Residential Real Estate

First and foremost, potential homebuyers are encouraged to consult with an attorney even before deciding on their dream house. Seeking counsel early in the process, even if you are going through a realtor, ascertains that you make informed decisions every step of the way. Paperwork given to prospective buyers is often full of complicated legal language that is hard for anyone to understand. Hiring an attorney to review documents, offer advice, and alert to potential problems before they occur ensures that the closing process goes as smoothly as possible. Some states even require you to have an attorney to guide you, although Wisconsin does not.

Unless you are planning to pay for the property in cash up front, it is wise to get pre-approved for a mortgage before you even start house hunting. While pre-approval isn’t required, being able to show notice that you are already approved for a mortgage gives you the upper hand compared to other prospective buyers. It demonstrates to sellers that you have robust financial backing, which gives you more latitude to negotiate. Mortgage pre-approval accelerates the closing process and locks in a lower interest rate for the duration of the mortgage. Prospective homeowners who are pre-approved for mortgages typically also save time and effort during their search for the perfect house. Pre-approval can be used as a budgeting tool, showing potential buyers what they can reasonably afford to spend on a home. By eliminating properties that are out of the authorized financial range, buyers can narrow down their options and consider only homes that they are able to buy. Finally, looking for a mortgage lender ahead of time offers buyers more recourse in the event that they are discriminated against during the pre-approval process. Applying for a mortgage well in advance of needing it ensures that anyone who feels that their application was unduly denied has time to seek financing elsewhere**.

Because the process of closing on a home can be lengthy, it is best to open an escrow account as soon as the seller accepts your offer to purchase. Escrow is a type of financial agreement whereby funding or another kind of asset to be used in a transaction between two parties is held by a third party, an escrow agent, while the transaction is ongoing. Assets are held in escrow for the legal protection of both parties, and will not be released to the intended party until respective contractual obligations are fulfilled. Until the sale process is complete, the seller can hold any deposits or related funding in the escrow account until it is needed.

After the buyer and seller reach an agreement on the house’s price and sign a purchase agreement, the real estate agent handling the sale will collect earnest money from the buyer and deposit it into the escrow account. Earnest money is a deposit that effectively reserves the house for a specific buyer, and it will eventually be removed from the escrow account and applied toward the buyer’s down payment. The earnest money is kept in the escrow account while the buyer obtains any additional financing or insurance they need, gets the property professionally inspected, and completes their final walk-through with the realtor. At any time before closing is completed, the buyer may choose to withdraw their earnest money from escrow and walk away from the sale if the seller violates the conditions of the purchase agreement, or if the home inspection or walk-through exposes any problems with the property.

Title searches and title insurance are other forms of legal protection that are enacted after a buyer and seller have reached an agreement on the house’s price and have signed a purchase agreement. A title search involves examining public records to make sure that the person selling the house is in fact its legal owner, and to verify that there are no existing claims or liens against the property. A variety of sources can be used to confirm legal ownership and a clean title, including land records, property deeds, tax records, records of Court judgments, or other public archives. Title searches are normally conducted by dedicated companies, but can also be ordered by individuals or other entities. If document examination brings to light that there is a claim or lien against the home, its sale can not be completed until the encumbrance is resolved.

Title Insurance safeguard buyers against financial losses in the event that a title search determines that the house they anticipated purchasing cannot be sold due to an existing claim or lien, or because it is discovered that the seller of the property is not its legal owner. Title insurance protects both buyers and their contracted mortgage lenders by offering them recourse to get their financial contributions back if the property in question cannot be legally sold to the buyer by the seller, or if obtaining legal title to the property causes the buyer to incur additional unanticipated expenses. Title insurance is usually required by mortgage lenders to secure financing because it protects the bank or mortgage company from unforeseen expenses or liability incurred on behalf of the intended buyer.

An alternative to title insurance is a warranty of title. Warranties of title are a means for a seller to demonstrate to a buyer that they have legal right to sell the property in question, and that no one else will dispute the sale. Often, warranties of title are automatically included in documents provided to buyers during real estate transactions, except if the property is purchased at auction or in an estate sale. Like title insurance, warranties of title protect the buyer and their mortgage lender from financial loss incurred if a property can not be legally sold by the seller, or if transferring title to the intended buyer causes them to incur additional costs.

Lender appraisals, also known as home appraisals, are conducted by real estate appraisers or mortgage lenders to determine the fair market price of a property. While lender appraisals are not always required to buy a home, real estate agents often advise prospective buyers to include contingencies in the purchase contract that they will be getting the property appraised to make sure that the selling price is fair, and will be walking away from the sale if the home is appraised at a significantly lower value than it is being sold for. Appraisals aren’t required to purchase a house, but are strongly encouraged if the buyer will be obtaining a mortgage to finance the house, or if they will be first time homeowner or are subject to a strict budget. Buyers who are more seasoned or who are paying for the property up front with cash may decide against having an appraisal done. Similarly, if the demand for real estate is high (there are many people looking to purchase houses), but there are not enough houses available to meet the demand, prospective buyers may opt not to have appraisals done. In this scenario, which is called a seller’s market, real estate prices tend to be inflated, and buyers may have to agree to pay more for the property than the otherwise would have in order to compete with other offers.

Before committing to a real estate purchase, prospective homeowners should contract a licensed home inspector to conduct a physical examination of the property. During the inspection, a professional should look into the house’s inner and outer structure, and test systems like the heat, water pressure, air conditioning, and electrical wiring. Home inspections are non-invasive, and provide buyers important insight into any existing problems with the house’s structure, as well as any other health, safety, or security concerns that will likely need to be addressed or repaired before or shortly after moving in. Although home inspections can be costly, they can save buyers thousands of dollars in repair costs down the road due to unforeseen issues.

Including a home inspection contingency in the purchase agreement enables buyers to walk away from the sale without penalty if a home inspection exposes sufficient defects, or to have the seller reimburse repair expenditures. Sometimes, realtors will also include home inspection contingencies in the agent agreement that buyers must sign before they begin viewing properties. Mandating home inspections before closing on a home sale prevents realtors from being held liable for unexpected repair costs incurred by unhappy homeowners who closed on a house without subjecting it to a home inspection. Having a professional examine a property before you purchase it is wise no matter the age of the house; it is actually wise to conduct an inspection on houses that are in the process of being built. An inspector can verify that the house’s foundation is solid before any concrete is poured, make sure that the mechanical structure can withstand drywall before it is hung, or do a walk through of a new build home to check for shoddy construction before the owners move in. Even if a house is in good condition, a home inspection can alert buyers of repairs that will be necessary in the future. Often, inspectors can also provide valuable insight into how often routine maintenance should be conducted on systems or structures in the home to keep them in good shape.

Another vital inspection that should be completed before closing on a house is a pest inspection. Even in colder places like Wisconsin where termites don’t flourish, carpenter ants and other insects can wreak havoc on homes, especially those that are made mostly of wood. When pest inspectors enter a property, they investigate for signs of mice, bugs or other unwanted non-human guests that might be munching on or take up residence in your home. Not only are pests gross, even small infestations can be devastating to your home’s integrity, and can be expensive to eliminate. Professional pest inspections should take place around the same time as your appraisal and home inspection, or even before if you have any reason to suspect that insects might be present.

Pest inspections are mandated by mortgage companies and other home financing sources in many states, especially if the sale will be financed through a loan from the Department of Veteran’s Affairs. Even if your state or mortgage lender does not require a pest inspection, having one completed is strongly advised. If an inspection reveals an insect or rodent problem, it may be possible to arrange for the seller to pay to have the issue resolved before closing.

It comes as no surprise that the home buying process is expensive, even without considering the sale price of the house itself. Closing costs encompass all expenses that buyers incur before they take ownership of a property. While some closing costs are fixed, meaning that they cannot be altered or changed and often need to go through providers specified in the purchase agreement, others are negotiable, allowing buyers to potentially cut costs on them. Negotiable closing costs often include:

A final walk-through allows buyers to inspect the property one last time, accompanied by their real estate agent, before they sign papers to assume ownership. Although final walk-throughs signal that the finish line is approaching, soon-to-be-homeowners must put their excitement aside and take the inspection seriously. Careful analysis of the property gives buyers peace of mind that the house is as they expect it to be, that it has been kept in good condition or has been improved upon in preparation for the new homeowners, and that any health or safety concerns have been addressed. Once closing documents are signed, it is difficult to make the seller assume responsibility for problems with the home, and such issues often must be resolved in litigation.When doing a final walk-through, even if your realtor will be present, it is better to be safe than sorry. Use the checklist below to make sure that no stone is left unturned during your inspection so that you can move into your new house with confidence.

At long last, closing day has arrived. It is perfectly normal to feel jittery and nervous on the first day of this new chapter in your life; the months of anxiety and anticipation have finally paid off. Closing day usually takes place between four and eight weeks after the seller accepts your offer on a house, with the exact time frame depending on how long inspections, appraisals, and title searches take, and how long it takes to get approved for a home loan.On closing day, funds from your escrow account are transferred to the seller, and your real estate agent also takes payment for any outstanding mortgage or title fees, and updates the property deed to list the buyer as the homeowner. As long as you come prepared, closing day should be an opportunity for the house to be transferred smoothly from one owner to the next. To avoid any problems or delays, the buyer should bring certain things with them to the closing appointment:

In addition to bringing necessary documentation, you can further prepare for closing day by contacting your closing agent ahead of time to make sure that they don’t require any additional action from you. The closing agent will often provide a list of things to bring to closing, and can also check that your personal information and the seller’s information are correct before closing day arrives, so that there are no delays due to administrative errors. You can further avoid delays by making sure that you know how much you will be expected to pay on the day of closing and making sure that this money is readily available in a single account. It is also commonplace to write a short note of appreciation and bring a small gift for the seller to the closing table to thank them for their cooperation during the process. Once your name is on the deed and the keys to the property are in your hand, the closing process is complete and it’s time to party.

Although sellers in Wisconsin aren’t required to have an attorney to represent them, having someone to advise you on proper wording in contracts and other documentation or to advocate for your best interests during negotiations is often beneficial. Whether you choose to sell your house in private sale or through an agent, a real estate attorney can ascertain that everything is done in accordance with state law. Legal counsel ensures that your legal rights as a seller are safeguarded, and can also expedite the process where possible.

Like buyers, sellers can expect to incur certain costs to sell their property that fluctuate depending on the vendor and service chosen or as the result of negotiations. Depending on the real estate market, a seller might also opt to cover a portion of the buyer’s closing costs to encourage the them to pay more for the property than they initially expected to. This is fairly common in a buyer’s market, when there are more houses available for sale than buyers looking to purchase them. Even in a real estate market favors sellers, however, sellers can expect to incur certain expenses before closing is complete.

Perhaps the largest expense sellers should anticipate is real estate agent commission. This is the percentage of the home’s selling price that is paid to both parties’ real estate agents in exchange for their services. Sellers are typically responsible for covering both their agent’s commission and the buyer’s agent’s commission, and should expect that amount equal between 5% and 6% of the sale price.

Next, to prepare the home for showings and make it seem attractive to potential buyers, sellers should expect to continue paying for utilities until the closing process is complete. Prematurely cancelling utilities decreases the likelihood of sale; it is hard to tour or imagine oneself in a home without heat, air-conditioning, or electricity, especially if the property is located in a less-than-temperate region. While sellers won’t be paying as much for utilities if they aren’t living in the house, they should plan to pay for them until the new buyer moves in.

Another large portion of the seller’s expenses is in income tax in the year that the property is sold. Although this tax isn’t technically included in the costs incurred prior to closing, sellers are responsible for paying federal income tax if they earn a profit from the sale. According to tax guidelines, sellers’ profit is calculated on an adjusted cost basis, which is the sum of the price that the seller paid for the home plus the cost of any improvements made during their ownership. Expenses incurred for home improvements, while they increase the property’s value and resale price, decrease the profit that the seller earned from the sale, because the seller had to spend money in addition to what they bought the house for. In addition to the profit earned, the amount of taxes assessed is also based on how long you owned the home for. If you had ownership for under a year, your profit on the home will be taxed as a short-term capital gain, which means a much higher tax rate than if you owned the property for over a year and your profit is considered a long-term capital gain. Although the income tax from a home sale profit can be high, sellers may be eligible to exclude it from their taxable income if they have owned the property that was sold for at least two years and have lived there for at least two of the last five years.

Another fee that the seller is typically obligated to pay is prorated property tax for the portion of the tax year before the buyer takes possession of the house. In Wisconsin, the average effective tax rate is around 1.5%, which is high compared to most other states. Sellers can pay prorated property taxes directly, or can use funds in an escrow account associated with their mortgage on the property.

If the real estate market is not favorable, sellers will often choose to offer concessions to buyers to encourage them to commit to the purchase even if it is more than they anticipated spending. Concessions are written into the offer to purchase, and typically take the form of “credits” on closing costs, whereby sellers agree to cover a portion of the buyer’s expenses. Concessions serve to give buyers a more attractive deal and are often worthwhile to get property to sell quicker and at a higher price, but are added to the seller’s own expenses.

Ultimately, the seller’s exact financial obligation depends on the result of negotiations with the buyer. Regardless, each party should expect significant expenditures, making it necessary for sellers to be just as financially prepared for the closing process as buyers.

When your house has been through all of life’s ups and downs with you, sometimes it needs a facelift to look its best. Preparing for showing can be a big undertaking, but putting in work to clean and repair the house before putting it on the market will lead to more offers (and the potential for a higher sale price!).

Perhaps the most obvious action sellers can take in preparation for showing their home to prospective buyers is to clean and declutter it. When you’ve lived in a space for awhile, excess stuff starts to accumulate and the house gets dirtier than it was when you bought it, especially if you have kids or pets. Even if you’re relatively tidy, it is important to make sure the home is looking its best for visitors. Remove everything that gets piled up on counters, the kitchen table, or elsewhere around the house so that potential buyers don’t have to look past your mess to see what makes the property amazing. It’s also a good idea to make the home look more open by removing larger pieces of furniture. Items that are too big for the space can make rooms look smaller and more closed off, so removing unnecessary furniture allows prospective buyers to move easily throughout the house. Similarly, you’ll likely receive offers quicker if you give your space a good scrub prior to showing to remove the day-to-day grime. Just like preparing your home for guests on holidays, making everything look clean and organized goes a long way to make other people fall in love with the house just like you did.

When prospective buyers tour a property for sale, they are more likely to make an offer if they can picture themselves in the space. Sellers should depersonalize the house as much as possible, removing things like family photos and children’s artwork before showing starts. Creating a neutral canvas allows buyers to envision their own things in the space.

Once the home is clean and tidy, sellers can further prepare it for showing by highlighting areas that might be major selling points for buyers. Traditionally, people look for high-quality kitchens and bathrooms, so taking steps to repair and renovate these spaces could make the property sell faster. If the house has any unique features that set it apart, like big windows, a dramatic entryway, or historical features, it is beneficial to draw attention to them.

Although the seller most likely won’t be present for showings, preparing a house to impress prospective buyers is key. Although spending extra time and money on a property you hopefully won’t own for much longer can be frustrating, it can also be thought of as an investment towards a higher asking price and quicker offers.

The next step after preparing your house for showing is to determine a criteria for accepting offers. Prospective buyers who like what they see might be inclined to submit an offer to purchase that is far below the asking price to see if they get lucky, especially if the property has been on the market for some time. To prevent impulsive acceptance of unsatisfactory offers, sellers should have an idea of what they are willing to accept. Generally, an offer that is 20% below the asking price is considered “too low”, unless the current real estate market favors buyers and the property needs significant updates or repairs to make it habitable. An offer 10% below the asking price could be considered reasonable if the market is slightly skewed away from sellers, or if the house needs repairs but can be occupied because the repairs are primarily cosmetic. In many cases, buyers who make offers of 10% less than what is being asked do so expecting to use the 10% that they saved for updates on the property.

If the current real estate market favors sellers, however, multiple buyers may bid on the same property. In this situation, sellers have the benefit of being able to entertain a “bidding war” when it makes sense to do so. If the property has been sufficiently cleaned, repaired, and staged, or has a desirable location, buyers may be willing to increase what they will pay for the house. While it may be tempting to accept the highest purchase price, sellers in this position must also consider which of the prospective buyers offer the best concessions. Buyers that are wiling to cover a portion of closing costs that would typically be the seller’s responsibility, even if they are offering a lower purchase price than other candidates, may be worthwhile. Having the buyer cover some closing costs in exchange for a lower purchase price could save sellers considerable money, especially if the house sells for a higher price than it would if market conditions were less favorable.

In either scenario, sellers should consult with a real estate agent to determine criteria for accepting or declining offers even before the house is on the market. The agent can use data from comparable property sales to recommend an acceptable offer threshold and advise on worthwhile concessions to mitigate lower offers.

Before they look at a property in-person, most buyers have already “toured” it online via real estate websites or other sources. To increase the number of in-person showings scheduled, it is important to sufficiently market the property on all major real estate search sites. A major part of this marketing is done with clear, professional photos. Photography is included almost all real estate agents’ seller packages, as oftentimes buyers rely on photos as much as written descriptions when deciding which houses to tour. It is important for sellers to ensure, however, that the photographs are taken by a professional, rather than simply by the agent themselves. Real estate listings with professional photos attract more viewers than those with subpar images. Since more viewers can prompt more offers, professional photography pays off in the long-run, even if it is more expensive to procure.

While sellers may be tempted to accompany prospective buyers during showings of the home, or to prompt their agents to do so, this is often counterproductive. Sellers and their agents’ influence may seem overbearing to someone touring the property, which may dissuade them from expressing their true opinions or making an offer. Furthermore, speaking with the seller isn’t likely to prompt a buyer to fall in love with the home; a space that was ideal for one person’s tastes and lifestyle could fall short for someone else regardless of the seller’s likeability. Even though prospective buyers touring your home can seem nerve-wracking, showings aren’t opportunities for others to critique your decorating sense or disagree with renovations you’ve made. Instead, they offer interested parties the opportunity to determine whether a space will meet their needs.

Likewise, sellers shouldn’t mandate that their real estate agents attend showings. The buyer’s agent is already contracted to attend showings with their client, and to advise them or answer their questions as needed. The listing agent shouldn’t attend showings, as their presence might appear predatory or coercive. Committing to purchasing a house is a major financial and life decision, and requires in-depth discussions between prospective buyers and their real estate agent. The seller’s agent shouldn’t be involved in these conversations, as their presence may discourage the parties from speaking openly.

Logically, a house that generates a lot of interest from buyers will likely receive more offers. Thus, showings should be available at the buyer’s convenience. When sellers make it difficult for buyers and their agents to schedule tours, they greatly increase the likelihood that sellers will lose interest in the property in favor of one that is more readily accessible. Houses that spend an extended period of time on the market will likely sell for less than they are worth, as sellers grow tired of spending money and time on a property that no one seems to want. So, although sellers might want to exercise control over when the home is open to showings, doing so can ultimately lead to decreased profit.

Finally, allowing showings only after a house has been listed for a period time, or deferring showing, often leads to a quicker sale. This tactic allows news of the listing to reach as many prospective buyers as possible. Deferring showing increases the probability that multiple buyers will clamor to make an offer, and is especially effective when there are fewer homes available than meets the demand.

Concessions are closing costs that a seller agrees to pay on behalf of a buyer, in order to lower to cost of buying a house. They are also known as assists or contributions, and are part of the negotiation process between the buyer and the seller. Concessions carry a lot of bargaining power in a buyer’s market, or when the supply of homes for sale exceeds prospective buyers’ demand. When property isn’t selling quickly, or when it is listed for a higher price than other comparable houses, concessions can encourage interested parties to make an offer. Common concessions include inspection fees, appraisal fees, buyer’s attorney’s fees, credit check fees, homeowner’s association dues, insurance costs, or property taxes. In negotiations, the parties determine exactly what each will pay. Offering concessions during this process allows the seller to maintain a higher asking price or encourage a hesitant buyer to close on the deal.

When offers start coming in, it is difficult not to let excitement at the process of a large payout get in the way. However, putting emotions aside and preparing to negotiate a better deal could make a big difference in your profit. For many sellers, negotiations with buyers can seem intimidating. Setting a framework for how offers will be dealt with ensures that you don’t miss out on potential earnings.

One way for sellers to increase their profit margin is by waiting until after showings or the open house to consider offers. Advising potential buyers that offers will only be considered after tours have taken place incites a sense of competition amongst interested parties. Resulting “bidding wars” can be beneficial to sellers, as they can drive the property’s asking price up. This tactic works well in a seller’s market, where there are many interested buyers vying for only a few available houses.

When there aren’t enough potential buyers to create a bidding war, sellers can expect to enter into negotiations to increase their profit. Buyers anticipate some back-and-forth when bidding on a home, so their initial offer is typically well below the asking price, and may also be less than they are willing to pay. Instead of sending a counteroffer that is below the asking price so as not to lose out on the sale, sellers have the option to stick to their list price. This signals to potential homebuyers that the asking price is fair, and that the seller intends to sell for what the property is worth. While not conceding on an asking price can seem risky, and may make buyers who aren’t serious about the sale walk away, those who are truly interested in the property will likely counter with a higher offer so as not to lose out. Depending on the current real estate market, more risk-averse sellers could counter a lower offer with one that is only $1000 below the asking price, for example. Doing so shows buyers that the property is priced at what it is worth, but that the seller is willing to lower the asking price slightly to seem fair.

Risk-loving sellers, or those benefiting from a market in their favor, can also bring in more profit by denying buyers’ offers outright and ask them to submit a new offer rather than presenting a counteroffer yourself. While this strategy involves a high potential for buyers to be taken aback and walk away from the sale, buyers that are really interested will provide a counteroffer so as not to miss out on the property. Additionally, when the seller does not provide a counteroffer, they are not ethically committed to a transaction with any one buyer, and can reject any offer in favor of a higher offer without seeming unprofessional. Rejecting offers outright and requesting higher offers can be beneficial in instances where the property is already generating interest even though it has only been on the market for a short period of time, or when offers are coming in before showings have begun.

The first step after negotiations have concluded is the signing of the agreement to purchase. This document details the terms of the sale, including what is included in the purchase, how much the buyer is paying up front, any closing costs that either party is paying for the other, the amount of time that the buyer has to inspect the property, and when closing will be finalized. After the purchase contract is signed by both parties, the closing process begins.

The buyer’s home inspection is usually the first order of business. After a professional inspector examines the house, the seller’s real estate agent will contact the buyer and their agent with any repairs that they would like completed before move-in. After consulting with their agent, and with a lawyer if desired, the seller will choose to make the repairs as requested, agree to only a portion of the repairs, or deny the request for repairs all together based on what is reasonable for the condition of the home and the anticipated cost of the desired repairs.

Next, the seller is obligated to respond the buyer’s home appraisal. If the value generated by the appraisal is less than what is listed in the offer to purchase, the parties will once again enter negotiations to resolve the difference. In cases where an appraisal contingency is included in the offer to purchase, the buyer and seller must reach a compromise on this issue for the closing process to continue.

Once these hurdles are bypassed, the seller is ready for closing day. Just before the seller leaves the property for the final time, they should be sure to gather important warranty information, receipts, or owner’s manuals for appliances that will stay in the house, and give them to the buyer at closing or organize them somewhere safe so that they are easy to find. The seller should also use their last time in the house as an opportunity to thoroughly check for any personal items that may have been forgotten, and to shut off the home’s main water valve.

Closing day can be just as exciting for sellers as it is for buyers; it signals the end of what can be a long and stressful process. For everything to go smoothly at closing, sellers must come prepared. Each person listed on the property deed must bring photo identification; all parties identities will be verified before any documents are signed. The seller should also bring proof of any repairs made per the buyer’s request to avoid future liability, and should disclose the location of any appliance warranties or manuals and house keys or security codes, as well as the balance and due date of any utility bills to be paid by the buyer. Finally, the seller should come with a cashier’s check to cover any outstanding closing costs, as well as funds to pay for any unexpected expenses.

At closing, the offer to purchase is signed if it has not already been, as are the home deed, seller disclosures, and closing statement. Depending on the result of negotiations, there may be additional fees to pay or documents to sign. Once all debts are settled, the seller will receive a check for any net profit from the buyer or their agent, and the closing process is concluded.

To protect against liability during the closing process, sellers shouldn’t cancel any utilities or insurance policies they have associated with the property until closing is complete. Until closing documents are signed legally transferring ownership, the seller is held responsible for keeping the home in good condition. Cancelling utilities preemptively could leave the home susceptible to damage from heat, cold, moisture, or other elements. Without homeowner’s insurance, the seller could end up paying for this damage, or for anything else that happens to the house, out of pocket. Thus, sellers should plan to pay insurance premiums and necessary utilities until the property is legally transferred to its new owners, even if the home is unoccupied for a period of time.