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Q: How are real estate agents paid?
A: Real estate agents (and the brokers with whom they are licensed) are usually paid a commission. A commission is a fee, often calculated as a percentage of a home’s sale price, paid to a real estate broker. The broker then divides this fee, sharing it with the real estate agent and cooperating broker/agent (if any) in the transaction. An agent skilled in marketing, negotiating, and in closing the transaction often can make you more money than the fees you pay them. By law, there is NO set commission schedule for real estate transactions. However, a common fee is 6% of the sale price (split 3% to the listing agent broker and 3% to the selling agent broker). Your listing agent will be happy to discuss sales commissions in more detail and answer any questions.
Q: How are buyer’s agents compensated?
A: It used to be that seller-only agency was “customary” in residential real estate. The real estate commission was thought to be paid by the home’s seller, deducted from the home sale proceeds at the time of closing. Real estate agents and brokers represented the interests of the property’s seller; the buyer was unrepresented in the transaction – and usually not even aware that this was the case!
This “conventional wisdom” changed across most of America, during the 1990s: without buyers, nothing sells. The real estate commission is derived from the proceeds of the home sale, and is really paid by both buyer and seller. Both parties are entitled to an “agency relationship,” and the representation it entails.
With the advent of buyer agency, homebuyers are now able to be fully represented by a real estate agent in the purchase of property. In most states, it’s rare that buyers would pay their agent/broker directly for services in finding and purchasing a home. If a broker does charge buyers a direct fee, it should be outlined in an exclusive agency agreement that the buyer signs when engaging the broker.
When a buyer is represented by a real estate agent, she/he comes to terms on which services the buyer-client is seeking, and the manner in which the agent will be compensated for providing those services. In most cases, a fee or commission is still derived from the seller’s proceeds of sale, and shared between the seller’s (listing) and buyer’s (selling) agents and brokers.
Q. What typically goes into a listing agreement?
A. The listing agreement is between the real estate company and a home’s seller. Think of it as your legal instructions to the people who will market your home and represent you in its sale. It must include beginning and end dates for the term of the listing, the conditions to which you, the listing agent and the real estate company agree, and a price (usually a percentage of the eventual sale price) you’re willing to pay for services rendered.
Q. How important is the condition of my property to its sale?
A. The answer to this question depends upon your priorities. Are you hoping to extract the maximum sale price for your home? If so, condition and appearance can both be very important. If, however, you’ve let “deferred maintenance” catch up with you, your priorities may be different. You may wish to sell your home in “as is” condition, allowing its buyer to repair/replace items as she/he sees fit. In this case, your ultimate sale price will be less than what the same buyer would be willing to pay for your home in mint condition.
Q. Should we leave our home when showings (or open houses) are being conducted?
A. Generally speaking, yes. If it causes you no undue hardship, it’s easier for a real estate agent to show your home without you present. The agent is better able to “demonstrate” your home’s features and benefits, painting a realistic picture for the buyers to envision themselves living there. Your absence will also allow your prospective buyers to focus on the house and its attributes – rather than on being polite to you.
Q. What is an Agency Disclosure?
A. An Agency Disclosure is a state-required document, disclosing to you as a principal in a real estate transaction (in this case, the seller) whom the agent(s) in that transaction represent. A state’s Agency Disclosure simply notifies you of that state’s agency laws; it does not obligate you to work with any particular agent or broker.
Q. What is the MLS, and how does it benefit me?
A. A Multiple Listing Service, or MLS, is a database that makes it easier to reach a large number of buyers and increase your property’s exposure. It’s a system which participating brokers at the real estate board agree to share commission on the sale of houses listed by any one of them. For example, if your house is listed with one broker and another finds the buyer who purchases it, they split the commission. You benefit because more people have an interest in selling your house and your home is exposed to more buyers since Realtors have access to MLS.
Q. Should I buy first … or sell first?
A. Do you need the equity that’s built up in your present home to complete the purchase of your new home? If so, you either need to sell first or consider a bridge loan or house sale contingency. We strongly suggest that you engage a real estate agent with whom you can enter a trusting relationship. Then discuss this question with him or her, touching on every aspect of what it may mean for your particular situation.
Q. How can I prepare my house for sale?
A. The selling process usually starts months before a property is actually put on the market. It is a good idea to look at your home through the eyes of a potential buyer. This will help you decide what needs to be cleaned, painted, repaired or tossed out. Your agent can help you make these decisions and list your home at a fair price when it’s ready.
Q. How can I find out what my home is worth?
A. Your agent has a thorough knowledge of the current real estate market, and will prepare a professional market analysis of your home to help you set a competitive price. Your associate will also help you stage your home for showing to buyers. It is extremely important to view your home as a potential buyer would. Professional staging features your home in the best light, increasing its marketability.
Q. As a seller, what do I have to disclose about the condition of my property?
A. The best policy is truth when it comes to disclosing the condition of your property. You must disclose all known material defects of the property. Normally, these are noted on a Seller Disclosure Form (SDF). This is a form included in the seller compliance manual and is completed by the seller and Realtor. If an item is not covered on the SDF, you must still make disclosures about known material defects. Even if a matter has been repaired, you should still disclose the previous defect and a report of the repairs completed. By disclosing all problems up front, you can avoid any surprises that many times provokes a lawsuit.
Q. When is the best time to put my home on the market?
A. Peak selling seasons change from year to year and sometimes weather has a lot to do with it. Often early spring and early fall are the prime listing seasons because houses tend to show better in those months than they do in the heat of the summer or the cold of winter. Keep in mind there are more houses on the market during the prime seasons, so you’ll have more competition. You shouldn’t base your decision to sell on what season it is because each selling situation is unique.