Read This Before Selling a House in California


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Your home is your castle. A place of refuge after a long day’s work, and where you’ve made countless memories with friends and family. But there comes a time in many of our lives when selling our California home becomes necessary.

Perhaps the kids have moved out and it’s time to downsize, or maybe you’ve outgrown your first starter home and are looking to expand to accommodate your growing family. No matter the reason, selling a house in California can be a complicated process with a number of legal and other considerations to contend with.

For most California residents, their home is the largest financial asset they have. Not to mention it often holds a certain amount of sentimentality, from pleasant memories to the hard work you put into making it your own.

Because of this, selling a house in Cali isn’t a simple transaction. Care should be taking to make sure it’s done right, and in a way that benefits you and your family the most.

Although the process of selling a house in California is similar to that in other states, CA does have its own unique local practices and real estate laws to contend with. Making yourself familiar with this process early on in the stages of selling your home can help you avoid major headaches and problems down the line.

This guide will walk you through the ins and outs of selling a house in California, making sure you don’t get hit with any major surprises along the way. From working with a listing agent to legally required disclosures, we’ve got you covered.

picture of the Best Time of Year to Sell a California Home

Best Time of Year to Sell an California Home

 
 

When it comes to selling a house in California, timing matters. But it’s not just the month or season you need to take into consideration. Certain property types sell better at differing times of the year, and homes (on average) May sell faster or slower, or even at a higher closing rate during particular months.

You might not be able to time the stock market, but taking advantage of Cali’s competitive real estate market doesn’t have to be as difficult. According to research from Zillow, nationally the best time to list a home on the market is the second Saturday of the month of May.

But what about in Cali? Well, data reveals that the California market, especially Southern California differs slightly from national trends.

The Best Time to Sell In Some of California’s Biggest Markets

San Diego – Listing your home between April 1st through the 15th can net you up to a $7000 higher closing price, as well as a selling 11 days faster than the yearly average.

San Francisco – Listing your home between April 16th through the 30th can result in up to a $15,000 higher closing price with an average selling timeframe of 6 days faster.

Riverside – Listing your home between May 1st and the 15th on average can result in up to a $5000 higher sales price and an 11 day shorter time on the market.

Los Angeles – Listing your LA home between May 16th through the 31st is a surefire way to net an average of $8000 more at closing and a selling timetable 9 days faster than the yearly average.

Season and Weather

In moderate and more temperate climates (such as Southern California), weather plays a lesser role in the timing necessary when selling a house. However, Northern California has very clearly defined seasons, making the weather a significant factor in those areas.

Deviating slightly from the national average, those homes in northern Cali tend to move faster and for more money (on average) between mid-to-late April. This is due largely to the often harsh winter seasons in the northernmost region of the state.

Holidays and Timing

Post-summer the slowdown takes hold, with real estate activity in California starting to take on a steady downward fall as autumn approaches. This downtick in the market is often attributed to the last minute scramble many families face when getting their kids ready for the looming school year.

As kids (and parents) get back into the swing of things and a solid routine is established, we often see a small but significant upward trend in the market. The real estate market in California generally continues to improve leading up to the month of November, during and after which it slows again as sellers and buyers begin to shift their focus to holidays and family activities.

Best Time of the Year to Sell for a Profit in California

Is profit your number one concern? If you’re not in a rush to move your home quickly, you have the luxury of timing the listing or your property during those months that have the greatest potential for a financial windfall.

Remember, it can take up to 3 months to sell your CA home. So when planning out the best month to “close”, you’ll need to list between 1-3 months in advance to take full advantage (depending on the state of your local market).

Selling for profit during July can net homeowners up to a 4.51% higher closing price on average, while selling during January (the worst month for a profit) can result in a 5.89% LOWER sales price.

Best Time to Sell for Profit (best to worst)

  • July
  • June
  • May
  • October

Worst Time to Sell for Profit (in order of worst to least bad)

  • January
  • February
  • September
  • April
  • December
  • November

Best Time of the Year to Sell FAST

Money isn’t everything. Life circumstances often dictate that you need to sell your home fast. Looking at actual data we can uncover which months are the best months to sell your home quickly in CA.

Selling a home fast is especially important for many California home sellers. Job transfers, a death in the family, changing needs and other major life events may require you to move quickly. But oftentimes the one thing holding you back is the sale of your existing home (likely so you can purchase another).

According to data compiled from the MLS, homes that sold in May moved an average of 6.14 days faster than the average, with those that sold during January taking a painstakingly slow time to sell, coming in at over 21 days longer on the market than the average.

Best Months to Sell a Home Fast (in order of fastest)

  • May
  • April
  • August
  • September
  • July
  • March
  • October

Worst Months to Sell a Home Fast (in order of worst to least bad)

  • January
  • December
  • November

Buyers & Property Type Matters

Single-family homes are an ideal candidate for those with children. Buyers for these homes generally start looking in the spring, with an ideal “move in” date early June when the school year ends.

Ideally avoid selling during the winter months, especially in those areas of CA with heavy snowfalls and harsh conditions throughout the winter season.

picture of California home selling costs

Cost of Selling an California Home

 
 

Although most people think of selling a home as a profit-generating transaction, selling a home is not without its own associated costs. Let’s take a look at what you can expect in the state of California. In fact, the totality of closing costs for home sellers in California can reach up to 6-10% of the total sales price.

Let’s break down the common expenses California home sellers can expect to face.

  1. Listing Agent Commission – Although other options for selling your home exist, one of the most popular is to go the traditional route of hiring a listing agent. Listing agents can help with all stages of the selling process from start to finish, making sure everything goes smoothly and that their client gets top dollar for their property. However, these services come at a price. Listing agents are paid a commission based on the final sales price of the home. In California, this rate generally ranges from between 4-8% with the commission being split between both the listing and buying agent.

    For now, understand that real estate commissions in California are defined as a percentage of the sale price of a home and that while standard rates do exist, they are negotiable and other options (discussed later) do exist.

  2. Escrow Fees – An escrow fee is used to pay an escrow agent. An escrow agent is the person responsible for coordinating the transfer of cash and title at closing, and who legally holds the title to the property being sold in trust throughout the “escrow process”. Escrow fees generally average around $2 per thousand dollars of the purchase price in California, plus a $200-$250 fee. Generally, both the buyer and seller are responsible for the escrow fee and split it 50/50.
  3. Title Insurance and Fees – Title insurance is meant to protect and mitigate any risks with defects that may be present in the title but remained undisclosed or undiscovered prior to the acquisition of the property, including fraud. In this way, title insurance covers events that occur after the policy is issued, but not against anything you may have had previous knowledge about.

    Because title insurance is required by virtually all lenders, one would presume that it would be the buyer’s responsibility to pay this fee. However, who pays for title insurance (the buyer or seller) is not set in stone, nor uniform across the state of California, with practices varying county to county. As such, “who pays” is usually based upon the local practice and customs of that particular county.
  4. Title Search Fees – This fee, paid for by you, the seller, is meant to provide proof that you have a legal right to sell your home. Typical costs associated with a title search run from $250-$800, and are largely dependent on the type of property you have and the county it is located in.
  5. Mortgage Balance Payoff – Once escrow has closed, prior to receiving any proceeds from the sale, any amount of money still outstanding on your current mortgage will be paid to the lender. In addition to the balance owed, please be aware that you may also be required to pay a “loan payoff fee” or “pre-payment penalty” that varies lender to lender, based on the stipulations in your mortgage agreement.
  6. Closing Concessions – Many aspects of the sales process involve negotiations of some kind. Some buyers may negotiate or ask for certain concessions during the process, such as the seller paying for the entirety of the closing costs. Be aware of this and work with your lawyer or attorney to negotiate a situation that is a win for both you and the buyer.
  7. County, City or Other “local” Fees – These fees vary greatly in type and cost per location, with some locales having no additional fees to contend with at all.
  8. Notary Fees – A notary is required in order to verify your identity and validate signatures and execution of paperwork. Fees vary but are usually nominal.
  9. HOA Transfer Fees – In the event that the home you are selling is part of a Home Owner’s Association, there is often an HOA transfer fee to contend with. Generally the seller pays this fee, which is used to cover preparation of HOA paperwork and registration of the new buyer as the property owner. Typically these fees are $1000 or less.
  10. Home Warranty – Remember those concessions we mentioned earlier? A home warranty is a very common concession made by and paid for by you, the seller. The price for a home warranty generally ranges from $1250-$1000.
  11. Termite Inspection Fee – Termite inspections are a common requirement in Cali and generally cost around $100. In the event that damage or infestations are found, repair costs can range from $1000 on up.
  12. Natural Hazard Disclosure Report – Natural hazards abound in California, which is why this report is commonly requested in order to identify and properly disclose any threats in the area such as flood zones, fault lines (earthquake hazard) and even nuisances such as noise pollution from air traffic. The disclosure usually costs around $125.
  13. Seller Attorney Fees – As a seller it is often advisable to have a real estate attorney review contracts and for various other real estate related activities and advice. For example, title defects or numerous changes needed for a contract may require legal assistance.

 

picture of the legal requirements of selling an California house

Legal Requirements and Considerations

 

Do You Need a Lawyer? (No but Maybe you should)

California state law does not require that an attorney be used for the process of selling a home.

That said, having a lawyer in your corner is never a bad idea for contract review or to assist in negotiations. Real estate attorneys may also be useful for assisting with unconventional circumstances such as with a lease-to-own or owner-financed deal.

California Real Estate Disclosure Requirements for Sellers

California, like most states, requires that certain disclosures be provided by the seller of a property to prospective buyers. Although there is no specifically mandated deadline by which a seller must provide these disclosures, it is advisable that they be provided as soon as is reasonably possible.

Strict Disclosure Requirements

According to California Civil Code § 1102 sellers of real estate property must utilize a standardized format for disclosures, referred to as a “Transfer Disclosure Statement” or TDS. The TDS form can be found on the California Department of Real Estate’s website or provided by your listing agent or attorney.

The TDS form covers a wide selection of relevant topics including:

  • Structural information, damage, and repair information
  • Any deaths occurring on the property in the last three years
  • Information regarding appliances and which are included in the sales agreement
  • Disclosure of any additions or expansions
  • Disclosure of any noise issues in the neighborhood

Natural Hazard Disclosure Report/Statement

This additional required disclosure form must be provided prior to the closing of any home sale. The California Natural Hazard Disclosure Statement consists of a number of “yes/no” questions including but not limited to:

  • Whether or not the property is on a flood plane
  • Forrest fire risks
  • Earthquake fault lines

Depending on the county and other aspects of the real estate transaction, further disclosure statements may be required such as disclosure of money liens and special study zones. Lastly, disclosure of the location of any sex offenders in the area must be disclosed (known as Megan’s Law). This information can be found at California State-Operated website HERE.

As per federal requirements, a lead-based paint disclosure must also be made for the proposed sale of any property that was built prior to 1978.

picture of California home selling options

Options for Selling a House in California

 

Selling With a Real Estate Agent

When most California residents think about selling their home they think of listing with a real estate agent. In the state of California, you may also see seller real estate agents being referred to as listing agents.

Not only does a real estate agent handle the listing and Marketing of your property, but they also aid in helping you through every step of the process from showings and staging to contract negotiation and closing.

Listing agents will provide you with a comparative market analysis (referred to as comps), and provide pricing recommendations and strategies tailored towards your specific goals.

High Real Estate Commissions in California

Commission paid out to a seller’s agent is generally calculated as a percentage of the final sale price of the home. The percentage of commission can vary, with lower levels of service usually corresponding to less robust services.

Full-service agents handle the listing, marketing, showing, staging, negotiation, and closing of your home. Marketing expenses are handled by the agent out of their own pockets. These agents on average charge between 4-8% in California. This commission rate is split with any agent that may be representing the buyer’s agent. Commission rates with your seller agent may be negotiable.

The commission is paid out as part of the sale price upon closing and is not required upfront.

California’ Multiple Listing Service

Developed by REALTORS®, the multiple listing service, also known as MLS, is a multimillion-dollar real estate technology. The fundamental principle behind the MLS is that it helps brokers and real estate agents share information on the properties they represent for sale through a singular network.

Sellers benefit by exponentially increased exposure for listed properties, while buyers benefit do to the ability to quickly identify ideal properties on the market for their clients to purchase.

This system facilitates cooperation between competing agencies, brokers and agents, leveling the playing field and providing value for every party involved.

As a consumer, you can access MLS listings published on brokers’ and agents’ websites, but the MLS itself is a private database created and Maintained by licensed real estate professionals.

Listing Agreement

After interviewing and selecting a real estate or listing agent of your choosing, you will sign what is known as a “listing agreement”. This agreement grants the agent the legal right to market and coordinate the sale of your home on your behalf.

Listing Agreements Generally Cover the Following Terms:
  1. Commission Rate – The rate of commission you agree to pay as a seller (usually ranges from 4-8% in CA). This fee, as mentioned earlier, gets split between the buyer’s agent and your agent at closing.
  2. The Type of Listing – Listings can either be “exclusive” or “non-exclusive”. Exclusive listings are the most common type and require you to pay a commission to the selling agent no matter who or where the buyer comes from. With open or “non-exclusive” listings, on the other hand, you pay whichever agent brings the seller the commission.
  3. Listing Duration – Each listing agreement will cover a specific time-frame, after which the contract expires and you are free to hire another agent to do the job, handle the sale yourself, or extend the existing contract.
  4. Listing Price – Your agent should provide you with an in-depth market analysis and a detailed breakdown of comparable sales in your locale. Based on the data, their experience as an agent and your goals, the listing agent will provide you with advice on pricing strategy. The agreed-upon price will be included as part of the listing agreement.
  5. Any Items NOT Included as Part of the Sale – In some cases, there may be instances where certain items are not part of the home’s sale. For example, perhaps you plan to take the refrigerator with you when you leave, or an heirloom chandelier. Any such items you wish to take with you must be included in the listing agreement.
  6. Detailing of the obligations and Duties of Both the Seller and Listing Agent – Each listing agreement should (in detail) spell out the obligations you have as a seller to the agent and the obligations the agent has to you as the real estate agent representing your property. For example, the listing agreement will specify the ways in which your agent will market your property, the type of insurance that must be maintained on the home, and the disclosures you are required to make.

Selling Without a Real Estate Agent or By Owner

Although most California residents opt to sell with the help of an agent, non-traditional options offer a range of benefits of their own, with a growing number of sellers CA flocking to these opportunities in lieu of paying out high commission rates to an agent.

DIY or For Sale By Owner

Selling your home going the DIY or For Sale By Owner in California route has its challenges, and is certainly more work, but the payoff can make it more than worthwhile if you do your homework and put in the effort.

In fact, on a $250,000 home with a 6% commission fee, you can save $15,000. Further, according to the National Association of Realtors’ Profile of Home Buyers and Sellers, homes sold by their owners also often sell more quickly, sometimes in as little as two weeks.

But before you decide to dive off the deep end and handle your home’s sale on your own, bear in mind that the process isn’t exactly a cakewalk. Apart from marketing, staging and negotiating the sale, you’ll also be responsible for both the financial and legal paperwork associated with the transaction, something you’ll no doubt want to hire an attorney to help with.

Tips for Selling the DIY Way:

  1. Prep your home for the market – This means professional cleaning, removing any clutter, and staging the property both inside and out for viewing.
  2. Competitively price your property – With real estate platforms and data readily available online from sites such as Zillow and Redfin, you can do your own market research to find comparable properties and price your home similarly to those that best represent your home and sold within a timeframe that you are comfortable with.
  3. Invest in an California flat fee MLS listing service – In order to exponentially expand your reach to prospective buyers both in the area and nationwide (more on this below).
  4. Get a marketing plan together – Consider listing your site online, in classified ads and platforms, your local newspapers, social media, and even starting a website where you can digitally showcase pictures, videos of the property and more.
  5. Know your home’s best selling points – Put a “pitch” together to “sell” them both in person and in print or online.

California Flat Fee MLS Listings

As previously mentioned, MLS is short for “Multiple Listing Service”. The MLS consists of a network of over 900 individual MLSs nationwide in the USA. Each MLS is separate from each other, meaning that a real estate agent in Cincinnati, CA cannot view listings in San Diego, CA. This makes it critical to ensure you are listed in the proper MLS.

Why is Paying for a Flat Fee MLS Listing Worthwhile?
  • The MLS essentially represents the entire “real estate market”
  • In the US, over 90% of all sold properties are the result (at least in part) of MLS listing exposure
  • Listing in the MLS means that all local Realtors®, agents and brokers will be able to find and promote your listing to their clients
  • Potential buyers can find your home listed on hundreds to thousands of public MLS websites
  • Those properties listed on MLS tend to sell faster and at a higher price
  • You can avoid California high real estate agent commission rage (on average 6%)
  • You retain the right to sell your house yourself
  • You have full control over your listing
  • Qualified buyers will call you direct
  • You set the terms of the contract offer and negotiate conditions directly
  • Your MLS listing can be canceled at any time if your situation changes

Want To Learn More About Flat Fee MLS Listings?

If you want to save at least 50% of the Realtor commissions, check out our article about 9 Things FSBO’s Need To Know About Flat Fee MLS Listings

 

picture of an California purchase and sale agreement

California Purchase and Sale Agreements

 

In simple terms, a home purchase and sales agreement (P&S), also called a California residential purchase and sale agreement or purchase contract, is a contract that details the conditions of the sale to which both the buyer and seller agree to. This agreement is legally binding, and it is advised that the agreement be both drafted and reviewed by an attorney you trust.

NOTE: The majority of clauses within the purchase agreement are designed to protect the buyer.

In California there are two main types of P&S agreements:

  1. The California Association of Realtors (“MAR”) Standard Purchase and Sale Agreement (With Contingencies)
  2. The Greater Boston Real Estate Board (“GBREB”) Purchase and Sale Agreement

The agreement will cover such aspects of the sale such as:

  1. Sale Price – This will include both the actual sale price of the home as well as how much the buyer agrees to put down at the contract signing date, what amount will be financed and any balances due at closing.
  2. Financing Contingency – Financing contingencies are a common rider included in many purchase agreements. Generally, they define a timeline during which the buyer must qualify for adequate financing in order to purchase the home.

    Similarly, a rider may be included to protect the buyer, stating that the purchase is contingent upon them obtaining financing at favorable terms (such as within a specified interest rate rage).

    Other Financing Clauses may Include:

    • Dates by which the buyer must have applied for a mortgage
    • Dates by which the buyer must have obtained pre-qualification, pre-approval and/or final approval by the lender
  3. Inspection & Repairs – Under the agreement, an inspection clause dictates that the buyer has the right under the terms of the contract to inspect the property by hiring one or more contractors or licensed inspectors to look at the property.

    The contract will need to specify which, if any, repairs the seller agrees to make as a result of the inspection prior to closing.
  4. Title and Survey – The agreement will outline which party is responsible for title insurance and the duration of time the buyer has to review and/or object to the results. In the event that you, as a seller, provided a survey or the buyer ordered one themselves, the agreement will specify how long the buyer has to identify any issues.

    In the event that a resolution to a problem is required, a timeline for this solution will need to be established and incorporated into the contract. IN the event that you cannot or do not want to resolve the problem (due to finances or other considerations), incorporating a clause that states you have the right to cancel the agreement and return the deposit should be included.
  5. Personal Property / Excluded or Included Items – Just because you are selling your home does not mean you have to sell everything in it. From furniture, to appliances, and even light fixtures, you get to decide. But, you must specify in the agreement which items are staying behind and which are not part of the deal. Both you and the buyer should make a list of the property they expect to sell/purchase. From there you can both negotiate a deal.
  6. Closing and Move in/out Dates – Dates are very important with regards to the process of selling a home. Generally, the closing date for California properties lands around 30 days. However, this date is largely dependent upon the lender and may require an extension.
  7. Other Riders – CA real estate contracts also have a range of optional riders that cover such circumstances as those that involve:
    • Owner financing
    • Homeowners’ associations
    • Condominiums
    • And more…

picture of an California home sellers negotiating a contract

Negotiation Process – Offers, Counteroffers & Acceptance

 

Real estate deals are an evolving process with lots of moving parts, contingencies and more. All of which means that a lot can change between the point at which an initial offer is made and closing day.

Rarely is selling a home as simple as getting paid your list price without some form of concession and negotiation. These negotiations can go on for weeks until both parties reach (or don’t reach) an amicable deal.

Counteroffer

A counteroffer is the medium in which this negotiation is dealt with. Counteroffers are generally handled by either your real estate agent or attorney (unless you are selling DIY). Think of selling as a process vs a transaction.

Counteroffers arise when the terms of the initial offer are not agreeable. The counter-offer provides you with the opportunity to take a hard look at what items you are willing to compromise on and which are potential “deal breakers”.

picture of an California home sellers in escrow

Escrow Process in California

 
 

When a buyer decides on a property they are interested in buying, they first made a purchase offer. As part of this purchase offer they most often provide “earnest money”. This earnest money is a deposit made as a consideration to be held in escrow by an escrow agent.

The role of an escrow agent is to ensure the transaction closes on time and without a hitch. It is the duty of the escrow holder to validate that all conditions and terms of the buyer’s and seller’s agreement are met prior to finalization of the deal.

This means that all funds, required forms, documents are accounted for and that any loans or liens have been paid off as part of the transaction. This process ensures that the new buyer will have a clean title prior to the purchase of the property.

Although every sale is unique, the escrow process generally lasts between 30-60 days up until closing. As part of the contract negotiation, both the buyer and seller will agree to a specific escrow timeline so that each party will know what to expect and prepare for.

California is a unique state in which the escrow company is a separate entity from the title company. That said, in certain Northern California areas such as San Francisco or the Bay Area, the title company used often handles the escrow process themselves.

Escrow Timeline in California

Day 1: Pre Escrow

Pre-escrow is marked by document review, questionnaires, paperwork, negotiations, an offer, and purchase agreement.

Day 2-5: Funding Escrow

Earnest money deposit (down payment) is made by the buyer to fund the escrow account. As part of this process notarization of the grant deed, tax forms, payout documentation, statement of information and more are filled out and agreed upon (or not) by you the seller.

Day 3-20: Inspections and Disclosures

During this time buyers will perform their due diligence on the property, including but not limited to conducting a professional inspection of the home. As a seller, it is at this time when you will likely be providing a list of disclosures regarding the property and as required by federal, state and local laws.

Day 20+: Negotiations Based on Findings from Inspection

Post-inspection, buyers may submit a “Request for Repairs”. A “request for repairs” is generally covered under the “inspection contingency” in the purchase offer.

This request may ask for one of two concessions:

  1. Reduction in price based upon necessary estimates for needed repairs
  2. Request for the repair of items prior to closing

In the event that the offer incorporates an “appraisal contingency” as well, an appraiser will inspect the property to assess its fair value. The appraiser will also ensure other aspects of California Law are followed including proper outfitting with smoke and carbon monoxide detectors, as well as a double-strapped water heater.

Day 24+: Buyer Secures Financing

From this point forward, the majority of work and obligations land solely on the buyer. They secure approved funding from the lender, purchase homeowner’s insurance and finalize appraisals.

Up next? Closing!

picture of an California home sellers at a closing

Closing Process in California

 
 

The Closing Process in Detail

  1. Title Search: If one has not already been conducted, either the title company or a hired attorney will perform a title search in order to confirm that no assessments or liens exist on the title. Presuming the title is “clear” the closing will proceed as scheduled and a “title commitment” will be issued by the title company or attorney handling the proceeding.
  2. Title Insurance: Purchased by the buyer as well as a final title search.
  3. Loan Documents: Buyer’s lender finalizes and sends the loan documents to the escrow agent or seller attorney.
  4. Final walkthrough: The final walkthrough is usually conducted anytime between this point and up to the day prior to the actual closing. This is to confirm that the property is in fact in the same condition it was at the start of the process and as agreed upon in the contract.
  5. Signatures: Signature of the final “Verification of Property” form by both parties.
  6. Buyer finalizes down payment: The remaining money owed for the down payment is paid by the buyer to a representative of the title company or attorney who is acting as the settlement agent for the transaction., closing costs and other associated expenses with the escrow agent.
  7. Deed is recorded: Funds are disbursed and the closing reaches completion.

 

picture of an California home seller thinking

Final Thoughts

 
 

We hope that you have found this guide informational and beneficial. Selling a home can be an emotional and exciting time in one’s life. But it can also be a stressful one as well. Knowing what to expect and how to best prepare for the process can help you remain calm and in control throughout.

 
 

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