What to Expect Selling your Florida Investment Home
Selling your Florida Investment property isn’t as easy as making a phone call, but it doesn’t have to be a pain either. Knowing what to expect during the process can help you make decisions along the way and to plan ahead.
Step 1: Determine the market value and decide on a pricing strategy (1-5 days depending on how quickly we can access the home to see it’s interior)
Living in the information age, getting a starting point as to what your property may be worth is easy by just logging onto sites like Zillow for a “Zestimate” or any number of at least a dozen other online outlets that give an electronic estimate of value; with varying degrees of accuracy. In general, unless you have a unique property, the values are within 5-10% of actual market value (See Zillows’ own Accuracy measures HERE, in Orlando they say they are within 5% of the sale price about 64% of the time). This seems pretty accurate, but when you are talking about a $200,000 property that means they can be giving a range of $20,000 to $40,000! So bringing a local market professional in to do a full valuation can help you from leaving a lot of money on the table by under or overpricing.
It is also important to distinguish between market value and your pricing strategy. The market changes daily and there are factors to your investment property that can be very hard to nail a specific dollar figure too. Specifically, what selling a home with a tenant in place does to the market value. (“Should I Sell My Investment Home With a Tenant in Place?” Coming Soon). The market value on any particular day may suggest the house should sell for $200,000, however is the market on it’s way up or down? Is the specific neighborhood or street unique in its desirability and how many other competing homes are there at any given moment? Does my home show better or worse than all the other options a buyer can choose from? How quickly do I need to sell the property and how much does it cost me for every day I don’t sell? All these questions and more will go into whether you should price higher or lower than what the indicated market value is.
Request Your Market Evaluation Here
During this step may also be a good time to evaluate whether selling to an iBuyer is in your best interest.
What is an iBuyer and Should you Sell to One?
Step 2: Prepare the property for sale (3 days to 3 months)
With a full market evaluation, your agent should also have a list of suggested things to do to prepare the property for sale in a priority list of what produces the most value for cost. From little things with big returns like painting, selling with a tenant in place or not, to if a kitchen or bathroom renovation is worth the time and expense.
A transparent and honest discussion with your agent should be had to determine what time and expense is worth it in your situation. Also consider the coordination of any work, if you are not local and able to do these things yourself you will need an agent that is willing and able to coordinate this work on your behalf. Some agents can only refer you to vendors or a General Contractor that can handle everything for you, but if you are an out of are investor, it is a good idea to find an agent that can at least offer the ability to check in on the quality of work being done, if not directly coordinate it.
Additionally, an often-forgotten part of preparing a home for sale is the gathering of property and area information that homebuyers are interested in. HOA information, not just the costs, but what amenities are included, the financial stability of the HOA (budgets and reserve amounts), any use restrictions, disclosure of property defects, a list of positive features that may not be obvious on a buyers’ first viewing, nearby amenities and attractions, and the list goes on! Your agent should not only be able to ask you all the right questions to get this information up front but should also be able to assist you in finding all this information.
Step 3: Market the property for sale (1 day to 3 months)
If you have prepared the home well, the number one thing your agent should do is get professional photography to show the home in it’s best light! 98% of home buyers see your home first online. You can’t turn those shoppers into showings with dark, tiny and blurry cell phone pictures. I buy, sell, rent and manage properties all day every day and I am constantly surprised how poorly some agents present homes online on very high dollar homes. It has been a great market for many years now so homes even badly marketed can sell quickly (with money undoubtedly being left on the table). The great market won’t last forever though, so do a little research on any agent you interview to see how their current listings and past sales look online. Then honestly ask yourself what you would think of their listings if you were an online shopper.
Other MINIMAL levels of service should be expected as well. Placement of your property on the local MLS, a good description of the property that includes searched for keywords, listings on every realty site available, a yard sign, regular updates on activity, and answering their phone and email! I 100% advise people to test their agent by acting as a buyer. Submit a request for information online and/or call the marketing line listed on their advertisements. See how long the agent takes to respond and how they respond. If they aren’t responding quickly to direct buyer leads, they may also not be responding quickly to buyer agent inquiries, which will be the way your home sells 90% of the time. (“How does a Home Really Sell in Orlando FL?” Coming Soon)
As of the writing of this post (2018) the average days on market in the Orlando area have ranged from 47 to 64 days. However most of the property we sold over the past 2 years have sold in under 2 weeks, with the only exceptions being homes occupied by a tenant or in need of renovations.
Step 4: Negotiate and accept a contract (1-5 days)
There are standard sales contracts for the sale of Florida homes, prepared by the Florida BAR association and Florida Realtors Association. They start at 12 pages long though (and growing yearly it seems) with 3 different versions! Your agent should present the basic outline of any offer you receive and advise you on what the implications of accepting or negotiating any parts of the offer are. Scenario’s are myriad and would make this post even long than it already is, but the basic terms that are the most negotiated are:
- “Good Faith Deposit” or Escrow Deposit amount
- Financing contingency terms
- Closing Date
- Inspection contingency period
- The home being sold “As-Is” or not
- Repairs or concessions
- Who pays what closing costs
In addition to actual contract terms, your agent should be doing at least a minimal amount of diligence on the buyer that submitted the offer and their agent. How high the price is or how short the inspection and financing contingencies are are not the only factors that determine if an offer is solid or not. With every offer received we ask:
- Does the pre-approval or pre-qualification say (“What’s The Difference Between a Pre-Approval and Pre-Qualification” Coming Soon).
- Who is the lender issuing the pre-approval and what is their reputation?
- If the buyer isn’t asking for a financing contingency, did they provide a proof of funds for all cash or are they still going to try to obtain financing?
We even go as far as looking up their agent’s past sales history. Remember that 90% of the time a buyer is going to be represented by their own agent. How experienced that agent is, is going to directly affect the buyer’s chances of showing up to closing on-time, or not at all.
Step 5: Negotiating buyer inspections (7-10 days)
99% of all home sales are going to be subject to some form of inspection of the property. The results of the inspection is rarely a black and white, pass or fail issue. It typically comes down to how each buyer views the results of the inspections.
Some buyers will use the inspection contingency to re-negotiate the price no matter what the results are, some will not make a change even if something major is found. Many though will be somewhere in-between and the negotiation of how much to concede takes a delicate balance of negotiation and skillful questioning of the buyer as to what really is a deal breaker and what alternatives might be acceptable to both you as the seller and them as the buyer so that you both can continue toward the closing.
Step 6: Clearing other buyer contingencies (2-6 weeks)
The other major contingency between contract and closing is if a buyer is financing the purchase of the home or if the sale is otherwise subject to appraisal. The appraisal typically will occur 1-2 weeks after contract. So long as the appraisal comes in at or higher than the contract price, and doesn’t cite any property conditions that haven’t already been handled during the inspection period, the appraisal is a non-issue. If an appraisal comes in low, then options for both seller and buyer narrow considerably but an experienced professional can help explore every option there may be.
The final contingency of a buyer that is mortgaging the purchase, isn’t typically cleared until just days before the closing. The only way around the uncertainty of final loan approvals is to sell to an all cash buyer. Otherwise, it’s mostly a sit and wait proposition from the time of appraisal to closing as all you or your agent can do is keep up to date with the buyers lender to see where they are in the process. Due to confidentiality issues, updates are rarely detailed. This is why it is important that your agent does diligence on the buyer up front when you are in step 4.
Step 7: Closing the sale
From Contract to closing can be as quick as 10 days if it is an all cash or iBuyer (What is an iBuyer and Should you Sell to One?). In most cases though it takes a buyer at least 15 days if cash, and a minimum of 30 to 45 days if financing to go from contract to closing.
Answers to common seller questions when it comes time to close:
- No, you do not have to be physically present at the closing. “Mail-Away”/electronically transmitting closing paperwork is relatively simple and is very common with out of area sellers.
- You will need an ID to provide the title company for closing (a driver’s license or a passport if you are international)
- You will need at least one or more documents notarized in order to complete the closing paperwork. In the US notaries are plentiful, but overseas, special arrangements and appointments may be needed to get the needed notarization. Depending on where in the world you are located, we may have to plan far in advance of the closing date to ensure the proper notarization is done.
- Preliminary closing figures can be estimated before you ever put your home on the market. However final numbers won’t be available and ready for your sign off until roughly 3-5 days before closing (but should not be significantly off from estimates).
The day of closing is the culmination of the weeks of research and paperwork produced to properly transfer title to a new owner and money to you the seller. The title company’s function is to ensure they have everything from both parties, paperwork from you the seller and money from the buyers, and to then disburse each part everywhere it needs to go once everything is confirmed and complete. From the deed to the property, payoffs to your mortgage (if you have one), and your profit after all expenses.
Step 8: Receiving the proceeds of the sale
So, the sale has closed, all parties have performed their part and your closing proceeds are now sitting in the title company’s escrow account waiting to be sent to you. In most cases, the title company will wire the funds to you the day of closing if not the day after closing. You can also request a check if you wished. If you are not a US resident there are some additional things to consider and you should read “What to Expect selling your Florida Investment Home from Canada” but otherwise no income or capital gains taxes are withheld at the closing. So be sure to keep all your closing paperwork and provide it to you tax preparer when filing taxes for the year.
If you lived in the property as your primary home for at least 2 of the past 5 years, the capital gain on the sale may not be taxed at all. However, if this was an investment property be sure to read “Tax Advantages of Investment Homes” (Coming Soon) for some additional information on how to make sure you enjoy the most tax advantaged strategies available to you when selling. From 1031 Exchanges, to Deferred Sale Trusts, Seller Financing and more.