Massachusetts Real Estate Sale Process

Of course, entire books have been written dedicated to the purchase and sale of real estate, but the common transaction is made up of a fairly clear cut number of steps. That isn't to say that each deal doesn't have its own twists and turns, but with an experienced, dedicated real estate broker, these issues can all be addressed without causing you any trouble. Here, we're going to outline the basic steps of a real estate sale in Massachusetts so you can feel comfortable beginning the process.

Step 1 - Goal Analysis

We begin the process by sitting down to analyze your goals. You might think, "Well, I just want to make as much money as possible", but if we delve in a little deeper, there might be factors important to you that you weren't even aware we can accomplish. Are you looking to upgrade to a new home but don't want to move until September? While listing your property in the late Spring/early Summer might not normally result in a closing date favorable for your transition, it will most likely result in the highest sale price. We can negotiate extended closing dates, strategize short term rentals, and more so that both of your goals are realized.

Exit strategy...there is more than one way to sell a property. Let's say you have two-family home which you've been occupying one floor of and renting out the other. You can always sell the property as a multi-family, but you may be able to realize a greater return by converting the two units into condos and selling them separately. There are many concepts that your real estate broker should discuss with you before ever listing your property (on a side note, when shopping brokers, if any broker simply states "I can get you the most money" without telling you why AND how...run away).

Step 2 - Determining Fair Market Value And Listing Price

Knowing what your property is projected to sell for is paramount when deciding on a marketing strategy. Simply listing at a high price and hoping to get close to it is a disastrous plan. Overpriced properties sit on the market, become stagnant, and end up selling for less than they should have if properly priced from day one.

In order to determine fair market value (FMV), we perform a comparative market analysis (CMA) on your property. This entails taking a good look at the subject property including all of its features, improvements, and even its flaws. We then draw up a list of similar properties in the same location that have sold within the past three to six months. After factoring in the differences between the properties, slight variation in location, and current market trends, we can come to a solid estimate of what the property will sell for based on its price per square foot valuation.

Now it is time to plan the listing strategy. A lot of first time sellers will look at the value determined from the CMA and immediately think it's best to list at a higher price with the idea, "buyers will bid somewhere between our high listing price and the FMV so we can get more money". While this strategy has its place, it is rarely if ever effective in the Boston real estate market. In fact, it is usually detrimental. Remember, the buyer's agent will be running a CMA on your property before putting in an offer and they should come to roughly the same forecasted price that we do. Most first time buyers (and buyers in general) will immediately think, "Let's bid a good amount below the FMV and that way we can meet in between and get it for less". Ask yourself, would you even entertain that offer? Probably not.

The key is to market the property at a listing price that is both attractive for buyers but also accurate in representing the property's worth. In the end, the true market value is only what a buyer not under any outside pressures is willing to offer and a seller under no similar pressures is willing to accept. While a property might sit for an extended amount of time in a much smaller market as a result of low buyer traffic, if a property is marketed properly in the Boston area, it will most likely go under agreement in just a week or so. Multiple offers should be expected on a properly priced property which can then be bid against each other to bring in a "best and final" offer from each interested party. This strategy will yield you the best results and most likely an offer over the original asking price.

Step 3 - Marketing The Property

This is where very little is needed from you, the seller. Expect a weekend of open houses to be relatively the only thing you have to work around. We encourage our sellers to not be present for open houses. Some will take things they overhear personally. Some might try to talk up buyers and inadvertently give up information that puts them at a disadvantage (leave the negotiations to your broker).

All other parts of the marketing process are done in a way that never directly affects you (with the exception of staging if necessary). All marketing, both push and pull, is handled by your broker without having to involve you. Of course, we are going to need time to take floor plan measurements and professional photos, but all we need for that is a clean home. Encore Realty prides itself on being the market leader in effective digital strategy. Combined with our finely designed and branded marketing materials, we present your property in the absolute best fashion.

Step 4 - Going Under Agreement

Once offers start being presented, it's time to negotiate. With the help of your broker, you can make sure to get the best possible value for your property. There are a number of factors that can make for an appealing offer aside from just price. Contingencies, strong financing (or cash buyers), along with the proposed price make for a complete package. Is an extra $5,000 worth holding off on a closing for two extra months? Maybe on some properties but not on others. It's a simple mathematical computation of holding costs in some situations, but it may impact you in other ways personally. Is a cash buyer worth a $10,000 cut compared to a decently financed buyer? It depends on the level of risk and the overall value of the property. All of these things are concepts your broker is well versed in. A truly capable broker should also be able to negotiate that price up regardless of the secondary characteristics of the offer. A binding amount is given with the agreed upon offer (commonly in the amount of $1,000 but any number can be issued to make for a stronger deal. This is the amount that the buyer walks away from if they back out for any reason not bound in the offer).

Once an Offer To Purchase is agreed upon and signed, it's time for the contingencies to come into play. Any inspections will be scheduled (again, we strongly encourage the seller to not be home for this process as it will most definitely lead to issues that can easily be avoided by going out to lunch while your broker handles the process for you). After the inspection, the buyer may ask for concessions based on serious material defaults (a deck that needs to be power washed is not a place for negotiation. The property was priced with that in mind and that item was clearly visible during any showings). Deals may sometimes reach a standstill here if either party is unreasonable in their demands but trust in the experience of your broker to know when it is time to make a concession or simply hold firm. Condo docs (if applicable) should be reviewed by the buyer's attorney. The buyer must apply for financing (if applicable). Other contingencies may be part of the offer, but these are most common.

Now that the contingencies are met, it is time to sign the Purchase and Sale Agreement (P&S). The P&S is basically a fleshed out version of the original Offer To Purchase including any concessions or agreements made after the inspection. It is a very "legalese" document that is handled by both parties attorneys. The second, and commonly much larger, deposit is put down by the buyer during the signing of the P&S. This amount can be any percentage of the full offer price, but is commonly between 5% and 10%.

Step 5 - Closing On The Property

Shortly before the closing is done, there are a few extra steps your broker will perform including a smoke inspection (smoke and carbon monoxide detector placement and power). Certain types of properties may have additional paperwork needed but this will be handled by your broker. The closing is a relatively simple process. The attorneys will walk each side through the paperwork they have to sign. The balance of the offer will be paid. 

After the paperwork is completed, a runner will bring the deed to be recorded. At this point, the sale is official.

Last Thoughts

There are, of course, many different types of property which can call for additional steps (or depending on the structure of the deal, sometimes less). Bear in mind that you may run into unforeseen issues along the way. Engaging a trusted real estate broker is the best way to ensure a smooth transaction that realizes your goals. Take the first step in this process by contacting Encore Realty today!