Selling Your Home

 

Hiring a Realtor


Picking a realtor and getting started

If you've decided to get a realtor, where do you start? Referrals are the number one way of picking real estate agents. Talk to your friends and neighbors. Narrow down to at least three to talk to. Pick up the phone and set up meetings.

Most realtors will come to you, see your property, and bring a presentation (“marketing plan”) to discuss selling your home. You’ll hear about types of listings, and price ranges for comparable homes in your neighborhood (called "comparables”). Ask how the agent will market to other agents - through previews, open houses, or caravan. If the agent tries to get you to sign right away, don’t.

Ask each realtor to come back with more details and a specific price in mind a few days later. Compare what they’ve said, how you feel about them, and the proposed prices.

Do a little research yourself to see comparable prices. Use www.realtor.com, or www.mls.com, or any large real estate company’s website to look at properties for sale in your school district or zip code. This way, you are armed with information so you know if the prices proposed by agents are realistic or overly optimistic. Below are some questions to get you started when selecting a realtor.

Example Questions For Your Realtor
When you talk to your realtor, consider asking...
1. How long have you been a licensed realtor or real-estate agent?
2. How far does your area extend?
3. Do you live in the area?
4. How many homes have you sold in the past year?
5. What services can you provide, specifically, in terms of marketing my home? (flyers, ads, open houses, etc.)
6. What other services or individuals can you recommend to assist in preparing my home for sale? (repair people, gardeners, painters)
7. How quickly will my home appear in the MLS?
8. What is the average number of visitors you expect to get through my home?
9. What special incentives will you use if the house is on the market for a long period of time?
10. How long do you expect my home to be on the market? Why?
11. How will you go about setting the price of my home?

Pick an Agent

Once you’ve met with several agents, heard their marketing plans for your specific home – including proposed price and services to be provided - you need to decide on one.

Price should be a factor in your decision, but reputation, knowledge of your neighborhood, and good referrals are all essential.

When you select a realtor. You will need to setup a Listing Contract. Here are some tips for listing contracts.

The Freakonomics of Realtors

Realtors have taken some hits in the press in the past year, including in the much touted Freakonomics book by Stephen Levitt and Stephen J. Dubner. Among other things, this book points out what anyone could see if they did the math. As agent commissions are squeezed by sellers and competition, an agent’s return on an additional $10,000 is the selling price of a home is so small, it may not be worth their effort to try and get it for you, or the risk of losing the deal.
 
Here’s an example. Standard commissions are between 5% and 6%. This money is typically paid by the seller, and split between the seller’s agent and the buyer’s agent. That means on a $300,000 sale, at a 5% commission, your selling agent stands to make 2.5%, or $7500. You want your agent to go back and counter offer, to get you to $310,000? For you, it’s an extra $10K. For the realtor it’s an extra $250. The agent barely gains anything and risks losing the deal all together.

Set up a Listing Contract

What goes in the listing contract? Here are the main elements:

  • Listing price
  • Terms of sale (personal property that is included – fridge, washer/dryer, ceiling fans; real property that is excluded – your grandmother’s chandelier)
  • Commission percentage
  • Term of contract (90 days is typical)
  • Options for renewal, including for shorter timeframes
  • Timing of when commission is paid
  • Listing with MLS or local version of MLS
  • Use of lockbox or by appointment showings
  • Agent’s duties as your “seller’s agent’ including fiduciary duty (responsible for your financial best interests)
  • Protection periods
  • Additional disclosures if agent’s company also may represent buyer
  • Arbitration/dispute resolution procedures.

Remember that you can negotiate almost anything on the listing contract. Be careful to include clauses to protect yourself in terms of when commissions are paid, cancellation of the contract, protection periods (should you change agents), and termination without cause.

 

Take Caution with Agent Agreements

While most agents are reputable and professional, make sure your listing contract protects you against contingencies. For example:

  • Your agent contract will specify when commissions will be paid. Make sure commissions are paid from proceeds of the sale upon successful closing, not when an offer is accepted.
  • If you change agents, and your house eventually sells to someone who initially saw it when you were represented by your first agent, you may end up owing two commissions. Many agents will discuss this with you, and work out an equitable arrangement. But if the agent contract specifies a “protection” period, negotiate it down to 90 days or less, and get the specifics in writing, just in case.
  • Make sure there is a protection clause in both contracts – including the one with a second agent.
  • Request a clause for cancellation of your contract for any reason, with a specified termination notice in writing (for example, two weeks). If your agent messes up severely (lies, steals, cheats), you can terminate “for cause.” You won’t owe commission, but you may still owe for costs and a penalty. Look closely at your contract for “termination for cause” provisions.
  • Put everything in writing, for your sake, your agent’s sake, and clarity of a good working relationship. 

Your contract with your realtor is one of the most important steps in selling your home. Click here for more information on your contract with your agent.

Now let's turn to marketing your home and maximizing your sale price.

Disclosure

Along with the listing contract, you need to fill out a disclosure form. Disclosure means communicating any material fact about your home that might influence price, or a buyer’s decision to purchase or not. In other words, it is a record of all the pertinent information about your house – it’s age, construction method, type of mechanical systems (air/heating system, water supply), and many other details, along with dates and descriptions of repairs, additions, or known defects.

Each state has specific disclosure requirements, and your realtor should give you the form you need to fill out, and help you determine what is “material” and what is not.

Along with flyers that advertise and describe the features of your home, many agents recommend that you have copies of the disclosure form available as well. Prospects will typically leave your house with both a flyer and a disclosure form, to help remind them of what they’ve just seen.

 

If You Change Your Mind About Selling. . .

Your out-of-state job falls through. You’re relieved to find that your former employer is happy to have you back. But now you want to take your home off the market. What do you?

Maybe some other life event is causing a delay in your plans – unexpected illness, or the baby comes early. You still want to move, but you need to postpone the selling process for awhile, so you can take care of family matters.

The unforeseen happens. This is why you should cover yourself in any contractual agreements, as much as that is possible.

  • Know the financial consequences if you change your mind, at any point in time – look closely at the listing contract.
  • Are there penalties for early termination?
  • Do you have a grace period for changing your mind upfront with a lesser termination fee?
  • When are fees or commissions due to the agent, depending upon where you are in the process?

Be an Informed Consumer

Ask questions before you sign with your realtor or broker. Explain any risks you are aware of. Understand that real estate professionals are used to bearing a certain amount of risk, but they're also less likely to actively market your home if they think they’ll make nothing for their efforts, or that you’re on the fence about selling.

Remember - there is a fine balance between motivating your realtor to work for you, and not valuing the time, expertise, and services that go into that process. Just as you expect good faith services on your behalf from your agent, your decision to sell should be in good faith as well.

If circumstances do change, realize that you may have expenses to pay your broker. They’re legitimate. He may have been working for you for some time, and your change of circumstances is outside of his control as well.

A note about sales contracts

If you think there are contingencies in execution of or timing of a sales contract on your house, make sure you discuss them with your realtor. Cover them in the agreement reached with your buyer, or you may find yourself in the difficult position of being legally bound whether your circumstances have changed or not.

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A note on loss

The disclosure process requires you to communicate material facts about your home. If a death has occurred in your house, depending upon the circumstances, you may be required to disclose it. In most instances, that isn’t the case, particularly when it is due to natural causes or illness. But check with your agent, and make sure he or she knows the circumstances – what to say, and what not to say.

Some people will not want to purchase a house in which there has been a death. Others will find that immaterial, regardless of the circumstances. But you don’t want problems at closing because of failure to disclose a material fact that would’ve influenced the buyer’s decision. So don’t take a chance, and tell your realtor. 

The listing contract is set, and disclosure statement is done. Click next, for a few more things to keep in mind when dealing with your realtor.

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