Listing your home can seem like a complicated process and some home sellers have their own theory about listing agents and even agents all together. Understanding how the process works and how your listing can work for you is the first step in realizing its not as complicated as one would make it seem. I hope this information will help in understanding the listing process and how your home listing can work for you.
Unlike many other professionals, real estate agents are only paid if they are successful — if the home sale goes through. A lawyer who loses a case, for example, may still expect payment, as do doctors who may not be able to cure their patients. Real estate agents, however, receive no payment unless a home is sold and makes it to settlement.
Agents work many hours before and after a sales contract is signed, in hopes of receiving compensation at the end of the process. Because they want to serve clients to the fullest, most agents work on commission.
Understanding Your Listing Agreement
Once you find an agent you want to work with, you’ll sign a “listing agreement” specifying the commission or fee to be paid and other contractual terms. The agreement is not between you and the agent, however, but between you and the broker the agent represents.
By law, only licensed brokers are allowed to receive a brokerage commission or fee. The salesperson you work with (your “listing agent”) will receive a share of the commission when the home sale goes to settlement. If another agent brings the buyer to the table, that salesperson (and his or her broker) will also receive part of the commission
Your agreement will stipulate compensation by either a commission or fee. Buyers and sellers may not realize that there are no set commissions — no “going rate.” Real estate brokers cannot discuss between themselves how much they charge for commissions, nor are they allowed to set commissions. To do so would violate anti-trust laws and threaten a broker’s license.
Traditionally, it’s said that the seller pays the commission, yet some would argue that it’s the buyer’s loan that creates the cash to pay the commission. Either way, the funds brought to the table from the buyer’s loan and the seller’s equity pay the real estate companies involved
Money Well Spent
In addition to the compensation, the terms of your listing agreement will detail how long the contract will remain in effect and the specific services contracted for. A full-service agent or company usually:
- Lists details about your home and listing agreement in the Multiple Listing Service (MLS).
- Provides and prepares all forms to list the property for sale.
- Educates the sellers on the sales process.
- Fronts all advertising and marketing expenses.
- Conducts analysis of the home in preparation for sale.
- Prepares a home brochure and finance sheets for distribution as needed.
- Assures that all buyers are at least pre-qualified, if not pre-approved for a loan, before making an offer on the home.
- Negotiates all aspects of the contract, including: price, finance terms, contingencies, seller subsidy (if any), home inspections, etc.
- Monitors various professional inspections, including pest, radon gas, home and others.
Sometimes agents will conduct all the work above, only to have the buyers’ contract fall through. Then the process starts all over again, in hopes the sale will go through the next time around.
When Is Compensations Earned?
Although the commission or fee may not be paid until settlement, it is considered to be “earned” when your agent brings a “ready, willing and able buyer” to you, even if the buyer has been working with a different agent in the home search process.
A “ready” buyer is defined as a person who wants to purchase the home within a designated time frame. “Willing” means the buyer has signed a contract with terms agreeable to the seller. “Able” means the buyer qualifies for the financing required to purchase the home.
Once these stipulations are met, the listing agent has earned his or her commission. Still, the agent’s work is not done. Following the contract comes all the work to get the transaction to settlement.
After You List
Getting your home listed, of course, is just the beginning. You and your agent will then begin work on a marketing plan and a time-table for implementing it. Your agent will help you decide about the best asking price for your home, based on current market conditions. He or she will also advise you about what you can do to improve your home’s chances for selling quickly at the best possible price