How much should you offer for a house?

When making an offer, you should consider the following factors:

• The advertised price of the house.
• What you can afford.
• Prices for comparable houses.
• Whether the local real estate market is hot or cold.
• The seller's needs, like whether the seller needs to close quickly.
• Whether the house is uniquely valuable to you.
• How much you feel good about paying for a particular house.

What is a house "closing"?

The so-called "closing" is the final transfer of the house to the buyer. It occurs after both the seller and the buyer have met all the terms of the contract and the deed has been recorded. Closing also refers to the time when the transfer will occur, such as "the closing on my house will happen on January 27 at 10:00 a.m."

The event referred to as the closing frequently takes place at the office of the professional who handles the transaction, such as a title officer or real estate lawyer.

Do I need an attorney to create a house purchase contract?

This varies depending on state law and local custom. In some states, such as California, attorneys are not typically involved in residential property sales, and an escrow or title company handles the entire closing process. In many other states, particularly in the eastern part of the country, attorneys (for both buyer and seller) have a more active role in all parts of the house transaction, and handle all the details of offer contracts and house closings. Check with your state department of real estate or your real estate broker for advice.

How does seller financing work?

In rare cases, a seller will agree to loan you part or all of the money to buy the property. This can happen when you can't borrow enough money from a bank or commercial lender or when the seller wants to spread his or her income from the sale over a number of years. This can be carried out in one of two ways.

The first possibility is for the seller to take back a mortgage on the house. You, the buyer, sign both a promissory note (promising to repay the loan) and either a mortgage or a deed of trust (allowing the seller to foreclose if you fail to pay). In return, the seller signs a deed transferring title to you. Because you hold the title, you can sell the house or refinance. But you must keep making the agreed-upon payments to the seller.

The second and less popular possibility is for the seller to keep title to the property for as long as it takes you to pay off the loan. The contract you and the seller sign is known by various names, including "contract for deed," "contract of sale," "land sale contract," or "installment sales contract." It works like this: The contract states that the seller will keep title to the property until you pay off the loan. (You normally pay the loan off in a series of regular payments, similar to a standard mortgage.) After you pay off the entire loan, the seller signs a deed transferring title to you. Because the seller keeps the title over the life of the loan, you cannot sell or refinance the property until all payments are made and the title is transferred -- an obvious reason for the unpopularity of these contracts.

When should I sell my house?

Too many people sell their house at the wrong time, or are in too much of a hurry. Basically, you want to sell when you're ready and there's the largest potential pool of buyers -- causing prices to go up. This occurs in the following situations:

• Mortgage interest rates are low.
• The economic climate of your region is healthy and people feel confident about the future.
• There's a jump in housebuying activity, as often occurs in the spring.
• Your area is considered especially attractive -- because of the schools, low crime rate, weather, proximity to a major city, or other factors such as employment opportunities.

Of course, if you have to move immediately -- because of financial reasons, a divorce, a job move, or an imperative health concern -- and you don't have any of the advantages listed above -- you may have to settle for a lower price, or help the buyer with financing, in order to make a quick sale.

How do I set the selling price for my house?

The key thing to setting a price is determining how much your property is actually worth on the market -- called "appraising" a house's value. Because no two houses are alike, it's impossible to predict with absolute certainty what a buyer will pay for yours. However, the best indicator is recent sales prices of similar properties in your neighborhood ("comps").

Real estate agents have access to local sales data and can give you a good estimate of what your house should sell for. Many real estate agents will offer this service free, in hopes that you will list your house with them.

To get a ballpark figure on your own, use websites such as http://www.domania.com. By entering your address, you'll be able to pull up sales prices for recently sold homes of the same size as yours in your neighborhood.

Observing the asking prices of houses still on the market can provide guidance. However, you'll need to adjust these prices for local market conditions. In some areas, asking prices are typically 10% or more over the market. To find out asking prices, go to open houses, check newspaper real estate classified ads, and go to online listings such as http://www.halfvalue.com.

Other options include hiring a professional real estate appraiser and visiting public record offices, such as your county clerk or recorder's office.

Do I need a real estate agent or attorney to sell my house?

Except for a few states where you are required to hire a real estate attorney to do your closing, you do not have to hire an agent or attorney to help you. Beware, however, doing it yourself is a lot of work. You might consider hiring an agent to help you out in specific ways, such as advertising your home in the local multiple listing service (MLS) and handling some of the paperwork.

Will I owe taxes when I sell my house?

Thanks to the Taxpayer Relief Act of 1997, many home sellers no longer owe taxes on the gain they make when they sell their house. Married taxpayers who file jointly now get to keep, tax free, up to $500,000 in profit on the sale of their home, as long as they lived in it for two of the prior five years. Single folks and married taxpayers who file separately get to keep up to $250,000.

Can I finance the sale for the buyer?

You can agree to loan part or all of the sales price to a home buyer. You may want to do this if you want to spread out your income from the sale over a number of years or if the home buyer can't borrow enough money from a bank or commercial lender. This can be carried out in one of two ways.

The first possibility is for you to take back a mortgage on the house. The buyer signs both a promissory note (promising to repay the loan) and either a mortgage or a deed of trust (allowing you to foreclose if the buyer fails to pay). In return, you sign a deed transferring title to the buyer. The buyer holds title and can sell the house or refinance. But the buyer must keep sending you the agreed-upon payments.

The second and less popular possibility is for you to keep title to the property for as long as it takes the buyer to pay off the loan. The contract you and the buyer would sign is known by various names, including "contract for deed," "contract of sale," "land sale contract," or "installment sales contract." It works like this: The contract states that you, the seller, will keep title to the property until the buyer pays off the loan. (The buyer normally pays the loan off in a series of regular payments, similar to a standard mortgage.) After the buyer pays off the entire loan, you sign a deed transferring title to the buyer. Because you keep the title over the life of the loan, the buyer cannot sell or refinance the property until all payments are made and the title is transferred.