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Listing Your Home to Sell

Listing your home refers to the process of hiring a real estate broker and formally putting your house up for sale on the market.

For most Americans, their home is their principal asset and primary investment.  The process of selecting a broker is a very important decision because you are turning over your most valued possession to someone you hardly know.  The brokers function is to get the highest price they can and you expect them to perform the duty using honesty and integrity.

 While any broker can list, advertise and market your home, real estate brokers come in a variety of packages.  Each broker has special skills and a unique background.  Just as Doctors and Lawyers now specialize in targeted fields of interest, real estate agents are no different.  These specialty areas of expertise may be geographic or dependent upon a highly defined local area.  In large cities, a real estate agent on the Northwest side of town, may be unfamiliar with the housing market on the east side of the city.

Also a broker may specialize in specific types of real estate, such as commercial property or they may exclusively market new construction offered by builders.  They may have very little knowledge of the existing home resale market.

In selecting a broker keep in mind you will be paying this salesperson thousands of dollars in fees and commissions for their expertise.  The selection of a broker is one of the most important decisions you will make for your most valued possession.  Yet, 75% of all homeowners hire the first real estate agent they contact, without knowing where their specialty lies.

 Identify Two or More Brokers

In shopping for a real estate agent, it is recommended that you interview two or more brokers before making your decision.  Then interview two or more agents with each firm. Select an agent that you feel comfortable with and whose personality is compatible with your own.

You also should consider a discount broker.  A discount broker charges a lower commission rate in exchange for allowing the homeowner to do some of their own work in marketing or showing their home.

Selecting The Real Estate Broker 

The first information that you should investigate is to evaluate the level of activity a broker has in your local area.  A broker with a lot of listings in any area may reveal intimate knowledge of an area, but it also suggests the broker may be too busy to sell your home.  There are many agents who are listing Kings and Queens, but they may rely on others to sell their homes.  If you drive through an area and see dozens of listings by one agent, you must investigate whether they are good at selling sellers or good at selling buyers.  An agent with 50 listings can only have one open house per year.  You should ask how many listings the agent has, (and over the last year) and how many of those listings did the agent actually find the buyer and close the deal.

An agent with fewer listings, but a lot of home sales may be better for you, since they will put more effort into marketing your home.

Also, examine the local newspaper to see how many listings the agent has for sale.  If they offer few listings with advertisements, but have numerous listings under their name, they may not be marketing their homes with all their energy.

As a quality control check contact lenders, lawyers and former clients about the company’s reputation and experience. When you sign a listing agreement with a broker, you are employing a firm or a broker to find a buyer for your property. If you pick a brokerage firm because you want to work with a particular agent, keep in mind that you are still relying on the firm’s experience, contacts and reputation. While most of your contact may be with the agent, make sure you are comfortable that behind that agent is strong supervision and plenty of expertise.

Keep in mind that your agent may need to turn to others for advice if problems develop. In most agencies, the managing broker is responsible for resolving financial problems, supervising complex contract preparation and counseling agents.

Remember, the 6% commission may be negotiable under special circumstances—for example, if the buyer is found by the listing broker, with no sharing of commission with another firm. While brokerage commissions are officially negotiable, in practice most firms hold tight to their stated commission. Review each firm’s standard listing contract.

In some FSBO (For sale By Owner) situations, you can enlist a number of brokers to help you sell your home by offering them a reduced commission if they bring a buyer to the table.  In this instance, the homeowner bears the burden of marketing and advertising costs.  This commission generally average 3-4%.

In qualifying brokers find out how many agents are employed, how many are full-time/part-time, and how many years experience their agents are as a group.  Find out the distribution of specialized areas of real estate.  How many concentrate on residential resale and how many dabble in commercial real estate and property management.

While most firms participate in a multiple listing service (MLS), confirm that the firm is an MLS member and can access or provide inventory to all other real estate agents in the area. Agents use this information extensively to match up buyers and sellers.

Does the firm participate in a national referral service?  You home may be attractive for corporate transfers.  Corporate transfers typically pay top dollar for home purchases and there is generally less haggling.

Finding The best Real Estate Agent

Interview real estate brokers to obtain the names of their agents and experience level.  Generally, the prior year home sales for each agent is available, upon request.  Remember, though, the best agent for you may not necessarily be a $1 million producer.  An agent with lower sales numbers may have more time to promote the sale of your home than an agent that is managing numerous listings.

A great idea to help to sell your home is to hold your own open house (for real estate agents only) and invite all agents in your local market to attend.  Make it clear to the list of (agent) invitees that you are holding the open house to interview agents to represent you in the sale of your home.  This makes all area agents aware that you will be selling your home, allows them to get an early peak at your home, and creates competition for your listing. Notify all agents that you will be selecting a listing broker in two to three weeks. In many cases, an agent will bring a buyer to you before you get an opportunity to sign a formal contract with another broker.  Many agents will bring multiple buyers during the 3 week decision period to earn your listing.  If you sell your home before you sign a formal listing contract, you reap rewards in paying a lower commission rate.  Announce during the open house that you will pay 4% (rather than the customary 6%) during the decision period.  You will probably have buyers (and hungry agents) beating down your door with requests to show your home.

The Real Estate Agent Evaluation Process

If you opted to hold an open house for real estate agents only, take the list of agents who attended the preview and compare this list with those who brought buyers for a look-see during the decision period. Select two or three to give you a full “listing presentation” After all the presentations, select the one agent you want to do business with first. Your decision should be based on everything from professionalism and knowledge to personality.

Make a list of those that attended, and make a note of any agents (from the offices of those that attended) that did not attend, but brought buyers through your home during your decision period.  This might provide some indication of how other agents in the office work together to sell their brokers listings.  Remember, you are not only selecting an agent, you are selecting a broker, and all the agents employed by that broker.  Many brokers have a single "star" salesperson, but the best brokers may have a number of better than average (or simply average) salespeople.  It is often better in the long-run to have 20 agents with a 20% closing rate, than a one-horse team with an 80% closing rate.  All sales professions are simply a matter of sales results.  It matters not in how many failed sales attempts were made.  It only matters how many sales were made.  If an agent shows your house 20 times, the only thing that matters is that a sale was made.

One critical mistake made by most home sellers is in asking an agent how much their home should sell for and then selecting the agent that gives the highest selling price estimate.  This practice is deceitful and highly unethical, but it has become common place.  While contracts may be negotiated, I would like to see sellers negotiate commission based on the final sale price.  This would bring an immediate halt to this integrity issue.  Lets use two agents as an example and comparison.  Agent A ( who is highly ethical) suggests a sale price of $150,000.  Agent B estimates your homes sale price at $200,000, so you choose Agent B.  Now if the contract called for a 6% commission for your home if it sells for $200,000 and 5% commission if it sells for $175,000, and 4% if the home sells for $150,000, this might discourage the questionable practice of overstating the anticipated sale price of the home.  If Agent B must pay 3% of this commission to the rep that actually sells the home, the 1% received is not worth unethical behavior just to get the listing.

The Agents Listing Presentation to The Home Seller

In asking for a presentation from the broker that you have selected to host your listing, look for the following information;

• Information about the agent’s experience, education and background.

• The number of sold homes, and date of listing for the unsold ones, along with detailed descriptions of each property.

• Advice on repairs and other improvements that would make your home more appealing.

• Suggested asking price, based on how quickly you wish to sell your home.

• Information about the housing market in general and current activity in your neighborhood.

• Discussion and description of the kind of advertising and promotion to expect.

• Market analysis showing all recent comparable sales in your area and properties currently on the market. It should specify the selling price and date of sale for the listing.

• “Net proceeds” sheet, illustrating what you might realize on the sale under varying financing arrangements and with various levels of commission.

• Explanation of various kinds of listings and listing agreements.

• The agreement, whether oral or written, exclusive or nonexclusive, is a legally enforceable contract.

As you work through the listing contract with your chosen agent, keep in mind that the standard contract can be modified to suit your needs. With any kind of listing, if the agent brings you the deal that the listing calls for (full price and exact terms offered by a buyer who is ready, willing and able to buy), you are obliged to pay a commission whether you accept the deal—or not.

Once you’ve selected an agent, you’ll need to work out an employment contract—called a real estate listing—with the agent’s broker. The listing contract appoints the broker (and his agents) as your agent for the specific purpose of locating buyers for you home.

Following are some of the most common elements of a listing arrangement;

Exclusive right to sell

This is the most common agreement. The listing agent is entitled to a commission no matter who sells the property, including you. If another agent produces the buyer, you still owe only the one commission, which will be split between the listing broker and the broker who found the buyer. This type of agreement usually assures you the best service. The agent is guaranteed a commission if he produces a sale, and you have an agent to hold responsible for making all “reasonable” or “diligent” efforts to find a purchaser.

If your employer has guaranteed to buy your home at a discount if you can’t get a better offer on the open market (usually in cases of a transfer), be sure to amend an exclusive-right-to-sell agreement to prevent an agent from claiming a commission on your company’s purchase. And remember to check for a new “transaction fee” before signing the contract.

Exclusive or Exclusive Agent

You don’t pay a commission if you find your own buyer without help from the agent. If you sign an agreement like this, you’re in effect competing with your own listing agent; if you get direct queries about your property, handle them yourself and don’t refer callers to your agent.

If you have a good prospect who has expressed an interest in your home before you listed it with an agent, use this kind of agreement and add a clause that says you may sell the house to this named party—and any other whom you find yourself—without paying a commission to the agent.  If you held an open house for realtors, make sure that any visitors brought through your home during the decision period are noted.

Open Listing Contract

You agree to pay a commission to any agent as long as he or she is the first to produce an acceptable buyer. Again, you don’t owe any commission if you are the first one to find a buyer.

This type of listing is most common when there is no multiple listing service. It’s also the kind of listing often used by sellers who want to do most of the selling work themselves, but want the cooperation of agents in finding buyers.

The commission is typically half of the standard rate—say, 3%. The seller should notify agents of such an offer by putting the words “Brokers welcome at 3%” in newspaper ads and even on the “For Sale” sign. Then the seller signs a simple open-listing agreement with each agent who expresses an interest in bringing a buyer to see the home.

Make sure you specify an expiration date (not too distant) on every open listing, because you can’t sign an exclusive listing with one agent, if you have open listings still in force.

Contract Expiration

The expiration date of a contract can be vital if the agent turns out to be one of those unethical agents mentioned above.  It allows you the opportunity to hire another agent, if your broker decision turns out to be a poor choice.  I remember my own corporate transfer from Indianapolis to Boca Raton, FL in 1990.  I made all the wrong decisions by selecting an agent from the Northeast side of Indianapolis (with who I was personal friends) to sell my home on the city's West side. This was in repayment for all the pain my wife put this lady through in finding this house originally. I signed a one-year agreement and made 12 mortgage payments and not a single buyer was brought forward.  Just before the listing expired and I announced that I was planning to select another broker, a flurry of visitor activity suddenly developed .  When no buyer came forward, I contracted with Len Dionne, a west side Indianapolis agent. Within 30 days of obtaining the listing, Len produced a buyer at the listing price and I was freed from the mortgage and immediately bought another home in Boca Raton.  Then came Hurricane Andrew-which is another story altogether.

Knowing the average and median length of time it takes for homes to sell in your neighborhood should influence your choice of a listing expiration date. A period of three to six months is common. Generally, the shorter the better, but it isn’t reasonable to insist on a three-month listing when homes like yours are taking six to nine months to sell.

A relatively short listing will give you the option of switching agents if friction develops with your first agent, or if you feel the agent isn’t working hard enough to sell your home.

You can extend a listing beyond its original life, but don’t inadvertently sign an agreement containing an automatic extension. If you wish, substitute a provision that extends the listing as much as 60 days if a buyer reneges on a signed sales contract.

You also may want to add a clause reinforcing your right to cancel the contract should the agent fail to do a good job. If you exercise that option, however, you may find that you are still liable for certain expenses that were incurred by the agent. Also some listing contracts may even require you to pay a penalty for early cancellation.

If, after the listing expires, you sell your home to someone your former agent had a hand in finding, there may be a clause in the contract that entitles the agent to a commission. Naturally, no agent wants to lose a commission because the listing agreement expires while he or she is still working with a prospective buyer.

Typically, protection clauses give commission rights to agents for 90 to 180 days after a contract ends. If a listing agreement contains such a provision, it also should provide, in fairness to the seller, that the agent give the seller the names of prospective buyers before the listing expires—and require written purchase offers from any such buyers within a reasonable time after the listing expires.

Commission Rates

Commissions are negotiable. They are not set by law or by industry rules—something most sellers don’t realize. A listing agent usually gets a commission based on a percentage of the final sales price of the property traditionally 6% to 7%.

As a practical matter you won’t get very far negotiating a lower rate unless you have special circumstances that make your property more economical to sell than others.

Condition of Property and property Description

The listing agreement should describe the general condition of the property. It should show what is being sold “as is” and what, if anything, will be repaired, removed, substituted or altered prior to settlement. The agreement should list every fixture that will be sold with the house, and those that will not.

Make the agent aware of problems or defects in the property. If the listing agreement doesn’t adequately spell out the current condition of the structure, the appliances and the electrical, mechanical and plumbing systems, have it corrected or write a letter to the agent setting out the information. The old saying, “caveat emptor” (or buyer beware), has no legal support anymore— the new philosophy, backed by court decisions, is “seller beware.” Buyers have a right to know about the true condition of your house and property. If you don’t disclose problems and the buyer later discovers them, in most states the buyer can sue you, your agent and the broker—and will often win.

The Brokers Marketing Plan

Get the proposed marketing plan in writing as an addendum to the listing contract. It can serve as documentation should you feel that your agent is not fulfilling his or her commitments. (Some agents don’t use formal marketing plans, so you may find they are unwilling to provide one. If that’s the norm for your area, that’s fine; but if it’s not, you may want to consider an agent who can and will provide one.

If your agent doesn’t call you during the week to give you a progress report, then call the agent. Find out how effective the efforts have been, and whether there any good prospects. If not, are any changes being considered for the marketing plan, and what are they?

• Open houses. What efforts will the agent make to bring interested buyers to your home? For example, will agents who deal with likely clients be sent an information sheet describing the property and date of the open house? Will ads and signs be used?

• Multiple listing service. How promptly will an MLS list your property? Ideally, it should go into the computer very quickly, and you should specify a deadline in the listing contract; some multiple listing services require their members to enter new listings within 24 hours of the signing of the contract.

Some brokers will try to keep a new listing out of the MLS computer for several days or more; that gives their own agents a shot at selling the property “in house,” so that the whole 6% commission is kept within the firm. Once agents at other firms see the listing in the computer and bring prospective buyers in to see the the odds increase that the listing broker will have to split the eventual commission with another broker (called the “co-op” broker or agent). You’ll pay only the full commission in any event, and your interests are served by a fast sale.

• Agent tours. An organized tour for other agents in the office should be arranged soon after you sign the listing. An open house for agents from other firms is another useful sales tool.

Spreading the word. Will your agent inform your neighbors that you are selling? What other networks will he or she use?

Financing. Will your agent be able to work with interested buyers to locate financing?

Get Ready to Sell

Your agent will set about the task of selling your house as soon as the ink is dry on a listing contract, so you had better be ready, too. Ideally, your home will be ready to show immediately, but if it isn’t, do all the last-minute touch-ups and cleanup as soon as possible.

From now until a sales contract is accepted, your home has to be in tip-top condition and ready to show on a moment’s notice. It’s difficult and sometimes stressful living in a home that’s for sale, but its tidiness during an appointment or open house will have a lot of bearing on how fast it sells and for how much.

Try to have everyone out of the house when your agent brings a prospect to inspect it, even if that means gathering up kids and parents on short notice. When you aren’t there, the agent and house hunter can talk more candidly and the buyer can more easily imagine his or her own family living there comfortably.

One of the newest techniques for advertising your home for sale by owner (FSBO) is to list your home on the internet

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