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If you’re trying to figure out how to sell your house in Los Angeles, be ready to deal with some challenges in the next year. The housing market is cooling off around the country, and the Golden State is no exception: The California Association of Realtors projects that median sales prices in the state will decrease by nearly 9 percent in 2023.
That doesn’t necessarily mean home-selling is no longer a good idea in the City of Angels — just that it’s not quite the slice of angel’s food cake it used to be. As you prepare to list your property, read on for some key considerations to pave the path to a smooth and successful sale.
Sell a house fast in Los Angeles
While buyers were moving fast when mortgage rates were low, that’s no longer the case. The California Realtors Association reports that the median number of days a property spent on the market in September of 2022 was 23 — compared to just 10 days one year earlier. While it’s hard to pinpoint the best time to sell a house right now due to changing market conditions, it’s easy to spot the worst time to sell a house here. Redfin data shows that properties have sat on the market for much longer during winter months over the past two years.
As individual buyers worry about inflation, rising interest rates and general economic uncertainty, it’s likely that properties will continue to take longer to sell in Los Angeles. If you’re on a tight timeline, consider looking at iBuyers, which include companies like Opendoor and Offerpad. Be aware that the offer you’ll receive from one of these flip-oriented firms, while in cash, may be significantly lower than you would from someone who wants to actually live in the house.
Plus, some of the iBuying activity is slowing down even in southern California, one of its longtime bastions. As of Nov. 9, RedfinNow – one of the biggest names in iBuying – was not operating in the Los Angeles metro area, or in fact anywhere: this iBuying arm of the real estate brokerage Redfin was shuttered permanently.
Things to consider when selling your house in Los Angeles
As you’re preparing to list your home, you’ll need to think about some important questions to develop your sales strategy.
What kind of shape is your home in?
Is your home in need of a ton of repairs? Rather than paying to fix everything, you can consider listing the house as-is — meaning, you won’t make repairs or improvements, but have priced the house to take its condition into account. Or is it in fairly great shape but could use just a touch of love? It might be worth investing a small amount of cash in a quick and easy project that can boost your property value.
How quickly do you need to sell?
Are you trying to sell your house while buying another? If you’re relocating from Los Angeles to a housing market where properties are going fast, you might find yourself in a tough spot if you can’t afford to pay two mortgages at once. As properties sit on the market for longer, you might want to think about ways to accelerate your sale.
The biggest holdup tends to be waiting for a buyer to receive formal approval of their financing, and that holdup is getting even more challenging due to steadily-rising mortgage rates. With that in mind, it’s wise to try to sell your house for cash, either to a deep-pocketed individual/investor, an aforementioned iBuyer or a local “cash for homes” real estate firm. You will probably make a bit less than you would from an individual buyer who’s using financing, but time is money. Sell it faster, and you can move on with your life.
What’s the market like in your specific area?
You’ve lived in Los Angeles long enough to know that different neighborhoods have different levels of desirability. Buyer activity in Fairfax might look much different than it does in Culver City. For example, Redfin’s data shows that properties were spending 35 days on the market in West Hollywood in August while properties just nine miles away in downtown LA were taking 77 days to sell at the same time.
How much will all this cost?
When you’re selling your home, you’re likely focused on all your profit potential. However, you need to consider another big question: How much does it cost to sell a house? The answer varies based on a number of factors including your sales price and your contract negotiations. As you think about your bottom line, be sure to consider these costs:
- Realtor fees: This represents the biggest chunk of cash that eats into your profit potential. You’ll be responsible for paying your agent’s 3 percent commission (unless you can negotiate a lower fee) and the buyer’s agent’s 3 percent. Both will come off the top of the purchase price.
- Transfer taxes: There are hefty real estate transfer taxes imposed at both the city and the county level in Los Angeles. Los Angeles County charges $1.10 for every $1,000 of house value, and the city itself charges an additional $4.50 for every $1,000 of value. On a $750,000 sale, that comes out to $4,200 in transfer taxes. No law mandates who has to pay the tax, however, so you may be able to negotiate splitting the tariff with the buyer.
- Title insurance: Again, there’s no legal mandate, but it’s standard practice for the seller to pay for the buyer’s new title insurance policy in southern California. While rates vary, a policy for a $1 million property would typically be $750.
- Unpaid property taxes: If you have any outstanding property taxes, you’ll need to pay your portion of that bill at closing.
- Attorney fees: If you hire a real estate attorney (which is always a wise decision), you’ll need to pay them based on their rate and the number of hours they put into your deal.
- Concessions: Don’t be surprised if the buyer requests that you cover a portion of their closing costs — or knock some money off the purchase price — if they uncover any necessary repairs during their home inspection.
Preparing your home for sale in Los Angeles
Since buying a home in Los Angeles costs so much cash, most buyers are going to need to feel wowed as soon as they see a property. Who wants to pay $750,000 for a place that looks cluttered or outdated? To stir up a love-at-first-sight feeling in prospective buyers’ hearts, you might want to hire a professional home staging service. The cost of staging your home varies based on whether you need just a little assistance – editing and organizing, for example – or major help such as renting furniture to outfit a few rooms. It can make a huge difference in how quickly you sell and how much money you make. A 2021 “Profile of Home Staging” report from the National Association of Realtors found that 23 percent of agents believe that staging helped increase offers by 5 percent.
In addition to considering staging services, you should think about what’s underneath the floors and in the walls. A pre-listing home inspection can help you spot potential red flags before the buyer’s home inspection uncovers them. If your agent thinks they’ll lead to concession requests or even be deal-breakers, you might want to just pay for them to avoid any snafus.
Gearing up for your listing also involves some paperwork. You’ll need to complete the California real estate transfer disclosure statement and share all your knowledge of any defects and issues on the property. You’ll have other forms to complete, too, such as a natural hazard disclosure and Meghan’s Law disclosure.
Selling your house with or without a Realtor
If you’re thinking about selling your house in Los Angeles, you’re probably thinking about trying to do it on your own. After all, a 3 percent commission on a $750,000 property means you’ll pay your agent $22,500. However, that is money well spent if you don’t have the ability to take on the responsibilities of a real estate agent.
Opting for an FSBO – For Sale By Owner – listing means that you will need to craft a compelling listing, advertise it online, schedule open houses and negotiate with a buyer’s agent. Plus, you’ll still need to pay the buyer’s agent’s commission.
Does all that work sound a bit too much? It’s time to find a local real estate agent.
Pricing your home to sell
Once you have a solid understanding of how much you will need to pay to sell your house, it’s time to figure out how to get a buyer to want to pay whatever it takes to get the keys. There are simple and free ways to estimate what your house is worth, but online algorithms aren’t that smart. They don’t know if you updated your kitchen or you installed a new outdoor fire pit.
So, instead of relying on technology, ask your agent to talk you through comps of similar properties that have sold in the last couple of months. What happened a year ago doesn’t matter: The market looks very different now, so it’s important to understand what buyers have been willing to pay – and how quickly they have made their offers – as they stare down 7 percent mortgage rates.
Getting to closing day
After you accept an offer and sign the purchase and sale agreement, you still have a bit of work to do to make sure the deal goes through. Make sure you’re answering emails, texts and phone calls from your attorney and your agent to respond to contract revisions and concession requests as quickly as possible. Buyers have been backing out of contracts to a higher degree lately, especially with the rapid rise in mortgage interest rates, so make sure you are protecting yourself.
After you’ve cleared the initial hurdle of a home inspection, things are likely looking good. It’s time to schedule movers, and as your move-out approaches, make sure the home is in good shape for the buyer’s final walk-through: It should be in what’s called broom-clean condition.
Be sure to review the closing statement — a list of all the closing costs and expenses — that you’ll receive about three days prior to the closing. You can attend the event yourself on the actual closing day, but often you don’t need to show up; your attorney can handle all the final details and make sure you pay all the necessary closing costs.
The rest of the net proceeds are yours. Congratulations, and happy days in your next home — whether it’s across the street or across the country.