12/02/07: Finding A Real Estate Agent
By Benny L. Kass
Q: We know that sales of single family homes are slow, but for a number of reasons, we have to sell our house within the next three to four months. How do we go about finding a good real estate agent? We live in a nice neighborhood, with lots of children and good schools. We believe our house can sell for at least $475,000.
A: Even if we were in a strong real estate market, you have picked perhaps one of the worst times to sell. We are rapidly approaching the Christmas and Hanukkah season, when most people would rather prepare for the holidays instead of shopping for real estate.
Have you considered trying to sell your house on your own? I know that the real estate community will not be happy with this suggestion, but give it some serious thought. You can place ads in the Washington Post, as well as on several websites, and test the market. You may have friends who might be interested. Have you considered posting notices on bulletin boards where you work and where you worship?
Selling on your own is not difficult. Your financial advisor and your attorney can assist you throughout the process, and those fees will be considerably less than paying the real estate commission.
But many homebuyers are just not up to the task. They either are too busy, or perhaps too intimidated to try it on their own.
So how do you go about finding a competent real estate agent?
There are many real estate brokerage companies in the Washington metropolitan area. Keep in mind the distinction between a real estate broker and a real estate agent. The agent works for the broker, who may or may not own the company. There are large companies with many local offices. Each office generally consists of a manager - the broker - and several agents who work for and report to the broker. There are also many small brokerage firms, consisting of a broker and perhaps a couple of agents.
Bigness does not equate to competence. Regardless of the size of the company, the person who will be your primary contact is the most important part of the selling process. You don't want to hire a broker, only to find that he or she has "farmed" out your property to someone you have never met.
You should contact at least three or four companies. Invite the broker over to inspect the house, but insist that the person who will be directly working for you will also be present. Ask each brokerage firm for their estimate of what your house is worth.
Some brokers will low-ball the value of your house, while others will provide you with a range of estimates. You can listen to these valuations, but only you can make the final decision as to the price that will be marketed to the public.
Ask a number of questions:
- will they hold open houses, and if so how often? Who will be present when the house is shown?
- where will the house be advertised? Does the brokerage firm have a website which will carry pictures of your house, and if so, are there any extra charges for this computer program?
- if a real estate agent will be working with you, how long has she or he been selling real estate?
- does the brokerage firm specialize in any particular geographical area, and how many houses have they sold in your neighborhood?
- what commission do they charge, and is it negotiable? If the brokerage firm finds a buyer on its own, and does not have to split the commission with another company, will the commission be reduced? Many brokerage firms are willing to make this kind of arrangement but you want to know in advance what this will cost you.
For example, if you were to try to sell the house yourself, and a broker came in with a potential buyer, you might only have to pay that broker a 2 or 3 percent commission. You should get the same benefit if the broker you hire is able to locate a buyer without the assistance of another company. You might be asked to pay some of the advertising costs in that situation, but that is still less expensive than paying the full 5 or 6 percent commission.
- what other charges will you be required to pay at settlement? Ask all of the brokers you interview to prepare a sample settlement statement which will give you an approximate idea of your bottom line.
Once you have selected the brokerage firm, you will be asked to sign a number of papers. The most important is the listing agreement. This is a legal document which represents a contract between you and the real estate company. Read it carefully. If you do not understand anything, don't hesitate to ask questions before you sign. You may also want to have your lawyer review it.
Here are a few suggestions which should be included in the listing agreement:
- limit the arrangement to not more than 90 days. If you are satisfied with the agent's performance you can always extend it.
- the commission should only be earned if settlement takes place. Many listing agreements provide that the commission is earned when there is a signed sales contract, but that payment is deferred until settlement. This is not acceptable. Many buyers have second thoughts - called "buyer's remorse" - and try to back out of a contract. You should not have to pay a commission if your house has not sold.
- if the broker has made certain representations - such as how often open houses will be held, or what kind of advertisements will be used - they should be reduced to a written document, signed by the broker.
After you sign the listing agreement, make sure that you get a signed copy for your files.
Now that you have a real estate professional working for you, keep in constant touch, and insist on receiving periodic status reports.
Don't get discouraged if there are no immediate positive results. As you know, we are in difficult economic times, and the real estate market appears to have taken the brunt of the financial downturn.
You have indicated that you have to sell quickly. If so, you may have to significantly reduce the price so that it will be attractive to potential buyers. Obviously, no one wants to sell for less than the market value, so are there other alternatives? Can you rent the property out for a year or two? Although real estate sales are sluggish, the rental market appears to be active.
If your reason for selling quickly is based on financial reasons, you should consult a financial advisor before you commit your self to a listing agreement. Congress, the Bush administration and many state governors are actively working on programs to relieve the financial strain and to save houses from going into foreclosure. You should also talk with the manager of the company that holds your mortgage; perhaps some reasonable accommodation can be reached to ease any financial burdens you are having.
The process of selling a house is not complicated. If you shop around for the right broker, ask as many questions as you can, and continue to monitor the broker, you will ultimately find a buyer for your house.