Preparing for the Sale

As you get ready to sell your home, it’s important to think through the many aspects of the sale. Is the property you are selling being used as a rental property, a seasonal home, or your primary or year-round residence? If you’ve been renting your home, have you booked tenants for the following season? This can be a benefit to the sale, but it’s important to communicate this information to your agent, so they can inform potential buyers, and to prospective tenants to alleviate potential complications at the time of sale.

If your home is being used seasonally and is not winterized, you should try to list before you close up the property for the season. That way, photos can be taken while the place looks its best, and marketing can occur during the winter months, when many buyers are looking with a spring closing in mind. Many buyers want to close before the summer season so they can enjoy their new property the following year.

If you’re selling your year-round home, you should be prepared for open houses and showings. Walk through your home and try to see it as a potential buyer would be seeing it. Is there excess clutter that can be put away without totally disrupting your lives? A house always looks larger with less clutter, and this “clean-up” gives you a nice head-start when you pack for your move.

There are also housekeeping issues to consider — things to think about to get your home in top showing condition. Are there maintenance issues such as paint, carpet, or yard work that may have been put off? Do garages or outbuildings need cleaning out? If so, consider making an investment in these items. It’s amazing how a fresh coat of paint, some new rugs, or freshly cleaned windows can brighten a room and “enchant” a prospective buyer. You should also consider a regular cleaning service, if you can afford one, while your property is listed. Again, buyers respond more favorably to a fresh-smelling, gleaming property than one that’s musty and dusty. Many of these expenditures are tax deductible; ask your tax planner for information on deductions that can be associated with the cost of the sale.

Other things that to consider are items that may be under the control of your property association, if you have one. Is your home down a long dirt road that’s badly in need of regrading? A few calls to your association maintenance contact to get this work done can offset fears of a prospective buyer who may be worried about their BMW making it down the drive.

Timing is also important; it’s probably one of the most challenging factors when selling on the Vineyard. Island properties tend to be on the market for longer than off-island properties (see the days on market information for your town in Sales & Trends for details), which can make planning difficult. Your Coldwell Banker Landmarks agent can help you set realistic expectations on market timing and will work with prospective buyers to coordinate mutually agreeable closing dates. If you’re moving for a job, buying another home, or moving off-island, your Coldwell Banker Landmarks agent may be able to make suggestions that will ease the transition process for you.

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Talk With a Broker You Trust

When you’ve made the decision to sell your home, you’ll want to talk with an experienced professional you feel you can trust. At Coldwell Banker Landmarks, we’ve found that experienced buyers and sellers of real estate tend to go back to the same people over and over again, building a relationship that makes their buying/selling process that much easier. As we all know, when there’s trust in a relationship, things run more smoothly!

When you sign the contract to sell your home, your listing agreement will most likely be that of a Seller’s Agency. The state of Massachusetts defines a Seller’s Agent as follows:

Seller’s Agent: When a seller engages the services of a listing broker, that seller becomes the broker’s client. This means the broker, and his/her subagents represent the seller. They owe the seller undivided loyalty, utmost care, disclosure, obedience to lawful instruction, confidentiality and accountability. They must put the seller’s interests first and negotiate for the best price and terms for their client, the seller. (The seller may also authorize subagents to represent him/her in marketing the property to buyers.)

Your potential buyer may work with a Seller’s Agent, a Buyer’s Agent, or a Disclosed Dual-Agent.

With the experience and contacts built from years in the profession, as well as memberships in the LINK Network and the REALTORS association, the Coldwell Banker Landmarks agents are ready to provide you with the advice you’ll need on selling your property in today’s market and to begin building that all-important relationship with you. Contact us today for a get-to-know-you meeting and free market evaluation.

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Understand the Market

Property values on the island have appreciated dramatically over the past four years, and while not quite at the high of the summer of 2000, are still holding strong — so it’s a good time to sell. Your Coldwell Banker Landmarks agent will work closely with you to price your property such that its time on market is minimized and your sold-price is maximized.

It’s a good idea to browse through our database of sold properties for “comps” (comparable sales). A good comp will be a home in your neighborhood, of similar age, features, and size that has sold fairly recently. In our Sales & Trends area, we also provide by-town sales data for the past eight quarters. Again, your Coldwell Banker Landmarks agent will be happy to assist you in understanding how to maximize your home’s current market value.

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Your Costs as a Seller

Attorney Fees: Depending on the complexity of the sale, and your choice of attorney and their fees, the costs you pay to your attorney can vary. You may wish to use the same attorney who helped you with the purchase of your property; they will have a file that provides many of the necessary documents that can speed the process and save you money. Your attorney will provide a number of valuable services through the sales process, including preparing the purchase and sale agreement, preparing the deed for transfer, discharging any mortgages or liens, and paying the Tax Stamp. Ask your attorney to provide you with an estimate of the fees you will incur when selling your home. These costs may be deductible against any gains you have on your property; talk with your tax planner for more information.

Closing Costs: Closing costs, which include fees associated with the work your attorney will perform (transfer of deeds and the required filings of various documents), are typically paid by the seller. Your attorney can provide you with an estimate of the closing costs in advance and will provide you with a final detail of closing costs just prior to closing. Closing costs will be paid by your attorney, from the proceeds of the sale, prior to disbursement of funds to you.

Commissions: Sales commissions can range from 5-7% of the final sales price. Talk with your Coldwell Banker Landmarks agent about the varied marketing and service benefits that are associated with different commissions levels. The seller typically pays the sales commissions. If two agencies are involved in the sale, your listing agency and the agency who brought the buyer will share the commission. This is often referred to as a co-broke. Your listing agency pays for all marketing of your home from their share of the commissions.

Pests and Repairs Required From Inspection: If problems were discovered during the inspection of your home, the buyer may ask to have these items repaired by you prior to closing, or they may ask you to adjust the agreed-upon price to account for these repairs. These items may be as small as a leaking faucet or as large as a new roof. Pest infestation (such as termites or carpenter ants) and major structural issues (such as rotted sills and joists) can present major problems, since a buyer will not be able to obtain a mortgage on a property with these types of problems. Talk with your Coldwell Banker Landmarks agent if you are concerned about any potential major repairs.

The better understanding you have of the condition of your home, and the potential costs associated with needed repairs, the better prepared you will be. Your Coldwell Banker Landmarks agent can provide resources for repairmen, pest removal specialists, and local contractors to help complete repairs in a timely manner, but as anyone who’s had work done on the island knows, it’s not a good idea to wait until the last minute! A contractor not showing up as scheduled to complete the agreed-upon work can jeopardize your closing.

Tax Stamp: In the state of Massachusetts, all real estate transactions require the payment of a Tax Stamp at closing, which is currently priced at $4.56 per $1,000 of the final sales price. Your attorney will ensure that this payment is made from the sale proceeds at the time of closing.

Taxes: As you prepare to sell your island home, there are a number of important factors to consider that can help to maximize your profits and minimize your tax burden. It’s a good idea to talk with a tax professional or look into the latest tax information at www.irs.ustreas.gov to understand what capital gains impact the sale may have for you.

If you are planning to purchase another property, on- or off-island, you may want to see if you can qualify for the tax benefits of a Like Kind Exchange. Other tax savings may be available to you, depending on the type of property you are selling and the amount of time you have owned/lived in the property. Again, it can be beneficial to speak with a tax advisor or research this information before you sell your property.

Title V: If your property has a septic system, you will be required to have it inspected and provide a Title V certification that it is in good working order. State law mandates that a property cannot be sold unless it has been inspected by a state-licensed inspector. Your Coldwell Banker Landmarks agent can provide you with a list of local licensed inspectors who can perform the Title V inspection for you.

If your septic does not pass inspection, it must be replaced or repaired within nine months of the sale. Either the buyer or seller may assume this responsibility. Typically, the seller will bear the costs associated with the repair/replacement, even if the buyer agrees to have the work completed after the sale. If the repair is to occur after the closing, the buyers’ lending agency (bank) will require that one-and-a-half-times the estimated costs of the repair/replacement are held in escrow until the repairs are completed and approved by a licensed inspector. Once the system has passed inspection, any remaining, unused, escrow funds will be refunded.

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Like Kind Exchange

If you could find a way to sell a piece of investment property that you own, pay no current taxes on your gain from the sale, and use the proceeds to purchase that special home or lot that you have been talking about for years, would you be interested? You may be surprised to learn that with a some careful advance planning, and help from your attorney or tax planner, this very attractive scenario just might be possible.

In 1990, the Internal Revenue Service (www.irs.ustreas.gov) released its final regulations on tax-deferred exchanges of real property. Technically known as Section 1031 of the Internal Revenue Code, the regulations state that if you meet certain requirements, you may be able to defer taxes on real estate gains when you exchange property held for productive use in trade, business, or investment.

This type of transaction goes by a number of different names, including Like Kind Exchanges, Tax Deferred Exchange, 1031 Exchange, Tax Free Exchange, Tax Deferred Delayed Exchange, and Starker Exchange. Don’t let the names confuse you, this regulation can be a powerful source of leverage for you real estate interests.

Like Kind can mean almost any type of real estate as long as it meets the exchange criteria. Buildings, undeveloped land, and rental houses are examples of properties that might qualify for favorable tax treatment. There are basically two ways to complete the exchange. One is a simultaneous “swap” of one property for another. The other is a delayed exchange.

The delayed exchange, sometimes called a Starker Exchange, has some features that make it extremely attractive. After the property you currently own is closed, you have up to 45 days to identify a qualified replacement property. You must complete the purchase of the replacement property within 180 days from the date you closed on the sale of your present property.

An example will demonstrate how advantageous this important tax shelter can be. Let’s say you own a summer cottage in Oak Bluffs. You list it for sale and sell it at a profit according to the requirements of a Starker Exchange. IRS regulations give you 45 days to locate up to three qualifying potential replacement properties, either here on Martha’s Vineyard or elsewhere. You must close on the replacement property within 180 days from the date you closed on your Oak Bluffs sale, so timing is a critical factor in these types of transactions. Even if you experienced a substantial appreciation in the value of your Oak Bluffs cottage, that gain may be “rolled over” tax-deferred into your new property.

It is very important to understand that when you exchange one property for another, the transaction process is significantly different from a traditional property sale. The most prominent difference is that for you to obtain the maximum tax benefit associated with an exchange, you may not personally receive any of the proceeds from the sale of the property when the closing occurs. The proceeds from the sale must go to a qualified intermediary, who will hold the funds until the closing on the replacement property takes place.

If you are considering a Like Kind exchange, be sure to let your Coldwell Banker Landmarks agent know, and talk with your attorney or tax planner during the early stages of planning your sale.

Be aware that the tax laws often change. Recently, the Internal Revenue Service published rules concerning Reverse Starker Exchanges. A Reverse Starker Exchange expands the flexibility of a Like Kind Exchange. It offers a tax payer the opportunity to purchase a replacement property, using the services of a qualified intermediary, before selling the old property that will be given in exchange for the new property.

This overview is intended to spark your interest in the exchange concept and its potential benefits. As with any matter relating to taxes and property transactions, it is important to consult with your accountant and attorney. As realtors, we don’t offer legal or tax advice, but we understand the concept of using a Like Kind exchange to effectively help you buy and sell real estate.