. What if the deal falls through? Will the broker agree to receive a commission only if the sale is completed? These are terms that can be negotiated with the broker.

PREPARING YOUR HOUSE FOR SALE

Your broker will have suggestions for you on how to fix up your house so that it will show better. This may even include giving the house a fresh coat of paint. You should be sure to talk to your accountant or attorney as to whether any of these items are tax deductible. Improvements made to your home add to your basis in the house thereby reducing any capital gain tax that may be owed upon the sale. Save your receipts for your tax preparer.

THE REAL ESTATE CONTRACT

When a buyer is interested in your house, he/she will make an offer to purchase by giving you a real estate contract. Their offer will include how much they are willing to pay for the property, when they want to close, personal items they want included in the sale and how much time they will need to get a mortgage. These terms are usually negotiable as is whether you must give them possession at the time of closing. Once all the terms have been agreed upon, the buyers will deposit a check with your broker for the earnest money.

Once an agreement has been reached, you will have to provide the buyers with various documents. You must prepare and sign a Residential Real Property Disclosure Statement. This is to inform the buyer of the condition of the property. You must also provide a disclosure statement as to the knowledge of any lead-based paint on the premises. In Chicago, you must also provide a statement of utility costs. Your broker should have these papers for you to complete.

If this is the sale of a condominium, the buyer may ask for various condominium documents. These usually include the By-laws, rules and regulations and the operating budget. You must provide the documentation asked for as soon as possible. In addition, you should find out whether the association requires a credit report, a meeting with the Board of Directors, or anything else.

CLOSING COSTS

The following are some of the usual and customary closing costs that the seller traditionally pays:

If you remain on the premises after the closing, a possession escrow will be held to insure that you move out. This will be returned to you when you do so, less any charges for staying past the closing. Subtract the closing costs and your mortgage pay-off from the purchase price to determine how much you will receive from the sale.

TAXES

Your sale will be reported to the Internal Revenue Service. You may be required to pay taxes on the capital gain from the sale. The capital gain is based upon your basis in the property. This tax can be deferred if you purchase a home for a greater value within 2 years of the sale. In addition, if you are over 55 years of age, there is a one time exemption of $125,000.00 that can be taken to reduce any tax consequences. Check with your accountant or attorney on how to minimize your taxes.

CONCLUSION

Selling your home can be a wonderful experience. In order to maximize the money you realize from the sale and to minimize the work you have to do, hiring the right professionals can be invaluable.

This pamphlet is for informational purposes only. You should consult with an attorney regarding your specific situation.

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