Saturday, August 15, 2009

The Process of Selling a House

View of the kitchen at the "spec" house; locally made lodgepole cabinetry
Side front view of spec house just before completion

front of the house where we live, garage to rear and guest cabin on the right

the guest cabin
I've had a few comments and questions regarding the process of selling a home. I hadn't realized that the transaction might be conducted quite differently in other places.
My husband's work for a number of years has been to build as a general contractor either "custom homes" for a specific client or to purchase vacant land and construct a house which we hope will be appealing and saleable. Either process presents some pitfalls.
In the case of a custom home there is a specific budget arranged between the client and a mortage lender or bank. The general contractor and the home owner to be must go over plans, designating what portion of the funds will be allocated for such things as labor, materials, sub-contracting, fittings such as lighting, cabinetry and appliances. Usually the contractor presents a detailed estimate of the amount for which he can do the specified job, allowing for a cost over run. We have worked with clients who have a good understanding of how their funds must be spent and are able to sort their "dream home" wishes and come up with a plan that is affordable and pleasing. We have also had the negative experience of clients who can't come to grips with reality. These are the ones who feel priviledged to make phone calls 24/7, who decide that they would like a doorway repositioned , a window added, an interior wall moved. They are apt to be people who fall in love with a style of cabinetry or lighting or flooring which is beyond the budget, but they offer reassurance that of course they will pay the difference in cost. The reality is that when it is time for a final settlement, the home owner is shocked at the total, protests that they couldn't have imagined the difference in price, have decided that something doesn't suit and therefore they "can't pay."
J. came to the point of preferring to buy a parcel of land, go through the permitting processes to "sub-divide" into 4 or 5 plots, and one at a time design and build quality homes to be offered for sale. The usual practice is to choose a local real estate agency [one or more realtors] to advertise the property through their website and in the area realty magazines. The realtors are involved in a multiple listing service [MLS] which means that any of the associated agencies can show a property listed by another firm. For their services the realtor receives about 8% of the selling price.
The realtors set up appointments for "showings" of the listed property. When an interested client makes an offer, the realtor acts as the intermediary, submitting the offer, conveying the seller's acceptance, rejection or counter offer. [Think piles of paper!]
Once a price is agreed between buyer and seller, the mortgage lender requires a safety inspection and a property appraisal. The inspection is usually straight forward; we have learned that the appraisal process is not. The appraisers, like the realtors and inspectors, are state licensed. Their job is to make an evaluation of the house based on location, construction quality, desirable "upgrade" features, design details, etc. The appraisor has to show "comps"--similar properties which have sold within the past year--and review how the subject property compares to the others he or she has chosen to include. The subject property must appraise for at least the dollar amount that the buyer has to borrow, preferably more. The appraisal is meant to be based on careful review, including in the case of new construction, questioning the builder about materials and building practices which may not be obvious. Most appraisers are conscientious, some are more conservative in their evaluations than others. We have just had dealings with one who has a poor reputation in the area--a man not interested in thoroughness or research. The gross errors and invalid assumptions contained in his appraisal of the spec house have caused a delay in closing the sale--while the buyers sought another lender and a second appraisal. The bank where we do all our business refuses to use the services of this particular appraiser and we have begun the process of a formal complaint which is under review by the licensing board.
Once the inspectors and appraisers have filed their reports and collected their fees, a bond is posted while a title company researches the validity of the seller's right to the property, determining if the boundaries are properly recorded at the county courthouse, whether there are any liens against the current owner, or even against a former owner of the property. When a "clear title" is established a closing date is scheduled.
We have occupied three of the houses built with resale in mind. The goal is to realize enough profit so that we can build and keep a mortgage-free home for our declining years--which are bearing down upon us. On several occasions the houses have been "under contract" for sale before they were quite finished. Two of them, one in 2006 and the current one, have been on the market for over a year. That is when J. gets nervous and decides that whatever house we are living in will also go on the market--to give us better options. In 06 when he did just that, both houses suddenly sold within six weeks--and we hastily packed our belongings into an old barn and squeezed ourselves and numerous cats into a camper while we built the little "guest cabin" on this property. First we and then our daughter and her family stayed in the tiny cabin while we finished our house and one for them.
There is a tax exemption if one sells a home after a two year occupancy--thus J.'s reasoning that we should do this "one more time." Under the current administration, that tax break is likely to be rescinded.
So, kicking and screaming, this where we are at. The closing on the spec house should go forward next week. Meanwhile I have to accept that we are again living in a home which might sell in 30 days --or might not. And--more wailing and gnashing of teeth--I have to be tidy enough to accept a viewing appointment on an hour's notice. For what it is worth, I protest!


  1. Ah ... now I understand ... heres hoping your final house is not too far away so that you can put down roots.

  2. My daughters husband is a GC whose company builds commercial but they are doing the same with their home. They are in the second and I believe he said the fourth will be free and clear.

  3. Angie: I really feel the pain of "unrootedness"--without a restless husband I likely wouldn't budge!
    Carol: I hope your daughter will be able to realize the mortgage-free home before she reaches my age--unless she is an adventurous sort who enjoys the moves!