Seller Pitfalls

·       It seems as though as many of us live longer we may live more complicated and challenging lives.  We spend our lifetimes driven by goals of accumulating wealth that for some involves the appreciation in the value of real estate assets, vacation homes that were a passion and potential conflicts when a divorce or bereavement occurs.  Blended modern day families, differing objectives, division of real estate assets can create fertile ground for the war of the roses within families.  Alternatively, poor planning can create family divides between siblings, known in the legal world as "chock holds" when siblings cannot or will not agree to the sale of a family asset, greed and misjudgment can quickly complicate matters.  The end result may be a sabotaged sale and years of expensive and unnecessary litigation.

·       The pandemic resulted in many individuals re-assessing the quality and priorities of their lives.  For some this was an opportunity to hit the life re-set button, working remotely, moving out of major Cities to different States.  Children may have returned home.  Parents may have moved in creating the need for generational living flexibility.  For some marital difficulties came to a head resulting in the decision to sell real estate that has been home for so many years.  There are many potential pitfalls that can be avoided by gaining good professional guidance and preparing a strategy that supports these changes.

·       Emotions often run high during the sale of a home.  It will be easier to be objective if you feel well educated and informed on your position within the transaction and have a strategy in place to manage the process.  Try to avoid selling without the right representation!  There are financial and legal implications at stake during the process.  Logic and reason should prevail!

·       After a time of great uncertainty, it is important to take responsibility for effectively planning the protection and division of real estate assets whether your primary or secondary residences.  Your wealth advisor, estate or trust attorney and a carefully selected real estate professional are all key components to ensure that this sometimes-emotional process is managed carefully and with dignity for all involved.  Potential problem areas include the following aspects.

·       Tax policy changes can complicate the estate planning process.  It is really never too soon to sit down and look at the tax implications and potential complications of the real estate sale.  This will avoid surprises at the closing table whether due to divorce or family bereavement.  This element should be taken into consideration as part of a marriage settlement agreement or creation of a will.  Revisit your plan on a regular basis to ensure that all liabilities are understood and accounted for.

·       Parents may be surprised at the wealth transferring to children.  Are the children qualified to manage the wealth transfer? Is there potential for family rift?  Are children in different States or countries unable to manage the ownership or sale of the real estate asset.  So many of my customers are starting to express concern about the Estate sale of their hard-earned and often valuable real estate assets.  Will the sale be managed properly or just become a 'fire sale' stigmatized by family wanting a quick sale or poor real estate guidance in terms of pricing and transactional management.

·       A vacation home may fall into a passion asset category and the remaining family may not share the passion!  For example, an oceanfront residence may have been enjoyed over the years but work pressure or geographic challenges may create a whole different scenario with high maintenance and insurance costs.  Take a hard look at your real estate assets and be aware of the length of time it may take to sell the property.  This is a good opportunity to align with a real estate professional who is active in the community and can guide you on value and market times.  The same can apply to a divorce situation and needs to be incorporated into a marriage settlement agreement.   Legal and accounting advice is beyond the scope of real estate and should never be assumed by a real estate professional.  Surround yourself with a team of strong advisors at an early stage of lifestyle and estate planning.

·       Taxes, always a thorny subject.  The more you earn and accumulate the greater the liability.   Seek the advice of an expert to be informed of exclusions or transfer taxes relating to businesses, investments and real estate that may attract estate tax bills.  In the US we have Foreign Investor Real Estate Taxes that will be due at the time of closing from non-US citizens.  Again, taxes need to be addressed and allocated during bereavement or divorce situations.  You may consider a corporate trust for real estate holdings to avoid mismanagement by family members, this type of structuring is guided by your attorney and accountant working synergistically.

·       Obtain at least one certified real estate appraisal.  Do not rely on the opinion of family or friends.  It is really important to be totally objective during a stressful and emotional time.  Seek out appraisers who are experienced in your real estate market so that your real estate assets are properly and impartially managed.

·       Combine the results of the appraisal with the opinion of value from your chosen real estate professional.  There is often a temptation to over-price and this may result in a series of price adjustments that can be stressful to the individuals involved, they may also result in increased legal fees and longer market times if not managed efficiently.

·       Meet with three real estate professionals who are active in the community.  Are they a good personality match during a potentially emotional process?  Do they have consistent sales performance in the community?  Will your home be promoted in a timely and professional manner?  Obtain a detailed marketing and sales strategy from each.  Try to avoid retaining family or friends who may not be qualified or be able to be totally objective!  This can be a costly mistake in both time and money.  Ensure that your selected agent is well connected, based locally but has a national and global reach appropriate to the community.

·       It is not unusual for a residence to require maintenance, a declutter or in certain circumstances professional staging may be required.  Seek the advice of your real estate agent on these issues.  Remember, in the event of a sudden death your attorney will need to guide you because the Estate may be sealed until settled.  This is a highly relevant consideration in the event of family conflict or even geographic challenges for remaining family members. This is another strong argument for having your affairs in order when preparing for a real estate sale.  

·       You may wish to consider a pre-sale inspection of the home.  An aging roof, outdated plumbing and electricity or a failing sea wall on an older waterfront home are all expensive considerations that may adversely affect value and market time.  A practical example of this situation is the changing height requirements for waterfront properties in Broward.  Older homes may have a lower or deficient sea wall.   The age of a roof and plumbing construction are also issues that drive insurability costs higher.  These are all elements that require consideration when coming to market. 

·       Also consider seasonal variations in different markets.  It may be challenging to sell a mountain home during the winter months or a tropical retreat may take longer to sell during the summer in certain markets.  Selling at the wrong time should be taken into consideration.  The local real estate market may change due to seasons, inventory, interest rates, competing new construction or even zoning changes may be influencing factors.  This is a subject for discussion with your chosen real estate agent.  It is very difficult to time a real estate market and sometimes the circumstances are beyond your control.  However, it is best to be fully advised and prepared to avoid expensive mistakes at any stage.

·       Has your lifestyle changed and you are no longer using a home?  This frequently happens in the luxury markets.  Sellers may decide that they prefer a mountain over coastal lifestyle!  Grand children arrive and the condo in Fort Lauderdale becomes unattractive.  Health restrictions impact desirability of a two-story residence.  Career moves or retirement necessitate a sale or change in family circumstances that may not always be avoidable or popular.  Not all family members may be comfortable or in agreement with life changes that can be emotionally charged and financially challenging.

·       Are your philanthropic goals shared by your spouse or family?  This is another potential area of contention and should be taken into consideration if appropriate to you.  The pandemic gave so many a cause to pause a reconsider lifestyle priorities!