Rick Dulai

Real Estate Broker, Investor & Entrepreneur

Phone

(586) 997-9900

Seller’s Net Sheet Explained

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A seller’s net sheet breaks down all of the debits and credits based on the accepted purchase price for the property. Let’s take a look at the credits first (the easy part).

Credits

The first thing on the seller’s net sheet is the selling price or the agreed purchase price. In this example I will use $400,000.00 as the selling price. This is the first line item for the credit column.

The second item on the seller’s net sheet is the prorated taxes. In Michigan we pay our taxes in advance. The summer tax covers from July 1st of this year to June 30th of next year. The winter tax covers from December 1st of this year to November 30th of next year. Buyers that are closing in August are paying the seller for 11 months of summer taxes and 4 months of winter taxes. Here’s another example if you are closing in May. The buyer will pay the seller for 1 month of summer taxes and 6 months of winter taxes.

The third item that could be on there is prorated association dues.

Any amounts that were paid by the seller for annual dues or monthly dues will be pro-rated back to the seller. As a result, this turns into a charge to the buyer.

The fourth item that might come up is prorated trash collection fees. The seller is entitled to the prorated amount in municipalities where trash collection is a monthly charge.

That is really it for the credit side! Pretty simple, huh?

Debits

This is where things can get a little complicated. You can not avoid this if you just take your time and follow the math.

Mortgage Pay-offs

Mortgage Pay-offs are first lien position amounts owed that are registered with the county. They are due on the sale of the property.

Assessments

Any assessments from the city, county or state will be paid out of the proceeds of the sale.

Title Insurance Policy

The seller must pay for an insurance policy from the title company. This is to insure the title is clean when delivered to the buyer.

Real Estate Transfer Tax

In Michigan, the seller is responsible to pay the real estate transfer tax unless otherwise agreed between both parties. This tax has two parts. 1) State transfer tax of $3.75 for every $500 of value transferred and 2) County tax of $0.55 for every $500 of value transferred.

Discharge of Mortgage

If you have a current mortgage on your home, when you sell it, there will be a discharge fee recorded with the county. The cost typically falls around $36.00.

Administrative Fees

The listing broker charges this fee to cover administrative costs associated with the sale of your home. This fee is separate from any commissions.

Home Warranty

If the seller has agreed to provide a home warranty to the buyer, then there will be a line item debit for that cost. This can range from $300 to $1,000 depending on the type of warranty and coverage.

Commission

The seller is paying the entire commission amount. The listing brokerage pays a specified amount to the selling brokerage out of the amount collected by the listing brokerage. So if the listing broke charged 7% to list the house and advertised a %3 commission to a potential buyer’s broker/agent, then the listing broker would collect the remaining 4% as their fee for marketing the home for sale. Commissions are completely negotiable!

Seller Concessions

These are previously agreed upon amounts the seller is willing to pay towards the buyer’s closing costs and pro-rations. In general, on conventional loans this amount cannot exceed 6% of the purchase price. In some cases it is an amount “up to”. If all of the costs are covered within the agreed upon amount, the remainder comes back to the seller, .

Miscellaneous

Pest Inspection fees, City Certification fees, Delinquent taxes, etc are all types of debits to the seller.

As a result, when we look at all of the credits and debits, we can estimate (based on the offer price) how much the seller will put NET in their pockets.

I always like to show my sellers several price scenarios.

A) This helps them understand if their list price makes sense or not.

B) This helps them negotiate with better information (knowing their bottom-line).

Visit my YouTube Channel for more Tips and Information when comes to selling your home!

Home Selling Process Timeline Explained

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A lot of the anxiety and stress in the home selling process can come from not knowing what to expect next. In this article, I will break down the timelines and explain the most significant takeaways for each item.

Home Selling Process Timeline Breakdown:

  1. List the Property for Sale: Listing the property for sale includes much more than just meeting with your agent and filling out paperwork. There is a lot of prep work that goes into putting your house on the market. Cleaning, repairs & maintenance, photography, yard sign installation, lockbox access, etc are all parts of this first step in the process. You can read more about that here.
  2. Order Pre-title: I always like to order what we call “Pre-title” when the property is first listed. Basically, what that means is that I am asking the title company to do a preliminary title search on your property. This means that they will do a quick check to see who has claim to the title of your house besides you. Also, this gives them a chance to start your file. Now, when a buyer comes along, we already have a jump on things.
  3. Showing the Property to Buyers: Often the most showings (and best offers) come right at the beginning. As a property sits on the market it can lose its luster. However, it all depends on the market. DOM stands for “Days on the Market.” The average DOM for Oakland County is 36 days. To learn more about what to expect when showing your home, click here.
  4. Review Offers: If your agent has prepared you well, you should already have a good idea of what you will net at various price points. Most offers come with an expiration date/time. In a hot buyer’s market, that might be a matter of hours. In a hot seller’s market, it could be a day or two (or even more). So by this point, you might be 4-5 weeks into the whole process. To learn more about what to look for when negotiating offers, click here.
  5. Home Inspection: A typical home inspection period is 5-10 days from acceptance of an offer. Always pay attention to the wording of the purchase agreement regarding the timelines. Some purchase agreements just give a definitive amount of time to do the inspection and notify the seller whether the buyer is satisfied with the results or not. Other purchase agreements are worded such that the buyer has XX number of days to report their satisfaction. This gives the home inspector time to produce the report and the buyer time to review before notifying the seller. So keep this in mind. If you are keeping track, we would be about 6 weeks into the whole process at this point. To learn more about what to expect during a home inspection, click here.
  6. Appraisal: The lender will order an appraisal, once the buyer is satisfied with the home inspection and decides to continue with their purchase. The appraiser will schedule to view the home just like a showing. It usually takes about 3-4 days to get results back to the lender. To learn more about what to expect during an appraisal, click here.
  7. Lender Clear-to-Close: After the appraisal is in, the lender’s underwriter (the person that qualifies all the details from employment, income, debt, etc to approve the loan) will finish reviewing all of the borrower’s (the buyer’s) credentials and issue a “clear-to-close”. What that means is that all of the closing costs, interest rates, payments of principal and interest, etc have all been set and they have what is referred to as a “CD” or “Closing Disclosure”. This means the buyer side is ready to close and the file is passed on to the title company. This is typically 2-4 weeks after the appraisal is received.
  8. Title Company Clear-to-Close: Remember earlier in step 2 above I mentioned pre-title? Well, once an accepted offer was in place the title company goes to work researching the chain of title. This is to make sure they can provide the appropriate title insurance for the transaction. The title company in Michigan becomes the central hub for the closing. Essentially the buyer, seller, listing broker (seller’s broker), selling broker (buyer’ broker) and the lender all coordinate with the title company. If the title company has completed its research and is ready to issue a policy and the lender has already sent their clear-to-close, then the title company will let everyone know that they are also clear-to-close. The title company only needs about a week or so after the lender is clear.
  9. Schedule Closing: The title company then coordinates the closing with the listing and selling brokers/agents. The agents will coordinate with their respective clients. Typically the closing takes place at the listing agent’s office or at the title company. The title company will send out closing packages for the sellers and the buyers. The numbers are based on the actual closing date for accurate pay-offs, interest payments and other pro-rations.
  10. Attend Closing: Most closings take place 4-6 weeks out from an accepted offer. At this point, we are at about 8-9 weeks into the process (based on the average DOM). A typical closing will have the title company rep, the sellers, the listing agent, the buyers, the buyer’s agent and sometimes the loan officer. So it can be a roomful! A typical closing can take anywhere from 45 minutes to 2 hours. Timing al depending on the amount of paperwork and how much time everyone needs to review all of the documents. I would say the average closing is just about an hour.

I hope this helps you understand the timeline to sell your house a little better than before. Don’t forget to visit my YouTube Channel for more tips and information.

What to Expect with the Appraisal Process

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In my experience buyers and sellers have a huge misconception about the appraisal when purchasing a home. The simplest and best way I can describe the purpose of the appraisal is to justify the lender’s investment. It is not to prove the seller has negotiated the best price or for the seller to prove how much equity they are receiving.

So what does the above actually mean? Well let’s start with buyer’s equity position. I have noticed the appraisal usually comes in at or around the purchase price. This is not a coincidence that the buyers and sellers have negotiated the exact appraised value! Instead the appraiser is justifying (if the evidence supports it) the bank’s loan to the buyer which is based on the purchase price. Essentially, the appraiser is telling the bank that if the buyer defaults on their loan, the bank should be able to take the house and sell it to recover their loan amount. This is especially critical when the buyer is putting less money down.

Sellers often like to know that they didn’t leave a lot of money on the table. So they want to know what the appraisal came in at. However, the appraisal is paid for by the buyer and is required by the lender. It is really on for their information. If they decide not to share the appraisal amount, that is their right. Typically the lender will just report that the property appraised and that they are moving forward with their loan approval process.

In some occasions when the buyer is in fact purchasing a home well below market value, the appraisal can come in much higher than the purchase price. That is typically expected by all parties in that case.

The bigger issue is when the appraisal comes in low. In that case, any of the following could apply:

  1. The buyer must come up with the difference out-of-pocket in order to satisfy the lender’s requirement. This will allow the lender to proceed with the loan and purchase.
  2. The seller might agree to reduce the purchase price to keep the deal together and move forward with this buyer.
  3. The seller and the buyer can split the difference (to varying degrees) of a price reduction by the seller and more cash down from the buyer.
  4. The buyer can kill the deal because they don’t want to do any of the above. It is their right by most contracts as finance contingency is based on a loan approval which requires the appraisal. In this case, the buyer gets their Earnest Money Deposit (EMD) back and can move on to another property.

I hope this helps you understand a little more about how appraisals are related to the transaction. If you have any questions, please feel free to reach out to me anytime.

What to Expect During a Home Inspection

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As a seller, you might be wondering what to expect during a home inspection. It can be a little stressful and nerve racking to think about someone poking around your house trying to find things wrong with it. Also knowing that these things can be used to negotiate against you is just a stressful situation all around.

However, if you take my advice about a pre-listing home inspection (read that article here) you will have very little to worry about. If you didn’t do a pre-listing home inspection, don’t worry. I’m going to walk you through exactly what to expect.

  1. Some inspectors will get there early and begin on the outside, including the roof. Although some inspectors will actually get a ladder and inspect the roof, many have started using drones to film the roof and inspect it in more detail once they are back at their computer.
  2. Once the buyer(s) and their agent show up, they will make their way inside. Sometimes the buyers are there with the inspectors, sometimes they are not. I always recommend attending the home inspection for the buyers, but I think it is better for the sellers to leave (go shopping, watch a movie, get something to eat, etc).
  3. On the inside, the inspector will check the electrical, plumbing and mechanical (heating & cooling) system. They will also check all the windows for leaks and whether they open and close properly. Appliances will be tested, by running the dishwasher and turning on the stove. They will note every minor issue they discover.
  4. In the attic, they will look for leaks in the roof. They will check for any discoloration and potential mold. They will also check the insulation and determine if it is up to code and note what type of insulation material is being used.
  5. In the basement the inspector is looking for any evidence of water and potential foundation problems. An unfinished basement is ideal for inspection since everything is exposed and can be expected with the naked eye. This makes it easy to see what type of electrical work and plumbing has been done in the home.
  6. Inspections can take 2-4 hours depending on the size of the home. The home inspector is documenting everything digitally and taking notes. Afterwards the inspector will spend time generating a detailed report and deliver it to the buyer(s). The buyers will review it and then make a decision on whether or not to move forward with their purchase as-is or not.

Based on the results of the home inspection, the buyer(s) then decides to one of the following: a) move forward as-is, b) ask for repairs/credit or c) kill the deal. If the buyer asks for any repairs or credits, they are literally opening up the transaction to re-negotiation. This is where the help of a professional is the most beneficial!

Hopefully knowing what to expect will ease your anxiety about the whole inspection process. Feel free to reach out if you have any questions or concerns.

How to Negotiate When Selling Your Home

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There is a lot of advice out there for buyers on how to negotiate purchasing a home. I don’t know why anybody would want to do that on their own (unless they are a professional negotiator) but I wondered why there isn’t much advice for selling your home!

So I am going to give you some pointers here on how to negotiate offers on your home. Even though the first offer may be the best offer, I like to know exactly what my seller’s needs/wants are and then I draw a line in the sand. If you have a great home and follow my suggestions when we listed it, I am confident that we can generate the offer that meets everything that you want and need.

  1. Read the Entire Offer: Although it is tempting to react to the purchase price alone, read the entire offer. It can help to write down the key items. A lot of language in purchase agreements is standard or similar. However, you need to pay attention to the offer amount, the earnest money deposit, the closing date, occupancy, due diligence periods, any addendum and timelines.
  2. Offer Price: How much are they offering and what type of financing are they using? Are they borrowing money from a bank to buy your home? If so, how much are they putting down? The more money they are putting down, the stronger the buyer. Are they paying cash? That’s great! That means no appraisal (only lenders require an appraisal to justify their loan to the buyer). This could accelerate the closing timeline or it makes closing much easier (one less player without the lender now).
  3. Earnest Money Deposit (EMD): As a general rule of thumb, the more earnest money the buyer attaches to their offer, the better. I typically like to collect 3% of the offer price as the EMD. This helps to keep the buyer committed to the deal. Buyers can put up $0 if they want. As a seller you don’t want that. If the buyer ever decides to walk after contingencies are removed, there is no cost for them to do so.
  4. Home Inspection Period: The more time you give to the buyer to make a decision based on the home inspection, the more damaging it is to your marketing if they back out. When a buyer backs out due to a home inspection, they get the EMD back. The most common is 7 day inspection period. Anything between 5-10 days is pretty common.
  5. Occupancy: This is where the seller closes and the buyer is the new homeowner but the seller will continue to live in the home for an additional agreed upon time period. This is common if the seller is purchasing a home but needs to sell their current home to fund their new purchase. The amount of time and the daily rate are negotiable. Buyers will typically want the seller to pay based on the buyer’s new payment.
  6. Home Inspection Repairs: Everything is negotiable. The buyer might want you to pay for the whole new roof that needs to be tore off and replaced. However, you can say no (leave it all on the buyer if they still want the place). You can also pay for partial (seller gives a credit for half the cost of a new roof). A third option is to just pay for it all. Do this if you don’t want to lose this buyer and there is plenty of equity to cover the cost.

These are just some of the things that can be negotiated between a buyer and a seller. Having a professional who has years of experience dealing with these type of negotiations can really help guide you to making the best decision possible for you and your needs, when selling your home.

Don’t forget to subscribe to my YouTube Channel for more tips and advice on selling your home.

What to Expect When Showing Your Home

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A lot of home sellers wonder how to handle showings when their home is on the market for sale. So I am going to tell you exactly what to expect when showing your home, based on how my buyers view homes when we go out.

First of all, you are going to have to get used to the idea that people are going to go through your closets, kitchen cabinets and bathrooms. Remember, they are trying to figure out how the space works as they imagine themselves living there. They are not there just rummaging through your stuff because they are nosy.

Secondly, all appointments made through my office are vetted through the buyer’s agent’s office. We make sure to validate license information so that we know who is coming in and out. Remember, buyers are not permitted to be in a home without their agent. So expect some type of either phone or text confirmation of all showings.

Be Prepared for Critical Feedback.

Another thing to be aware of is that I always do my best to collect feedback on my listings from the buyer’s agent. I always provide feedback myself. Be prepared for critical feedback that you may not like. Just keep in mind that it is not personal. These buyers and their agent do not know you. They are not making judgments about you (like if they say the place felt dirty). Develop a thick skin and try your best to look for objective feedback. Objective feedback could give us insight into how to sell the home.

Make the home available to view as much as possible during reasonable hours.

Typically people will view homes between 9am and 7pm. Sometimes you could get a request for earlier or later than that but that is your decision to accept or deny. The more convenient it is for the buyer to get in and look, the better the chance we can get your home under contract.

I hope you enjoyed this article. You can visit my YouTube Channel for more tips and information about buying or selling a home.

Preparing Your Home for Showings

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Selling your home can be a very exciting process. Seeing your home online and receiving all of the showing requests really makes you feel good, especially when the photos/videos/etc are professionally done. However, preparing your home for showings (and marketing) can be a daunting task.

Have no fear though! I am going to help you keep track of what needs to be done and what to expect. Here’s a checklist to stay on top of everything.

1. De-clutter

Pick-up all the clutter. This seems obvious, but you’d be surprised how people’s clutter can become invisible to them. So go room-by-room and check all floors, table/desk tops and furniture. People need to be able to comfortably walk around your space.

2. Clean

If you don’t want to hire a cleaning crew to come through and do a deep, thorough cleaning, you can always take the time and just do it yourself. Do not skip this step! Vacuumed floors, squeaky clean countertops and mirrors, shiny appliances and sanitized bathrooms make a huge impression. If you decide to do nothing else on this list, that will probably be fine if you complete these first two steps.

3. Stage

This is much more simple than it might seem. If you have that interior designer touch, then have at it! For those of us that don’t, follow this simple rule. Define each room’s purpose and remove everything that doesn’t belong. If you have a bedroom that is being used as crafts room, I suggest clearing it all out and stage it as a bedroom. People want to see each room and how they will use it.

4. Landscaping

This is what we call curb appeal. Mow the lawn, add mulch to the flower beds, trim the bushes, etc. While you’re out there take care of any exterior repairs that might be needed. You want people to fall in love with the house as soon as they pull up. That first impression based on curb appeal is half the battle. I suggest actually getting in your car and driving up to your home and assess your curb appeal.

5. Lighting

Make sure all of the blinds are open and all of the lights work. Also make sure you have consistent light temperatures. That means the bulbs in a particular room are all of the same color. Pay attention to the color temperature usually labeled as daylight, soft white, etc.

Once you have taken care of all of the above, it is time to get your photos, videos and 3D tours done. Maintaining this level of cleaning and maintenance for showings will literally put you above every other showing out there.

Don’t forget to visit my YouTube Channel for more tips and information about buying or selling your next home.

What’s a Pre-listing Home Inspection?

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Getting a pre-listing home inspection is probably my #1 tip for homeowners looking to sell their homes (whether with a professional or on their own). Hire a home inspector to perform a full home inspection just like the buyer will do. Why? Well there are several reasons:

  1. You can identify repairs and maintenance issues. This will give you an opportunity to take care of these items before you go on the market. This can help improve showings too as buyers are smart and savvy and look at everything. When buyers see that a homeowner is proactively addressing issues, they are much more confident in their purchase.
  2. You can eliminate a buyer’s negotiating power. Now keep in mind that no two home inspectors are alike. Also, the same inspector may find different issues on the same property during different inspections. However, I would guess that 99% of the issues that would come up during a buyer’s inspection would have been found and taken care of with a pre-listing inspection. This is very helpful when negotiating because buyer’s will exaggerate the cost of a repair. For example, if you found a leak in the roof due to bad flashing around the chimney, you might get it fixed for a few hundred dollars. The buyer might try to get a new roof out of you!
  3. You can have peace of mind. Knowing what issues may or may not exist in your home will give you peace of mind. If you find something problematic, you now have an opportunity to fix it. Knowing your house is taken care of and you and your family are safe is worth a few hundred bucks for the inspection. If you find that there are no major problems, you can be comfortable and confident in showing your home to potential buyers.

I am certain that a pre-listing home inspection will help you get top dollar for your home. Spending about $400 upfront can easily help you net much more than that with an accepted offer.

Don’t forget to visit my YouTube Channel for or Tips and information about buying or selling your next home!

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What is a Seller’s Disclosure Statement?

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The Michigan Seller Disclosure Act requires a home seller to disclose the condition and other information about the property known to the seller through a Seller’s Disclosure Statement. It is not a warranty by the seller or agent and it is not meant to replace a buyer inspection. Also, agents will not (and cannot) help you fill this out. This is required to be filled out by the homeowner and what they know to be true.

What does a Seller’s Disclosure Statement include?

A Seller’s Disclosure Statement will typically cover appliances, systems and services associated with the home. The homeowner must be truthful in all representations. If you know that the dishwasher doesn’t work, you need to indicate it. However, if you never used the dishwasher and have no idea if it works or not, you can mark “Unknown” truthfully.

How Important is a Seller’s Disclosure Statement?

A buyer and their agent may use the seller’s disclosure statement in order to structure their offer or inspect any concerns they may have over any of the statements. For example, above I mentioned the seller might not know if the dishwasher works. Well, a buyer might want to ask their home inspector to specifically test it. This could influence whether the buyer’s asking price will include a discount for the dishwasher or not.

Property conditions include statements on whether the basement or crawlspace has ever had water leaks. It also asks whether the roof has ever leaked and how old it is (again, if you don’t know you can write in “unknown”). The seller is also asked to disclose any issues regarding the heating system, the plumbing system, electrical system and if there have ever been any infestations.

If a seller were to intentionally make a false statement, they could end up in a lawsuit down the road from their buyer (the new home owner). Let’s say the seller had a foundation leak in the basement and hid it. It was missed by the buyer and their inspection. Years later it was discovered that the leak was still present and had created very expensive damage. If the new home owner could prove the previous homeowner had lied on the disclosure statement, they might decide to hire a lawyer and sue!

Always tell the truth and exactly the truth. There is no need to guess or try to dig in and find out. If you don’t know, just say so.

Here’s a link to the Seller’s Disclosure Statement. Feel free to reach out if you have any questions or concerns.

For even more tips and information about preparing your home for the market, visit my YouTube page here.

What is My Home Worth?

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When preparing to put their home on the market, every homeowner has one key question on their mind- “What is my home worth?”

It’s important to understanding the basics of what goes into pricing your home. This will help you get the most for your home in the least amount of time. Ultimately, your home is worth what a buyer is willing to pay for it and what you are willing to sell it for. This is the reason why the most common method for determining the value of your home is using comparable sales.

Comparable Sales

I use the most recent sales of comparable homes in your area to determine the appropriate pricing strategy to list your home. Let’s break that down to better understand:

  1. Most Recent Sales: Depending on how many homes are selling in your area, I try to find homes that sold within the last 90 days. If there are not enough that are similar to your home, I will bump my search out to 120 days. Then I will go to 180 days, 360 days, etc. The most accurate will be the most recent. Finding 3 similar homes that sold in the neighborhood within the last 7 days is the best route to take in this case. This method will be a great indicator/predictor of what your home will sell for.
  2. Currently For Sale: The homes that are similar to yours and currently for sale are your competition. If you are over-priced, you will sit on the market as the other homes are purchased up. A good strategy is knowing what homes are selling for (see point 1). Pricing competitively against the homes currently on the market is important.
  3. Truly Comparable: Take a look at the recent sales and currently-on-the-market properties. Make sure you are realistically and objectively comparing your home to the others. Often we think our home is worth more because we VALUE the memories and design choices. Be honest in evaluating your home against others. Do you need a paint job? Is the bathroom outdated? How about the kitchen? What does your curb appeal look like compared to the others? Based on these answers you might need to be at the TOP of the price range. Alternatively, you may need to adjust your price down to compensate for any inadequacies.

What Your Home Value is NOT

It can be difficult to be objective (and that is where a professional can help), but you have to set aside your tastes and feelings. Here are a few things that the value of your home is NOT based on:

  1. What You Paid for Your Home: It can be difficult and painful to accept this, but it does not matter what you paid for it. That goes both ways. If you bought your home for $349,900.00 and it all of the data suggests a list price of $299,900.00, then you are out of luck. The numbers don’t lie. The same is true in the opposite direction. For example, if you paid $299,900.00 and the data suggests $349,900 then you are going to make some money. So it doesn’t matter what your monthly payments are or anything else. Also, don’t let buyers negotiate you out of money by looking at what you paid for it!
  2. What You Think of Your Home: Many of us love our homes and can’t understand why someone else wouldn’t feel the same. Often we build memories and we can’t help but be influenced by our emotions when thinking about our homes. You might love purple walls, but buyers will knock big bucks off their offer price to compensate for a professional painter.
  3. What You Spent on Your Home: The THOUSANDS you’ve spent on repairs, window treatments or landscaping won’t influence the price in the minds of buyers. One debatable update is when people finish their basements. Sometimes we spend a lot of money down there and enjoy the finished space for years. One might think that should be worth SOMETHING. Right? Well, I have found that two identical homes, one with a finished basement and the other without, may sell for the same amount in the end. However, the home with the finished basement might sell a lot quicker!

For more tips on how to prepare your home to hit the market, contact me here or visit my YouTube page and subscribe to stay informed on the latest information about Michigan’s Real Estate Market.