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!

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.

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 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.