Rick Dulai

Real Estate Broker, Investor & Entrepreneur

Phone

(586) 997-9900

Rick Dulai Presents: Case Study #2 – Widow Downsizing

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In this case study we’ll be talking about widow downsizing. The seller was a recently widowed member of the community and our place of worship. She was referred to me by a mutual friend. As sweet and mild mannered as she was, she was equally sharp and capable of doing what it takes to get what she wants!

I took the time to sit down with her and her son to explain my pricing strategy and recommendations. This included a discussion around some minor repairs and a little staging. The recently widowed seller was all over it. She got the landscaping done, her deck refinished and the whole house was cleaned top to bottom. She even touched up paint in several areas. Extra furniture was eliminated as a final effort and the house was ready to show in its best presentation.

Although she was concerned we priced the home too high, I was confident that my pricing was spot on. Sure enough we sold the home in 3 weeks and for 97% of the asking price! She was thrilled and was happy to downsize and move close to her grandchildren.

If you’d like to learn more about specific details when it comes to widow downsizing, please reach out to me directly. For additional information about buying or selling a home, you can visit my YouTube Channel here.

Case Study #1 – Selling a Home Due to Job Transfer

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In this case study I originally helped this young couple purchase their home in 2008. The real estate market was down and home values were down, but the economic crash and the foreclosure crisis were yet to get worse. Read below to learn how I later helped them sell that same home due to a job transfer.

He was a doctor and had just finished his fellowship. They moved back to Michigan where he had done his medical school and residency. We found them a home near the hospital that met their criteria. Over the years they did some amazing upgrades to the flooring, stairs, opened up some walls, updated the master bathroom, etc. The work was very well done and a great investment!

In 2017 they decided to sell due to a job transfer. The husband had accepted a job at another hospital. When I ran comps to price the home, we were surprised to see the values had come up so much in the past 9 years and those upgrades had really paid off. We were able to sell the home for almost 43% more than their purchase price.

In general this process went very smoothly. We had professional photos done to highlight the space and updates. Although we priced aggressively in the beginning based on nearby sales, we made some quick adjustments to increase showings and potential offers. That move made all the difference.

For more case studies and general information about buying or selling your next home visit my YouTube Channel. If you would like more specific information, please reach out to me directly here.

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.

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 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.

7 Reasons to Sell in Winter

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This quick little video gives you some counter-intuitive information on why the winter really is a good time to get on the market if you’re ready!

As always, I am willing and able to help. So don’t hesitate to contact me below if you are looking for a professional with a TOTALLY different approach that is based on facts and numbers not tradition and the status quo!