Real Estate Checklist for Sellers

  1. Sale price: Is the sale price fair? If you have not watched the market enough to feel qualified to judge, have you had an appraisal or hired a local appraiser to make an appraisal for you? Have you considered the value of a low interest rate mortgage (if yours is one that the Buyer may assume) or the recent increase in the cost of living? Are you in a hot or speculative real estate market?
  2. Qualification of Buyer: Be certain that all Buyers are over 21 and have a good reputation.
  3. Assumption of Mortgage: If the Buyer is to assume your mortgage, are you aware that you may be held to pay any deficiency should the Buyer become insolvent and a foreclosure result in insufficient funds to pay the balance then left due on the mortgage? Today, most mortgages have a due on transfer provision.
  4. Insurance: Remember to keep your insurance protection until you have no further risk in regard to property. If the Buyer does not assume your policy, remember to obtain a refund upon cancellation.
  5. Income Tax Considerations:
    1. Capital Gain--one-year Holding: If you are selling the land at a profit within one of buying it, you may be wasting an income tax advantage in regard to capital gains. The holding period has changed several times. Therefore, always check with your tax adviser. This IRS link explains some of the considerations: http://www.irs.gov/taxtopics/tc409.html.
    2. Tax Losses and Profit on Sale: If, during the year of sale, you have other tax losses but a profit on the sale, you may be losing an income tax advantage by postponing the sale where the gain can be offset against other losses. Always check with your tax adviser.
    3. Deduction of Taxes: A Buyer and Seller can each claim a deduction for the part of real property taxes paid or accrued proportionate to the number of days during which he held the property. A cash-basis taxpayer is permitted the deduction, even though he does not make the actual payment, if the contract of sale apportions the taxes.
    4. Residence Sale: If you are selling your principal residence you must consider the potential taxes and exclusion. http://www.irs.gov/taxtopics/tc701.html.
    5. Sale by Installment: If you are taking a mortgage or selling on contract, there must be at least one payment after the tax year of sale to have the sale qualify as an installment sale. http://www.irs.gov/publications/p537/ar01.html.
      This, in turn, will permit the profit to be allocated over the years in which the proceeds are received. Such a procedure can result in a tax savings on the capital gains, either because of:
      1. Lower future income,
      2. Leveling out of income, or
      3. Lower future tax rates.
      4. If you plan on having substantial future increase in income, such a procedure can result in added rather than reduced taxes.
    6. Corporation Sales: If a Seller is a corporation, the gain may be taxed twice--first, to the corporation and, second, upon liquidation to the stockholders, if the amount received in liquidation is in excess of the cost basis of their stock. Liquidation of the corporation with proper planning can, at times avoid this double taxation.
  6. Estate Tax and Gift Tax Considerations: If you have surplus funds beyond your own predicted needs, this may be an appropriate time to review with counsel ways in which you can transfer property to your loved ones with minimal tax impact.
  7. Investment Considerations:
    1. Have you considered which banks and savings and loan associations provide the highest insured return?
    2. If the consideration is being given to mutual funds, are you aware of:
      1. The "no-load" funds?
      2. Books existing that measure the performance of mutual funds?
    3. If you are taking a mortgage or selling on contract:
      1. Is your return equal or higher than the current mortgage rate?
      2. Are you given the option under such an agreement to require Buyer to re-finance upon reduction of balance with or without a prepayment penalty after Buyer has paid 50 per cent of the principal?
    4. Are you aware that your banker, as well as your broker, will often give you investment advice, and that a double check often provides needed balance?
    5. There are investment counselors and financial planners who can be consulted.
  8. Details Needed by Attorney to Prepare the Documents (usually the Contract to Sell the Property):
    1. Papers: If you have them, your deed, title insurance policy or abstract, last tax receipt, mortgage papers, and copies of any survey should be left with your attorney.
    2. Routine Data: Please list your name, business and home phone, street address of property you are selling, your home address after sale, location and estimated balance of your mortgage with interest rate, and the name of your property insurance agent.
  9. Matters for Discussion: The following questions should be resolved:
    1. Building and Zoning Codes: do any zoning or building code problems confront the Buyer?
    2. Mortgage Assumption: Is the Buyer going to assume your mortgage: If so, is he aware that he will receive credit for any accrued FHA premium, but will have to reimburse you for your mortgage reserve? Assumptions are no longer common.
    3. Assessments: Are there any assessments for streets, sewers, and the like? If so, are these to be assumed by the Buyer without credit on the purchase price? Are any assessments planned, but have not yet resulted in a lien on the property? If so, forewarn and disclose them to the Buyer.
    4. Possession: Are the Buyer's plans for possession in accord with yours and the rights of lessees or tenants in possession?
    5. Property Lines: Does any disagreement, actual or potential, exist in regard to placement of the property lines?
    6. Movable Property: What items of movable property are being sold (e.g., range, refrigerator, curtains, rugs, TV antennas)? What is the purchase price for those movables? Is that amount included in the total purchase price?
    7. Lien Potentials: Are you aware that, depending on local law, all improvements made in the last 120 days may have to be paid for and an affidavit given that payments have been made?
    8. Insurance: Will Buyer take over your insurance policy?
    9. Purchase Price: What is the purchase price? How much is to be paid down? How much by installment? If by installment, what interest rate is to be charged Buyer?
    10. Title Insurance and Transfer Taxes: If it is the custom in your area, are you to bear:
      1. The cost of title insurance? Usually the seller pays the owners title policy premium. The buyer pays the premium for the mortgage company policy.
      2. The payment of the transfer taxes?
    11. Attorney's Fees: Are the attorney fees for preparation of real estate contract, escrow contract, and deed to be split? If so, you must understand that
    12. Your interest conflicts with that of the Buyer in regard to fixing the purchase price, and the attorney will have the duty to give Buyer any information he has that indicates the purchase price to be unfair or the title defective; and
      1. Should a conflict arise regarding adequacy of title, fraud, or questions of interpretation of the contract, the attorney would not be able to represent either party in a suit against the other.
      2. This paragraph is included as the question about one attorney to prepare the documents on behalf of both parties does arise. It is the policy of many attorneys to not represent both buyer and seller.
      3. Normally the title company providing the title insurance is paid a fee to do the closing documents and this fee is split between the buyer and the seller.
    13. Escrow and Mortgage Assumption: If there is to be an escrow or mortgage assumption, are the charges for this to be split?
    14. Personal Property Taxes: If an apartment house or business property is being sold, how are personal property taxes to be handled?
    15. Easements: Do any other persons use paths, roads, or sewer lines, or have any easements over the property being sold? Do you use any adjoining property for paths, roads, sewer lines, or have any easements over adjoining property?
    16. Realtor Claims: Does any realtor have claim for any commission in connection with the sale?
    17. Special Agreements: Are there any special agreements?
    18. Normally the Seller should have his attorney prepare the receipt and option contract for sale of the property and the deed and closing papers. You should make the Buyer aware that he has the right to have his own attorney review the papers prepared by your attorney. Under no circumstances should you represent to the Buyer that your attorney will represent both you and the Buyer since this will cause a conflict of interest as noted in paragraph k above.
    19. If you carry a mortgage for the purchaser, be sure to review the interest rates you are charging with a tax advisor. The Internal Revenue Code provides for imputed interest rates where your note rate is too low.
  10. The following link:
    http://papers.ssrn.com/sol3/papers.cfm?abstract_id=269384 is to a site which has a paper titled "Disclosure Duties In Real Estate Sales And Attempts To Reallocate The Risk" by Florrie Young Roberts of Loyola Law School (Los Angeles) dated May 9, 2001.
  11. You should consider having your attorney put an "As Is" clause in the contract.
  12. ALWAYS HAVE THE DOCUMENTS REVIEWED BY AN ATTOYNEY BEFORE SIGNING ANY CONTRACTS.

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.