In most real estate transactions, the focus is on the purchaser and whether he or she can afford to buy the property. But there is another, equally important question: Can the seller afford to sell?
Many sellers become riveted on the gross selling price and fail to consider how much money they need to net in order to move to their next residence. That can be a serious mistake, especially if they haven’t built up much equity in their current homes.
The commission they are paying the listing agent is sometimes overlooked, as is the share of their buyer’s closing costs they’ll be expected to pay, what they owe on their current mortgage and the costs of the actual move.
Agents Should Warn Sellers
If the seller doesn’t take those and other costs into consideration, his or her agent should, said Margaret Rome, the broker-owner at HomeRome Realty in Baltimore. It’s part of the agent’s job.
“What the seller needs has no bearing on the price. It is the place to start the discussion,” Rome wrote recently on real estate site ActiveRain. “It is a must to find out [the seller’s] expected dollar amount. If no one has explained the cost of selling, or they don’t understand the fees, even with a full-price offer, [the seller] may not be able to afford to sell.”
Her advice to colleagues: “Never price a home without knowing what is owed and what the owners need to move forward. Find out the bottom line, their in-their-pocket number.”
More than a handful of deals have fallen through because a seller didn’t do the math – or an agent didn’t urge them to.
“It amazes me how many sellers are surprised by all the additional costs,” said Endre Barath of Berkshire Hathaway Home Services in Beverly Hills, California.
Carol Williams of Wenatchee, Washington, once inherited a listing in which she figured out that if the owners did move forward, “they would probably be left homeless.” The sellers’ credit was in bad shape and they had hardly any equity. Fortunately, at her suggestion, they spoke with a lender and discovered the harsh reality of their situation.
“They took the home off the market and stayed put,” she said.''
Endre Barath, Jr. Carol Williams and yours truly were all quoted in the above article.