Post written by Kim Cedarstrom, REALTOR®, Roche Realty Group, Inc.
Thinking about selling your home? There is a secret that you need to know that will maximize your chances of selling and will net you as high a return as is possible in the current market. Actually there are multiple parts to the secret. I’ll break this down into three parts. In this installment I’ll cover step one: preparation. Preparation includes determining how and where you will present your property for sale, how you will be represented, and what you will pay for that service.
There is no law that prevents you from selling your own property. There are folks out there who try to sell “For Sale By Owner” all the time. Back when the real estate market was booming, this had some possibility of success. Today this approach is very unlikely to work. Not only has the market turned from seller driven to buyer driven, it has changed its very nature. The real estate market is driven by the internet these days. Currently, we list our properties for sale on over 32 web sites, as well as on our own in-house site. If your property is not exposed to as broad a sweep of the internet as possible, you have very little chance of selling today. There are services that will list your property on MLS as “entry only” for a reduced commission (usually 2.5%). This approach does give some exposure, but it’s minimal and you are left to fend for yourself in all the other aspects of the transaction. By the time you hire a lawyer to check all details, your gain is minimal and you will be stuck with a lot of work.
SECRET PART ONE—Hire a qualified REALTOR© to represent you. How best to do this? Interview and negotiate. Hiring a REALTOR© is the same as hiring any professional, a lawyer, or accountant, or broker. Remember they will be working for you, not you for them. A qualified REALTOR© will market your property, negotiate the sale, and guide you through the closing. During the interviewing process you will negotiate the proposed selling price, the type of agency the REALTOR© will have, the duration of the listing agreement, and the commission you will pay for his/her services. Be careful. Signing a listing contract locks you into a relationship with that REALTOR© for the term of the listing agreement. You will be under contract to that REALTOR© for the period of time stated. Many REALTORS© will take your listing at an unreasonably high price to secure the listing and then return to you shortly asking for price reductions to bring your property down to what it should have priced at in the beginning. This does two bad things. One: Your property is introduced to the market at price which makes it unattractive and will cause it to languish and become stale. “Start high and negotiate” was a mantra you could get away with in a sellers market, not in the current one. Two: You only get one shot at a first impression, and if that impression is a negative one, it is very hard to overcome.
Commissions are negotiable; they are not set by law. In fact it is improper to advertise commission rates. Over the years the standard commissions have been 10% for raw land, 8% for commercial real estate, and 6% for residential. The rate you pay is agreed to by you and your agent. A word of caution, a lower commission may not mean more money in your pocket. A 1% difference in commission in the selling price of a $200,000 home is $2,000; an amount that is easily made up and exceeded by the negotiating skills of qualified REALTOR©. Also, ask yourself if your agent is working for a reduced commission, is their heart really in getting you as much as possible, or in just getting a quick sale. Put yourself in their shoes.
There are different types of listing agreements as well. Every state has its own rules. Here in New Hampshire there are two variations of Exclusive Listing Agreements- “Exclusive Right to Sell/Lease” and “Exclusive Agency Agreement”. The “Exclusive Right to Sell/Lease” is by far the most common. This agreement basically states what it sound like: you have hired this agency to represent you in the sale of your home and you agree to pay the commission no matter who presents the buyer for the sale. The Exclusive Agency Agreement allows for you, the seller, to bring a buyer to the sale and pay a reduced commission. Very few REALTORS© (in fact I don’t know of a single one) will enter into Exclusive Agency Agreements today. The way I handle this is if you the seller have a hot prospect, but you want me to handle the transaction, we negotiate the commission on that possible transaction. Remember, everything is a negotiation. The other type of relationship which can occur when your listing agent produces a customer who contacts the listing agent directly (not through another REALTOR©). Your listing agent then will represent both parties—the buyer as well as you the seller. This is called “Dual Agency”. Your listing agent must inform you in writing of this relationship so you will be aware of the situation. This is not generally the case, but may happen.
Listing agreement contract lengths are usually in six month intervals—a minimum of six months, usually a year. It’s a lot of work to list a home for sale, and these things take time to market. Again though, remember, these things are negotiable. Also, be aware that all listing agreements have clauses that extend the duration of the agreement to cover any customers exposed to your property by the listing agent during the time the agreement is in force.. What this does is prevent you from striking up a deal with a customer shown your property by the listing agent with out paying the agent for his or her efforts. Be sure to note this time. Most agreements call for a six month period, some a year. Be apprehensive of any longer time. I’ve seen them for as much as three years. I doubt that length of time is defensible, but save the problems and don’t agree to more than a year. Remember also that you are legally obligated to stay in this agreement for the agreed upon duration. This is when agents who list your property at an unreasonable price just to “tie up” your property will apply pressure to reduce your price to where it should have been from the start. Listing at a market driven price would have precluded this sort of pressure and would probably have your home sold by now! Personally, I never hold by clients to the entire term of the listing contract if they have any reasonable reason to terminate.
In conclusion if you want the secret to successfully listing and selling your property, follow these steps:
1. List with a REALTOR© you can trust and work with.
2. Read thoroughly and understand the documents you sign.
Next time I’ll deal with the second part of the secret to selling your home. The 800 pound gorilla in the room: SECRET TWO—The right price!