The Home Selling Process Part 2 of 3: The listing agreement and working with a realtor

Representation

The most common choice is to work with a realtor or real estate professional, either by referral, word of mouth or reputation, or of course a combination thereof. The advantage of working with a realtor for any seller is that they will get full representation on the back of what is called a listing agreement which I will go into in more detail, but for now lets just say that a listing agreement is encouraged and or required in all fifty states. 

In essence the duties of a contracted 'realtor' include the following...

  • Obedience (within reason)
  • Loyalty
  • Disclosure
  • Confidentiality
  • Accounting 
  • Reasonable care 

If you are that rare seller (around 1%) who is considering going with the for sale by owner (FSBO) option, keep in mind that you do not have access to the myriad tools a realtor has to find a buyer, or for that matter a plug and play support system to help you navigate your way through what can be a very complex process.

Similarly, when it comes to making sense of a contract it is less likely that a non-represented individual will have a comprehensive understanding of the market and the various contingencies that are typically attached to a real estate transaction, each of which holds value depending on the side. No two transactions are entirely the same and it can take a keen eye to recognize how to structure a successful arrangement in context. While you may save on the professional fee/compensation, I liken it to not working with a lawyer or a doctor when it comes to legal or health matters. In short, the process can take a lot of effort and time/oversight and should involve at the very least an attorney who is familiar with the ins and outs of real estate.

The Listing Agreement

A listing agreement specifies the various details that pertain to the seller and the sale side, and the principal elements of a typical agreement are as follows: 

Name of the sales agent/representative and brokerage

Fergus O'Brien, Long and Foster Inc etc

Start/End date

Length of contract from beginning to end 

Price

Other than location nothing is more important than setting a pricing to win. On the one hand you don't want to undersell and on the other you don't want to oversell, so how does one determine a price that makes sense and works for all parties. Since no one, unless the property has an identical twin at the identical time with the identical buyer type, knows for sure how much a property will sell for at any given time, but a good listing agent should have the tools and know-how to price a listing correctly or somewhat correctly by way of a close examination of like comps that sold within a reasonable time frame such as up to 180 days when it comes to the DC metro, for instance. Metrics have proved time and time again that it is better to under price than overprice, simply because a seller is ultimately looking attract as much interest as possible.  

Commission

Traditionally paid by the seller, but given the recent NAR (National Association of Realtors) settlement on commissions, there are no guarantees that the seller will pay a commission. However, it is recommended that they do, because the buyers agent will need to get paid and or have an incentive to bring the buyer. Historically in my area, the DMV, this fee has been 5-6% to be divided equally between the buyer's agent and the listing agent. For my part, I can qualify that this fee is typically well-earned, though in life some transactions come more easily than others.

I have worked with buyers who found a home in as little as two weeks and conversely I have worked with buyers who decided to stop looking or postpone their search after a year of looking. It's the same as working in a store. Sometimes a customer comes in and makes a purchase without needing help and there are other times when a customer can come in and try ten pairs of shoes and walk out with nothing. 

Amount owed on the property/type of mortgage etc

What the seller owes on a mortgage/loan? 

Date purchased plus dates occupied

November 2010 to Present (for example) 

Disclosure

Includes a property condition statement and an inclusions and exclusions statement. In general anything that is attached to a wall conveys, unless otherwise stated. A seller can choose to convey furniture if they so choose. Property condition relates to known issues, age of a roof or other items (can be unknown) or material defects such as a non-working window or heating and cooling that doesn't reach a specific room. The less a buyer has to do to fix repairs the better, but there are occasions when time prohibits the seller from taking care of these things themselves. The key is to price accordingly and to expect the buyer to include an inspection contingency, or in the event of a competitive listing, to ask for a pre-inspection (prior to writing in an offer). 

Keep in mind that a disclosure is not required by every state and or there are exemptions like in the case of a court order or short sale. Viriginia which makes up part of the three state grouping we call the DMV (DC, Maryland, VA) due to proximity, is a caveat emptor state, meaning that there is a buyer beware overlay in all real estate transactions which in turn precludes the listing party from the need to provide a disclosure. In this case, the would-be buyer will depend on a thorough inspection, or any information the listing agent might want to reveal such as a recently replaced HVAC or a brand new roof.   

SUMMARY

While a listing agreement is necessary to sell property via the multiple listing service (a private database that is created, maintained and paid for by real estate professionals to help clients buy and sell property), it is solely the property of the seller and their brokerage. The signed disclosures however will be visible to the other side and will become part of the contract whereupon the buyer side and their representative will be required to acknowledge the conditions by way of a countersignature set.  

Thank you for reading and as always feel free to like the post and or ask questions...





NEXT UP: Marketing, Showings/feedback/open houses, price reductions, reviewing a deal etc. 






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