How Selling a House Works

A "For Sale" sign that lingers for too long in front of a house may leave a bad impression with buyers. See more real estate pictures.
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Selling a house is a complicated process, no matter how good the real estate market is. Whether you’re a first-time home seller or not, you’ll probably have a bunch of questions. Do I need a real estate agent? What’s “closing”? How much paperwork am I going to have to fill out? How can I get the best price for my house? How can I sell my house and buy a new one at the same time?

In this article, you’ll learn the answers to all of these questions and more as we explain what “curb appeal” is and why an open house isn’t all it’s cracked up to be.


There are two main ways to sell your home -- with an agent or without one. Before we discuss and weigh each option, let’s go over some general tips that all sellers should know.

Knowing the value of your house and exercising patience and restraint are key. Get your home appraised; it’s worth the $250 to $500 price tag. In a good market, the sale price can be 10 percent to 15 percent above the appraisal. In a weaker market, the sale price may be around the appraisal figure. We’ll go over how to figure out your sale price in detail later in the article.

A home inspection is also important in avoiding complications during your sale. The seller will get an inspection, but discovering problems during a pre-sale home inspection allows you to have more control over how to handle them. If your home inspection does uncover problems with your home, it’s essential that you familiarize yourself with your state’s disclosure laws to avoid future litigation. These laws vary from state to state, but they generally require you to disclose, either verbally or in writing, the presence of any hazardous materials in your home or significant flaws in construction. If you’re unsure of what you have to disclose, consult a real estate agent, attorney or your local housing authority.

Remember, patience is key. Yes, it's true that realtors express concern that homes can go “stale” after being on the market for too long, meaning they are no longer attracting interest from buyers. But a stale sale usually results from a seller overvaluing his or her home. The opposite can also occur: in a rush to sell a home, or to sell in time so as to move into a new house, a home can be undervalued.

Finally, if you're able, try to put your home on the market as long as possible before buying a new one. Otherwise you may end up paying two mortgages, which can be difficult to afford. If you do end up finding a house that you can’t wait to buy before selling your own, you can ask your lender for a bridge loan. A bridge loan is a special type of loan that, if you have enough equity in your current home, allows you to pay the down payment on a new home. You may also be able to get a home equity loan in order to help with the dual mortgage payments. For more information, check out our article How Home Equity Loans Works.

Now that we’ve gone over some basic lessons for selling a home, it’s time to consider an old debate: Do I need a real estate agent or not?


Do I Need a Real Estate Agent?

A full service real estate agent can make the home selling process easier by conducting tours for potential buyers.
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Though the Internet has made it easier to sell your home without an agent, about 93 percent of home sales are still done with some type of real estate agent [ref]. An agent can work independently or for a company that acts as the broker. The broker signs the agreement with the seller. Top agents receive 100 percent of the commission and pay a fee to the broker while less experienced agents get 30 percent to 40 percent of the commission.

There are many reasons why hiring an agent can be helpful:


  • Education and experience - A good realtor understands the complex procedure and paperwork involved in selling a home. He or she has hopefully also gone through a licensing program.
  • Saves time and energy - You won’t have to spend time scheduling and conducting tours of your home, which cut into your work and weekends.
  • Gauging offers - An agent can help discern serious buyers from those who are simply looking.
  • The market - A good realtor knows the market and understand trends, which can help your bottom line.
  • Negotiation - An agent has the negotiating skills to help you get a good price.
  • Professional contacts - Your agent’s contacts with other realtors and with contractors, inspectors, landscapers and the like can help you find a solution for any problem you may encounter.
  • Sale price - In some cases, buyers will offer less money to someone who’s not using an agent, believing the seller is trying to save money by not paying commission.
  • "Caravans" - Agents sometimes conduct open houses just for buyer agents where buyer agents arrive in groups ("caravans") and check out the house. This is usually a quick process, is more convenient than a traditional open house and allows buyer agents in the area to tell their clients about your home.

A key tool for real estate agents is the Multiple Listing Service (MLS), a massive online database, which 900,000 agents subscribe to, that contains listings of 90 percent of properties for sale across the United States [ref]. Buyers can access the service for free at Usually, only subscribing agents can list properties, though in some cases home sellers can pay a fee to list their property.

With all of the benefits that come with using an agent, there are some drawbacks. Most importantly, it’s very expensive. Commissions can run up to 6 percent of the house’s sale price, though many agents are willing to negotiate commission, especially in a good housing market. Working with an agent also requires a certain degree of trust, a willingness to place your most valuable possession in a stranger’s hands and say, “Please help me.” But that, along with letting go of any sentimental attachments you may have to your house, is part of the sale process.

If you’re considering hiring a real estate agent to help you sell your house, you have a choice between a full service agent and a discount service. A full service agent does it all -- prepares your home, conducts open houses, uses the MLS, produces slick marketing materials and a nice sign for your yard and in some cases, hires a professional photographer to take pictures of your house.

A discount service provides less, though what you get depends on the company. Certainly you will pay less: discount brokers usually charge 2 percent to 4.5 percent commission. Some discount services pre-screen for qualified buyers, and they should list your house on the MLS. You will have to conduct tours, however, and buyers agents may be more reluctant to show your house because of the lower commission involved (buyer and seller agents generally split commission on a sale). But the service may be worth it if you think you can save money and still get a good price on your house. For examples of discount brokers, try ZipRealty and House Rebate.

Now that we’ve gone over what the benefits and drawbacks are, let’s learn how to find an agent.


How to Find a Real Estate Agent

Look for an agent who belongs to the National Association of Realtors. You'll know that he or she is bound by a code of ethics.
Photo courtesy stock.xchng / photographer Daniel K. Gebhart

It's probably best to find an agent who belongs to the National Association of Realtors, so you know that he or she is bound by a code of ethics. Ask people you know who have dealt with realtors for a referral. Pay attention to the listings in your area and to how quickly those homes sell. An agent who knows your neighborhood and has worked there before will be able to provide you the most accurate information about the current market conditions. Going to an open house will also allow you to meet the agent personally and “pre-screen” him or her.

Once you find an agent, don’t sign a contract immediately. First, take time to interview the agent to see if this is a person you want working for you. You want an agent who asks you questions and appears interested in your home, so you should treat this like a job interview. Here are some good questions to ask a prospective agent:


  1. What is your list-price-to-sales-price ratio? (This is the ratio of what the agent’s properties were originally priced (or listed) compared to what the properties finally sold for. It should be close to 100 percent.)
  2. How many homes have you sold in the last year?
  3. How will you market my home? Direct mail? Flyers? Online?
  4. Are you familiar with my neighborhood?
  5. How are you different from other agents?
  6. Can you provide references?
  7. Will you be able to help me find professionals and services I need?
  8. What guarantees are offered, and what are your policies with cancelled agreements?
  9. How much time will you be able to spend working on my home sale?

Ask for copies of the agency disclosure, listing agreement and seller disclosures. And even if your agent claims at first that he or she doesn’t negotiate commissions, most agents do, especially if you’re also buying a house through the same broker.

Be prepared to interview prospective agents by having a list of questions on hand. Take your time and get answers to everything on your list.

Before you sign any agreements, have a lawyer look over the contract. You will need a lawyer during the closing process, so it’s best to get someone involved early who can advise you along the way.


For Sale by Owner

Making upgrades, such as installing hardwood flooring, prior to placing your house on the market can often result in a higher selling price.
Photo courtesy stock.xchng / photographer Daniel K. Gebhart

Though it's the exception rather than the rule, selling a house without an agent can be done. With some hard work and good research, you may be able to save a lot of money -- up to 7 percent in some cases [ref]. Keep in mind that those savings can be hard to achieve and are very market dependent, especially if brokers are cutting their rates.

Beyond possible savings, there are other good reasons to try selling your house on your own. You know your home best and may be able to communicate its benefits and history better than a broker who has only recently come onto the scene. Conducting your own home sale also gives you complete control. There's no wondering if a broker is being honest with you, nor will you have to deal with someone telling you how to handle your home.


You will have to contend with a lack of exposure -- you probably won't have access to MLS or a broker's contacts. Buyers are also usually more comfortable dealing with a broker. Be prepared to settle for a lower sale price than you might get with an agent.

Selling your house on your own is time consuming and potentially stressful. You will have to place ads on your own, schedule tours, personally negotiate, and find and book any needed professionals (inspector, lawyer, title company).

Still, if you feel up to the job, don't let those reasons deter you! You can indeed save money, and acting as your own agent can be a satisfying experience. So read on for some tips for selling on your own.

Tips for Selling on Your Own

First, make sure you comply with fair housing laws. Next, advertising is key. Advertise in local papers' classified ads, and look into real estate papers or weekly newspaper inserts. Find sites that allow you to advertise online like For Sale by Owner or the National For Sale by Owner Network. Your ad should include basic information like the number of bedrooms, bathrooms and special amenities. Certain phrases can help, such as those that mention a below market price or furnishings included in the sale.

When selling on your own, you're probably looking to save money, but investing in a nice wooden sign for your yard can make a big difference. Depending on the company, you should be able to get an attractive, professional sign for $100 to $200. (Plastic signs and stands can run for less than $50.) It's worth it. Put it in your front yard where it's visible from the street. Make sure it has your phone number on it. Including an information box with handouts about your home can be helpful; besides providing general information like a floor plan and features, listing the asking price can help to weed out buyers who aren't ready to commit.

Plant some flowers and clean up planters to enhance your home's curb appeal.
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Talk to your friends, acquaintances, co-workers, bar tenders, doctors, lawyers and anyone else! Ask them if they know someone who's looking for a house. Not only can this help find you a buyer, but someone who comes through a friend eases the process.

Be careful of brokers calling -- they may promise a buyer, but letting them bring just one buyer over may make you responsible for the agent's commission. You can have an attorney draw up a document stating that you don't have an exclusive agreement with an agent but are willing to pay him or her a fee if the house is sold to a referred buyer. This fee is usually 1 percent to 3 percent of the purchase price, or half of a typical commission.

Throughout this process, proper pricing is essential. A house that is priced too high risks going stale, as we discussed before. And a price that continues to fall as the house stays on the market undermines your negotiating leverage and communicates to prospective buyers that you're uncertain how much your home is worth.

If you do manage to find a buyer and come to an agreement, congratulations! The closing process is essentially the same whether working with or without an agent, so we'll cover that later in the article, but it's recommended that in either case you employ a lawyer to draw up a contract of sale. Local regulations vary dramatically, and though some handbooks have copies of standard contracts, that contract may not be valid in your area.


Time to Sell Your House

A thorough and professional cleaning will communicate to buyers that your house has been well maintained.
Photo courtesy stock.xpert

Whether or not you're working with an agent, there are some standard practices you should follow when selling your home.

We've said it before, but it's probably the most important part of selling your home, so we'll say it again. Don't overvalue your home. Using an appraisal helps, but in the end the market determines the price. Consider also the various attributes of your home and the area -- location, schools, weather, housing market, special amenities and home prices in the neighborhood. If working with a broker, sharing this information will allow him or her to better sell your home. There's more of a danger in pricing your house too high. If you happen to price it too low, you will likely receive multiple offers, which should drive up the price.


Prepare your house before putting it on sale, and be ready to look at it with a critical, objective eye. Consider hiring a professional service to clean your house thoroughly, including carpets, appliances and windows. Get rid of any excess clutter. You want to communicate that this is a home that has been well maintained, and even a pile of old newspapers or kids' toys strewn in the hallway can drive a buyer away from your home and towards another.

Does your home need painting? Do any moldings, shutters or trim need to be replaced? Off-white is recommended for the inside of the house, while touching up cracked or peeling paint on the exterior can greatly enhance "curb appeal," or what a buyer sees when standing in front of your home. Make sure your trash cans are put away. Put some flowers out front. Stand at the curb and consider whether this is a house that you'd want to visit if you happened to be walking by.

How to Choose an Offer

Your agent should be able to weed out buyers who can't afford your home by looking at a prospective buyer's credit and debit history, income, employment status, the amount he or she has available for a down payment and the time needed before closing on the house (which should be six to eight weeks).

While your agent is required by law to disclose all offers to you, insist once again that he or she does so. There should also be a clause in your contract requiring all offers to be reported to you.

Think about your own finances. You probably have an ideal price in mind, but, ultimately, at what price are you willing to settle? Do you require a specific amount of money in order to make a down payment on a new home or for car payments? Also keep in mind the fees incurred by the sale process -- agent's commission (if you have an agent), closing costs, attorney's fees and so forth. Factor these numbers into your accounting so that you can have a good idea where you will stand when this process is complete.


Closing a Home Sale

Before handing over the keys, you'll need to “close” the sale. A lot of important details are worked out at closing.
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Congratulations! You’ve found a buyer, agreed to a sale price and are ready to sell your home. The long, exhausting process is almost over. Now it’s time to close the deal, so how is that done?

First, you’re going to need a title company. A title company examines the title deed, the document that gives someone ownership of the property, and looks for any issues such as disputed ownership claims or incomplete documentation. They also issue title insurance, which is usually issued to the homebuyer and guarantees against losses that come from a problem with the title.


Next, you’re going to want a lawyer, preferably one who specializes in real estate matters. Hopefully you already made contact with one, especially if you signed a contract with a real estate agent. He or she can then draw up the contract of sale and help you and the buyer work out the details, which can include items from the home included in the sale (major appliances, furniture, fixtures, etc.), the amount of the down payment, the closing and possession dates, conditions for the sale (such as the inspection), particulars of the mortgage, which closing costs are paid by whom and, of course, the sale price.

Your lawyer will also help to guarantee that this contract is fair and contains no hidden or deceptive clauses. And, he or she can advise you on tax implications from your home sale. If you are making a profit on your home sale, that’s great, but be aware that the U.S. Government is going to try to get a piece of the pie. But as your lawyer will tell you, you can generally exclude up to $250,000 in capital gains ($500,000 for a married couple) if you lived in your home for two out of the last five years. If you’ve lived in the house less than two years but are moving due to a change in job, health reasons or for other special circumstances, you can also get an exclusion.

After the contract is signed, you’re just about done. All that remains is to find some movers, hand over the keys and get out by the possession date.

For more information on selling a home and related information, check out the links on the following page.


Selling A House FAQ

How much money do you get to keep when you sell your house?
Once your house sells, the amount of money the buyer purchased it for is used to pay off your remaining mortgage, the seller's and buyer's agents' commission, and any other fees or taxes from the transaction. After that, any money left over is profit and becomes yours. This money can be used for anything, but many people put it toward a down payment for a new home.
What repairs should you make before selling a house?
The level of repairs you make will likely depend on how hot the market is. If it's a sellers market, your agent may not suggest making any big changes. But if it's a buyer market, you may need to spend some time and money to increase the "curb appeal" of your home, which can ultimately increase the price you sell for. If you're selling during warmer months, spending a little bit of money adding some simple landscaping can add up to 28 percent to the overall home value. Paint the walls in neutral colors like whites and greys and consider replacing any carpet, if it's older and won't show well. Finally, make any big repairs such as foundation issues, broken windows or shutters, and roof issues, as these are all things that potential buyers will likely look closely at.
What are the steps to selling a house?
Get your home appraised and if you're planning on working with one, find a reputable real estate agent who knows the area well. They will help you determine a proper listing price that will encourage multiple offers. Tidy up your home, store personal things away in closets, thoroughly clean your house, and get a professional real estate photographer to take pictures for the listing. Your agent will prepare the listing using information you provide and will handle everything once your house goes on the market. Once you've received and chosen an offer, all parties will sign an agreement. On closing day, you will receive full payment and hand over the keys to your now-former home.
What does the seller have to pay when selling a house?
The real estate agent's commission, which is split between the seller's agent and buyer's agent — is usually the biggest fee a seller pays — 5 to 6 percent of the sale price.
Is it better to sell your house with a Realtor?
Selling a house without an agent is possible, but listing with a Realtor has its benefits. They can help you avoid costly mistakes, effectively market your home, handle scheduling showings, understand and negotiate offers, and know the market well. Homes sold by Realtors tend to sell quickly and for more money than those sold privately.

Lots More Information

Related Articles

More Great Links

  • "2006 Code of Ethics and Standards of Practice." 12/2005. National Association of Realtors®.
  • "A Checklist for Selling a House." Home Seller's Information Center.
  • "Consumer MLS Access for the United States."
  • "Selling a Home." MetLife.,4132,P1652,00.html
  • "Selling Without a Broker."
  • "Selling a House With an Agent." Home Seller's Information Center.
  • "If you think you need a bridge loan." February 2003.
  • "Disclosure: What Sellers Need to Know." MSN Real Estate.
  • Bradford, Stacey L. "A Quick and Dirty Guide to Selling Your Home."
  • Weintraub, Elizabeth. "How to Sell a House for the Most Money."