Selling Your Home

Enhancing how your home shows to potential buyers can help sell it more quickly and often improve the selling price.

SHINE FROM THE STREET
A well-kept, neatly landscaped property can be very inviting to the potential buyer interested in viewing your home. Refuse containers should be out of view, and the lawn should be freshly trimmed. Fertilizing a few weeks prior to listing will help your lawn look lush and green. Woodwork should be free of chipped or cracking paint.

POLISH YOUR ENTRY
The front door should be clean or freshly painted. Brass knobs should be polished. Consider placing a planter of fresh flowers on your front porch.

MINOR REPAIRS–A MAJOR PLUS
Repair all loose doorknobs, cupboard hinges, dripping faucets, stained sinks, loose or missing caulking, sticking doors and windows, and damaged or missing window screens.

CLUTTER IS UNATTRACTIVE
Tidiness makes a room look larger and helps the buyer visualize his/her decor in your home. Workout rooms, sewing rooms, laundry rooms, and home offices should be as organized and clutter-free as the main living space in your home.

LIGHTING DOES WONDERS
An open, airy feeling generates comfort and welcomes the potential buyer into your home. Drapes, curtains and mini-blinds should be open to allow plenty of light in your home. Turn on all the lights when showing your home at night.

CLOSET SPACE IS A PLUS!
Neat, well-organized closets appear larger. Larger closets help sell homes.

BATHROOMS THAT SPARKLE
Remove stains from sinks, toilets and bathtubs, including hard water spots on shower enclosure doors. If drains run slowly, unclog them. Hang fresh towels on the towel rack.

THE CLEAN KITCHEN
Make the most important room in the house appear larger by clearing clutter from the countertops. Avoid dirty dishes in the sink. All countertop appliances should be kept out of view. Replace or repair worn-out flooring. Clean the ventilating hood over your stove. A brighter kitchen is always more attractive.

Professionals Involved In Your Transaction

REALTOR®

A licensed real estate agent and a member of the National Association of Realtors, a real estate trade association. Realtors also belong to their state and local associations of Realtors.

LISTING AGENT
The listing agent or broker forms a relationship with the homeowner to sell the property and place the property in the Multiple Listing Service.

BUYER’S AGENT
A key role of the Buyer’s agent or broker is to work with the buyer to locate a suitable property and negotiate the home purchase.

TITLE OFFICER
A title officer carries out the title search and examination, takes any necessary corrective action and provides the policy protection to secure a clean title.

ESCROW OFFICER
An escrow officer leads the facilitation of your escrow, including escrow instructions preparation, document preparation, and funds disbursement.

APPRAISER
Before you can get a loan, the bank will have an appraiser look at the home and decide if it’s really worth the money you’re planning to spend. Many homeowners hire their own appraisers to make sure they’re getting the best value.

MORTGAGE BROKER OR LENDER
A mortgage broker will find you the best loan and lender to fit your needs. The financing aspect of your home purchase may begin before you find an agent with a loan pre-approval.

A home inspection is an evaluation of the condition of a residential property’s general integrity, functionality, and overall safety. The purpose of an inspection is to ensure that a buyer knows exactly what is being purchased prior to completing the transaction.

In the course of a home inspection, the inspector will evaluate your home’s foundation, framing, roofing, site drainage, attic, plumbing, heating, electrical system, fireplaces, chimneys, pavement, fences, stairs, decks, patios, doors, windows, walls, ceilings, floors, built-in appliances, and numerous other fixtures and components. Pool and spa inspections are add-ons that buyers can inspect as well. Inspections are not intrusive (holes in the walls). An inspection will take about an hour per 1,000 square feet on average.

All pertinent findings will be detailed in a written report for the buyer’s reference and review, and the inspector will make a complete verbal presentation of these conditions for those who attend the inspection. This information enables a homebuyer to make educated decisions about a home purchase: whether to complete the transaction, whether to ask the seller to make repairs, or whether to buy the property as is. Buyers can also determine how much repair and renovation will be needed after taking possession, which problems are of major concern, which ones are minor, and what conditions compromise the safety of the premises.

WHO PAYS? Your Purchase Sale Agreement will specify who is responsible for the costs of inspections and for making any needed corrections or repairs. It is negotiable between the parties and should be considered carefully. Your agent will advise you what is customary and prudent.

STRUCTURAL PEST CONTROL INSPECTION A licensed inspector will examine the property for any active infestation by wood destroying organisms. Most pest control reports classify conditions as Section I or Section II. The inspection and the ensuing Section I repair work are usually paid for by the Seller. Section II preventative measures are generally negotiated, and not necessarily complete.

Section I Conditions are those currently causing damage to the property. These conditions generally need to be corrected before a lender will make a loan on a home.

Section II Conditions are those not currently causing damage but which are likely to, if left unattended.

HOME INSPECTION This inspection may encompass roof, plumbing, electrical, heating, appliances, water heater, furnace, exterior siding, and other visible features of the property. A detailed report will be written with recommendations and pictures which may include the
suggestion to consult a specialist (such as a structural engineer or roofing contractor). The inspection fee is usually paid by the Buyer.

GEOLOGICAL INSPECTION If requested, a soil engineer will inspect the soil conditions and the stability of the ground beneath the structure, as well as research past geological activity in the area. You may also elect to go to the city and research the property’s proximity to known earthquake fault lines. Typically, the Buyer pays for this inspection.

Some Sellers opt to do a house inspection when they list their property to determine in advance which items might be challenges to selling and to address issues that positively impact the sell ability and competitive marketability of a home. Properly maintained homes typically go into escrow faster.

Common Defects Found During A Home Inspection

The majority of home inspection findings tend to be routine in nature but some uncover construction defects and common safety violations.

BUILDING VIOLATIONS Building violations are often identified where additions and alterations were constructed without a permit.

ROOFING DEFECTS Problems with roofing material resulting from age, wear, or improper installation warranting maintenance, repair, or in some cases, replacement.

CEILING STAINS Some stains are merely the residual effects of leaks that have been repaired but others can indicate an unresolved issue. Inspectors will determine if a leak is active.

ELECTRICAL SAFETY HAZARDS Electrical safety hazards such as ungrounded outlets, lack of ground fault interrupters (shock protection devices), faulty wiring conditions in electrical panels can be identified.

WATER INTRUSION Groundwater conditions can result in water intrusion into basements or crawlspaces. Correction can be as simple as regrading the exterior grounds or adding roof gutters or as major as French drains designed by experts.

ROTTEN WOOD Rotted wood is can be found in places where wood stays wet for long periods such as roof eaves, exterior trim, decks, around tubs and showers, or below loose toilets.

MINOR PLUMBING DEFECTS Loose toilets, dripping faucets, slow drains, leaking drains, and hot water at the right faucet are most commonly found during inspections.

UNSAFE FIREPLACE & CHIMNEY CONDITIONS A lack of maintenance or faulty installation of fixtures is often found. Unsafe conditions are often attributed to a lack of spark arrestors and involve insufficient clearance between hot metal surfaces and combustible materials within the property.

FIREWALL VIOLATIONS IN GARAGES Special fire-resistive construction is required for walls and doors that separate a garage from a dwelling. Violations are common, either due to faulty construction, damage or alterations to the garage interior, or changes in code requirements since the home was built.

FAULTY INSTALLATION OF WATER HEATERS Check to make sure your water heater is installed in full compliance with plumbing code requirements. Violations can include inadequate strapping, improperly installed overflow piping, unsafe flue conditions, or faulty gas piping.

HAZARDOUS CONDITIONS INVOLVING GAS HEATERS Most gas-fueled heaters are in need of some maintenance if only the changing of an air filter while others might be in need of a long-overdue review by the gas company.

Escrow is the depositing of funds and documents that establish the terms and conditions for the transfer of property ownership with an impartial third party for delivery upon completion of the terms of the escrow instruction.

You’ve probably heard the term: documents are held “in escrow” or that the parties have “opened escrow.” The principals of the escrow (Seller, Buyer, Lender) will give to the escrow holder written instructions setting out the terms and conditions under which the further delivery is to be made. The Escrow Officer holds responsibility for seeing that these terms are adhered to.

WHO CHOOSES THE ESCROW COMPANY? The selection of escrow is typically done by agreement between the principals. In most areas of the country, the Seller typically makes the selection but it does vary. Often times, this aspect of a transaction is directed towards the Seller’s preference because if a home has fallen out of escrow prior, disclosures and reports are already ordered and paid for with an escrow company so it makes sense based on cost and efficiency to stay with the same company. Real estate agents or Lenders often recommend an escrow holder but it is the right of the Seller and Buyer to select the company they deem to be most competent and experienced.

THE PURPOSE OF AN ESCROW The common use of an escrow is to enable the parties in a real estate transaction to deal with each other with less risk, since the escrow holder acts as:

• Custodian for funds and documents.
• A clearinghouse for payment of all demands.
• An agency to perform the clerical details for the settlement of the accounts between the parties.

TYPICAL ESCROW TRANSACTION An escrow begins with the Realtor® opening the order for title work’ and providing the Purchase Agreement and all executed documentation to escrow. Once received, Title prepares a preliminary report. Upon receipt of the preliminary report, an analysis is made to determine the necessary action and documents required to complete the transaction:

• Demands for the satisfaction of liens not acceptable to Buyer and/or Lender.
• Documents for recording.
• Instructions and requirements of the new Lender.

In most areas, Buyer and Seller instructions are prepared for signature from the information gathered. When all the title and financial requirements are met, and instructions from all parties can be fully complied with, the escrow is said to be ‘in perfection’ and can close. Once the financial settlement takes place, documents are recorded and the title insurance policies are then issued.

THE HOME WARRANTY’S ROLE IN YOUR SALE As a Seller, a home warranty is basically an insurance policy covering the mechanical, electrical and plumbing systems of a house against unforeseeable events after you close escrow. A policy can ward off potential disputes after the sale for repair and/or replacement of covered items. Whether the Seller pays for the home protection plan and home warranty coverage or whether the Buyer pays for it, will depend on your local customs. In many regions, the Seller often pays for the coverage because it’s a Seller benefit in that the Buyer won’t be calling after closing if something breaks.

TYPES OF COVERAGE Home warranty plans range, on average, from $250 to $800 depending on coverage, and are prepaid for a year in advance. When used, the homeowner often pays a co-pay direct to a service provider when a service covered under the plan is rendered. Most home warranty payments are not due until the close of escrow and it becomes part of the Seller’s closing costs. The policy is mailed to the new policy holder and can be renewed on an annual basis going forward. Coverage varies from state-to-state and from policy-to-policy. Basic home warranty plans cover routine heating, plumbing and electrical systems. Optimal coverage for air conditioning, pools and spas, and appliances, is often charged on a per item basis. More comprehensive plans cover such items as irrigation systems, roofs and garage door openers. A home warranty plan can also be ordered at the time of listing to protect the seller during the listing period, usually not exceeding six months, then assumed by the Buyer at the time of the sale.

HOW IT WORKS Once the policy is in effect, when service is needed, the policy holder often has the option to either call the warranty company who will facilitate a call directly from an outside service company to arrange for service or they can call the warranty company’s in-house service department directly to arrange service. If an appliance is malfunctioning and cannot be repaired, depending on contract coverage, the home warranty company will pay to replace and install the appliance, for example.

If the Buyer is securing a new loan to purchase your home, the Buyer’s Lender will require an appraisal to determine the fair market value of the property. A licensed or certified appraiser will research nearby “comparables,” houses in your immediate area that have sold in the last
six months and are similar in size, age, construction, and amenities.

An appointment will be made for the appraiser to measure your home, draw a representative floor plan, take photographs inside and out, and confirm the property’s condition, specific improvements, and features. After a few days, the appraiser delivers an appraisal report on a standardized form to the Buyer’s Lender which includes the appraiser’s opinion of the market value of the property. Sometimes the appraisal report is used by both parties to set the sale price of the property appraised.

Title insurance covers the insured party for any claims and legal fees that arise out of such problems. These rights or claims remain attached to the title to the property until they are rectified.

• False impersonation of the true owner of the property
• Forged deed releases or wills
• Instruments executed under invalid or expired power of attorney
• Undisclosed or missing heirs
• Mistakes in recording legal documents
• Misinterpretations of wills
• Deeds by persons of unsound mind
• Deeds by minors
• Deeds by persons supposedly single, but in fact married
• Liens for unpaid estate, inheritance, income or gift taxes
• Fraud

AGAINST CLAIMS TO PROPERTY.
If a claim is made against your insured title, the title insurance provider protects you by:

• Defending your title, in court if necessary, at no cost to you.
• Bearing the cost of settling the case, if it proves valid, in order to protect
  your title and maintain the possession of your property.

Title insurance gives you the assurance that possible claims on the title to the property can be discovered from the public records – have been called to your attention so that these defects can be corrected. It is insurance that, if any undiscovered claims covered by your policy arise out of the past to threaten your ownership of the real estate, it will be disposed of, or you will be reimbursed exactly as your title insurance policy provides.

Frequently Asked Questions About Title Insurance

Q) What is Title Insurance?
A) Title insurance is a policy of indemnity protecting homeowners and Lenders from financial loss in the event that certain problems develop regarding the rights of property ownership. There are often hidden title defects that even the most diligent title search will not reveal. In addition to the protection from financial loss, title insurance pays the cost of defense against the covered claim.

Q) Who needs title insurance?
A) The Seller, Buyer, and Lender all benefit from the insurance provided by title companies. Buyers and Lenders in real estate transactions want to know that the property they are involved with is insured against certain title defects. Title companies provide this needed insurance coverage subject to the terms of the policy.

Q) What types of policies are available?
A) Title companies routinely issue two types of policies: An Owner’s policy which insures you, the homebuyer, for as long as you own the home; and a Lender’s policy which insures the priority of the
Lender’s security, interest over the claims that others may have in the property.

Q) Why does the Seller Need to Provide Title Insurance?
A) Title insurance represents a guarantee that the property being sold is unencumbered by any legal notices or judgments that might limit or jeopardize ownership. Any prospective Buyer will need evidence that their real estate investment is free of title defects and isn’t likely to take the Seller’s word on that. In fact, the title insurance policy is required in most contracts of sale. Absent title insurance, the Buyer would need to thoroughly search county and other records to try to find out, and if they made a mistake in searching, they’d have no recourse.

Q) Who pays for title insurance?
A) In most regions, the Seller typically pays for the Owner’s title insurance policy as it is the Seller’s customary means of proving to the Buyer “clear title.” If the purchase is financed, the Buyer pays for the Lender’s title policy which conveys to the Lender that title is “free and clear.” If the Buyer is paying cash, there is no requirement for separate title insurance.

Q) What protection does a title policy provide?
A) A title insurance policy contains provisions for the payment of the legal fees in defense of a claim against your property which is covered under your policy. It also contains provisions for indemnification against losses which result from a covered claim. A premium is paid at the close of a transaction. Unlike other types of insurance, there are no continuing premiums due.

Q) What are my chances of ever using my title policy?
A) Not all title searches are free from defect. As such, there have been Sellers who, as an example, might find during escrow that there are undisclosed mortgages or liens on their property from an original developer. Claims against your property may not be valid, making the continuous protection of the policy all the more important. With title insurance, you could go forward with your closing as scheduled and the title company would undertake the obligation to discharge the liens and clear the title. When a title company provides legal defense against claims covered by your title insurance policy, the savings to you as a Seller for that legal defense alone will greatly exceed the one-time premium paid.

In a Real Estate Transaction in California, here’s who typically pays for what:

The Seller Can Generally Expect To Pay For:

• Real Estate Broker’s commission
• Due and payable property taxes, bonds, assessment
• Prorated taxes, interest, rent HOA dues (could be credit or debit)
• The payoff of all loans, other liens, and judgments of record against the property (except those to be assumed by Buyer) including, but not limited to; accrued interest, demand/statement fee, re-conveyance fee, forwarding fee, late fees/prepayment penalty, if any
• Loan fees required by the Buyer’s Lender (specifically on FHA & VA loans)
• Homeowner’s Association transfer fee, document fee, and demand fee
• Pest control inspection reports and cost for repairs
• Home warranty plan
• Title insurance premium for Owner’s Policy
• Escrow fee (Seller’s portion)
• Document preparation fee for Grand Deed and other recordable document(s) prepared for Seller’s benefit
• Demand processing fees
• Notary Public fees
• Document signing service, if requested
• Documents recording charges
• Natural Hazard Disclosure
• County Transfer Tax ($1.10 per $1,000 of sales price)
• City Transfer Tax (varies by city)

The Buyer Can Generally Expect To Pay For:

• Prorated taxes, interest, rent HOA dues (could be credit or debit)
• Payable taxes (not yet delinquent) required to be paid in advance by the Lender
• Inspection fees (physical, roofing, geological, etc.)
• New financing costs, fees, pre-paid interest and impounds, if any (except those costs to be paid by Seller, as required by Lender or as negotiated in Purchase Agreement) or Assumption costs if existing financing is to be assumed by Buyer
• Hazard insurance premium – year paid in advance
• Title insurance premium for Lender’s Policy
• Escrow fee (Buyer’s portion)
• Document preparation fee for documents prepared for Buyer’s benefit
• Notary Public fees
• Document signing service, if requested
• Special delivery/courier fees/wire transfer, if utilized
• Document recording charges

Negotiated Terms

The costs and charges of a Southern California real estate transaction are fully negotiable between the Buyer and Seller through their respective agents. The negotiated terms will be set forth accordingly in the Purchase Agreement.

RESPA Regulations

In accordance with new RESPA regulations, all fees for Buyer’s financing, Owner’s Policy of Title Insurance, and Documentary Transfer Tax must be disclosed as a cost to the Buyer on the Good Faith Estimate and be charged to the Buyer in Sections 800, 1100, and 1200 accordingly on the HUD Settlement Statement. If negotiated in the Purchase Agreement that Seller pays for these costs and charges, Buyer will receive a credit for same from the Seller which will appear in Section 200 of the HUD Settlement Statement.