08/05/08: A Primer to Home Sellers
By Benny L. Kass
Q. We have lived in our house for more than twenty years, and finally decided it is time to move to a smaller – and more physically friendly – place. We have interviewed a number of real estate agents, but do not know what questions to ask. What is the difference between an agent and a broker? What is a listing?
A. I could write a book in order to answer all of your questions, but let's start from the beginning. You have decided to sell your house. Do you have any idea of what it is worth? Obviously, you do not want to sell at a low price, but you also do not want to set the price so high that potential buyers will be turned off. As you know, the real estate market is currently sluggish; have you considered holding off until the market rebounds?
There are several ways to determine market value. You can hire an appraiser, who will give you a written analysis of your house, and his/her best estimate of what the house is worth. The cost of an appraiser will be in the range of $300-500. While I usually do not recommend that potential sellers obtain an appraisal -- since this is just an additional cost which you will have to bear -- in your case it probably makes to engage the services of a professional, independent appraiser.
You can also talk with several real estate agents, and ask them to evaluate your house. There is absolutely nothing wrong with soliciting several real estate companies before you make the decision as to which company to use. In fact, I always recommend that if you plan to use an agent to help you sell your house, you must shop around. You should contact several agents, and meet with them separately. Each agent should be able to give you their estimate of market value. When you are interviewing the agents, you may get a wide range of estimated valued. However, some agents will low-ball the property, while others may want to impress you and give you a high valuation. This may be yet another reason to have your own appraisal before you start the interview process.
Some people use the assessment from the local county (or city) which is used for real estate tax purposes. Don't rely on that number, since it may not reflect the current value of your house. You asked about agents and brokers. Oversimplified, an agent -- often called a “salesperson” -- works for a broker. Only the broker can earn the real estate commission. You should keep in mind that when you hire a real estate person, you are really engaging the broker -- although it may be the agent who will (or should ) be in constant touch with you. This is a technical legal distinction, which should not be a concern to you.
Here are some questions you should ask all of the agents/brokers that you interview:
when did you get your license?
please give us some references so that we can check you out?
what do you think our house is worth, and why? Show us the documentation on which you made your estimate.
why should we retain you instead of some other agent?
if you are retained, how do you plan to market our house?
When you finally decide upon the real estate person, you will have to sign a contract. That contract is called a “real estate listing”. In effect, you are authorizing the real estate company to list your house for sale. If the agent is successful, a commission will be earned.
What should the real estate listing contract include? Keep in mind that the real estate agent will hand you a form listing agreement for you to review and sign. This form is not “carved in stone”. You certainly have the right to add and delete paragraphs to meet your particular needs. Here are some suggestions for items to be included in any listing agreement:
l. “ The commission will not be earned until and unless settlement actually takes place”. The standard listing agreement often states that should the broker bring you a purchaser who signed a real estate contract, a commission will be earned. But what happens if that buyer does not go to settlement? Without the proposed language referenced above, the agent could legally claim a commission, even though you have not sold your house.
2. The listing should be for not more than 90 days. You can always extend the listing if you are pleased with the services of the agent/broker. However, if you tie your house down for a long period of time, and are dissatisfied with your broker, it is often difficult to terminate that listing agreement.
3. Make sure that all terms are included in the listing agreement. These terms include such things as price, and any other seller concessions you are willing to make. Additionally, if there are certain items which will not convey with the house, these items must be specifically spelled out in the listing agreement. For example, if you want to take your favorite chandelier with you, you must advise the broker -- in writing -- at this early stage. You should understand that any item which is affixed to the house, such as light fixtures, mirrors, plumbing, legally must convey to your purchaser. In the Washington metropolitan area – as contrasted with the situation out west – washers, driers and refrigerators generally convey, but not always. To be on the safe side, spell out your intentions in the listing agreement -- and then again on the real estate contract when there is a potential purchaser.
4. What will you pay the agent if your house is sold? Negotiate the commission before you sign the listing. Remember: everything in real estate is negotiable..
5. Will you permit a sign in front of your house? Will you allow the agent to hold open houses -- and if so, how many per month? How often will the agent advertise the house? All of these are important items, and must be included in the basic listing agreement.
It is also recommended that you engage the services of a competent real estate attorney, who will give you guidance throughout the process. Your attorney should review all documents which you sign -- before you sign.
It should be noted that unless there is a written listing agreement, a real estate broker or agent may not collect a commission from the Seller. This was recently affirmed by the District of Columbia Court of Appeals in a case involving a complex commercial transaction. ( CB Richard Ellis Real Estate Services Inc. v. Christian J. Spitz, et al, decided on June 19, 2008).
Selling a house should not be a complex process. However, there are too many players involved in the real estate game -- and most of them are primarily looking out for themselves. Make sure that you have players that are on your team, and will be working exclusively for you.