I Finally Sold My Home. Now what?
Your real estate agent just called with great news. The buyers have accepted your counteroffer, and the purchase agreement is being prepared for signatures.
The home you have been trying to sell is finally sold.
Does this bring happiness or relief? Yes, of course.
But it also means there is a lot to do before a moving van pulls up to your now sold home to cart your belongings elsewhere. Technically, a seller with a signed contract is officially on-the-clock.
Let’s review some of the more important things to remember as the clock begins ticking down towards the closing.
Your Home is an Investment. A Paper Trail is a must!
If you have not already started, it is time to collect all the receipts and paperwork that relate to your home. Even those items that seem almost irrelevant should be kept for future use when it is time to settle up with the government’s Internal Revenue Service (IRS).
Examples of relevant receipts would include those for any home improvements, energy efficiency improvements, or finishing a basement, among others. To determine if your specific improvements qualify for tax exemptions, download the IRS Publication 523.
Selling a home creates a lot of paperwork and reading material. If you do not plan to read the contract and other documents carefully, it is crucial to hire someone who will, like an attorney. Some states allow for real estate licensees to facilitate this part of the process, while others strictly prohibit agents from working with any legal documents.
Each party to the contract has specific obligations that must be met. The seller must deliver the home in a particular condition, and the buyer must come to the closing table with enough funding to pay the sales price. Typically, other terms are detailed in the purchase agreement.
Read the settlement statements carefully. If you are uncertain about how to locate errors or hidden fees or don’t want to be responsible, hire an attorney to protect your interests in the transaction.
The Money Matters of Selling a Home
A home is an investment, which often generates a profit when sold. If you have sold a home for a profit, it is essential to understand the tax ramifications created by the sale and transfer of real property.
If the home you have sold has been your primary residence (for at least two out of the previous five years), you are eligible for the IRS capital gains tax exemption of $250,000 as an individual. A married couple’s IRS capital gains tax exemption is $500,000.
It is noted that the majority of homeowners selling homes in the United States would meet the requirements of this IRS exemption for primary home homeowners.
But what if the sold home is an investment property and not a primary residence?
Tax consequences will change for investment properties; however, even an investor selling an investment property may avoid being responsible for paying capital gains taxes by doing a fancy legal/financial maneuver known as a 1031 Exchange.
In a 1031-Exchange, capital gains taxes are avoided because the proceeds of the home being sold are used to purchase the new property. To understand more about the 1031 Exchange process, visit 1031exchange.com.
If you have no immediate plans for the proceeds generated when selling your home, it is smart to put the money in a liquid account that also has FDIC protection. A simple money market account is both safe and liquid, so the money is safely accessible and on-demand when needed.
With large amounts of money running through your accounts, it is probably a good time to re-visit your short and long-term financial goals. Compare your retirement projections with the actual amounts in your statements to see if you are on track to meet your goals. Use tax-savings instruments like IRAs or SEPs or speak with a financial planner who can help create a future financial plan.
Prepare for the Buyer’s Home Inspector
Most buyers opt for home inspections as a frontline defense in understanding the condition of the home they wish to buy.
Most sellers believe they are prepared for the buyer’s home inspector the day they arrive for the physical inspection of the property.
Yet, despite what the seller believes, it is the home inspector’s job to find what is (and potentially may become) wrong with the house. And, the reality is there is usually something that can be noted regarding a home that has been lived in years. Plus, a buyer may become suspicious if a home inspector finds nothing to indicate in their inspection report.
There are smart ways for sellers to prepare for a home inspection. According to WIN Home Inspection, a multi-state company, it is a good idea to –
- Clean the gutters.
- Repaint the home’s exterior if weathered or faded.
- Caulk the windows, chimney, and doors.
- Repair loose bricks, pavers, or loosened handrails.
- Keep attics and crawlspaces accessible.
- Ensure smoke and carbon monoxide detectors work.
- Check that there are no plumbing fixtures that leak.
- Replace light bulbs as needed.
Although it is not required, it is a good idea for the sellers to leave the house on the day of the inspection. Asking the sellers to leave is done mostly to avoid having the sellers share information about their home, which would cause a buyer or inspector to give pause.
Prepare for the Move
When you have been notified that the buyer’s mortgage has been secured and a closing date is set, it is time to pack, if you have not already begun to do so. Consider how you want to move.
Hire a Moving Company
It is imperative that you hire a reputable moving company because their expertise is crucial. Remember, the moving company is responsible for handling your belongings during the physical move. It is a smart idea to ask friends for moving company referrals.
When you have gathered several companies to research, check the company status with the Better Business Bureau. The U.S. Department of Transportation is another resourceful site that can help you determine if the moving company maintains appropriate insurance and licensing.
Most experts agree that you should obtain at least three moving estimates – in-home – before making a final decision. Be sure to ask for a detailed estimate that includes the company’s –
- Hourly rates
- Expected Number of Hours Needed
- Insurance Protection
- Additional fees
Do not be frightened to ask a lot of questions. It is essential to know –
- How many years has the company been in the moving business?
- The full name of the company and any dbas.
- The company’s insurance coverage for your belongings, if any.
- The company’s address, phone number, and email.
Before you decide how much packing materials you will need to buy, go through each room in the home and decide what you will keep and what must go. The items no longer needed can be sold online or donated to a favorite charity. Consider Goodwill, Habitat for Humanity, or GreenDrop, who often offer free pick-up services.
Move For Hunger partners with professional movers to coordinate the move of non-perishables to local food banks, for no cost.
When you have gained a full understanding of what you plan to move, begin stocking piling supplies. Be sure to have packing tape, markers for labeling, various sized boxes, and labels.
The online giant Amazon or any local home improvement store will have a sufficient amount of moving supplies.
Before Leaving Your Current Home
- Hire a professional cleaner or, if you prefer, clean the house yourself. After all, the purchase agreement requires the home to be delivered in a ‘broom swept’ condition.
- Notify utilities to schedule service shut-off dates for the day of closing. Utilities must be working during the buyer’s final walk-through, typically a week or so before closing.
- Take meter readings before departing to ensure you only pay for the service used. The remaining oil left in a home’s oil tank is typically adjusted for on the settlement statement.
- If you can, leave the new owners –
- Manuals for all appliances.
- Unexpired warranties.
- Helpful hints regarding your home.
- Trusted contractors who have worked on the home in the past – landscapers, plumbers, or house cleaners.
- Complete the change of address form on USPS.gov. Notify Social Security, the Elections Office, and the Motor Vehicle office.
The “I Sold My House” Checklist
To help organize your thoughts during what can be an overwhelming time preparing for a move, consider using this summary checklist –
- A Paper Trail is a must! – organize all receipts and paperwork regarding the home and home’s sale.
- The Money Matters when Selling a Home – contact a tax advisor or accountant to understand your tax liabilities, if any.
- Prepare for the Buyer’s Home Inspector – declutter the home, fix needed repairs, and leave the house the day of the inspection.
- Prepare for the Move – sort through belongings, donate or sell unwanted items, notify utilities, have the house cleaned, and leave essential paperwork for the buyers. Don’t forget to inform the USPS about your new forwarding address.