You’ve selected one real estate agent who you think is going to be able to sell your home. You’ve checked into their references and gotten a firm idea of what they plan to do to market your home. So you sign the listing agreement and off you go… or should you? The last thing that you should be doing once you’ve narrowed down the field of potential Realtors is immediately signing the Listing Contract. What people fail to realize is that the agreement you sign with your new real estate agent is exactly that: a contract.
Contracts are, by their very nature, negotiable and your contract with your Realtor is no different. Simply reading the contract is not enough, you should understand what it means and amend it, as necessary, to reflect what it is your agent has promised to do or will do for you.
Your Agent should also make amendments as necessary to reflect changes in their obligations. By each person being aware of their rights and obligations the chances of a potential dispute lowers.
There are some clear issues that you should be aware of before you sign and should consider dealing with. This is vital for both homeowners and for real estate agents because a good contract can keep your relationship positive which will benefit both parties to the listing transactions. This is not a me vs. them situation… it is simply ensuring that each party is aware of their rights and obligations.
Your Negotiation List Grows!
The list of things that you can negotiate has absolutely no limits given that the Listing Contract is nothing more than a template contract. As with any contract, the template is only a starting point for negotiation.
In terms of negotiation, you must remember that you are in the driver’s seat because most real estate agents would like to have your listing. When this fact is combined with the knowledge that the Listing Contract is negotiable, you can see why not negotiating for better results is a serious error.
Though this list is not exhaustive, these are some of the things that you may want to consider bringing to the table prior to agreeing to a Listing Contract:
- How much will commissions be?
- How much are commissions if the deal is “double-ended”?
- How and where will the property be marketed/advertised?
- Who pays the cost of ancillary items?
As I mentioned, this list is not exhaustive but by dealing with each of these issues you will help to eliminate the issues that cause the most issues between clients and real estate agents. Clarify the Commission Issue
Within most listing agreements, the commission would appear to be set at a certain percentage or fee. Often, the percentage is written into the contract to act as a “guide”. A large proportion of first time buyers and sellers take this to mean that the fee is set. They do not understand that the commission can be negotiated.
When you first decide to narrow down the field of potential Realtors you have to understand how much commission they will be charging and how much commission will be paid to the purchaser’s Realtor (if any). Though this is potentially difficult for some people to deal with it is a serious issue to be dealt with because it impacts your return from your property. Plus, commissions can affect how the negotiations between and a buyer proceed.
An example of this is if you had 2 houses, each list for $150,000, each with the same features in the same neighborhood. One of the houses is being sold on a commission of 6% while the second is being sold with a 5% commission. Assuming that each sells for the $150,000, the second person ends up with $1500 more in their pockets after the deal!
This is clear to everyone… right? But did you also think that commission saving could have been used to lower the price and help accelerate a sale? If the market had been slow, person 2 could ask only $148,425 or so for his/her house and end up in the exact same position as person 1 after commissions! If you were a buyer, which would you be most likely to purchase?
Double-Ended Commissions
Want to make your agent smile? Don’t add a clause into your Listing Contract that reduces commissions to the buyers agent if the agent is the same person that has the listing.
In some jurisdictions, it is possible for the Agent to act for both the buyer and seller. For example, your Realtor may have a client ready to buy your home so he/she may get the opportunity to close his or her own listing. This is called a “double-ended” deal because the Agent gets both ends of the commission.
Costa Rica Real Estates by CostaRicanDeals.com. Volcanoes, butterfly gardens, adventure tours, and more await you in Costa Rica away from the rat-race of life. Of course, there's plenty of space to just sit and relax too! Costa Rica's private beaches beckon you. Adventures will lure you. But, the beauty of the land will forever captivate you. Just make you wish list, contact us, and find your dream real estate in Costa Rica...
Here’s where your negotiation skills are important. Before you agree to a Listing Contract you should clearly set out what the commissions will be in a “double-ended” scenario. This does not mean that you should browbeat the Agent by demanding that the buyer’s commission be eliminated in that circumstance. That sort of tactic will only result in your Agent not aggressively showing your home to his potential clients. Would you blame them?
What you should do, however, is try to reach a reasonable agreement between you and your agent that: first, saves you some money, and second, provides incentive to your Agent to show your home to his potential clients. Once you have an agreement, then put it in writing in the Listing Contract to ensure that all parties are aware of the situation.
How will the Property be Marketed/Advertised?
A complaint that I often hear is that people feel that their home isn’t being marketed hard enough or that the marketing that is being done is ineffective. Not surprisingly, this is typically heard in markets that are slowing or areas where demand for homes is not high. Often, the problem is market driven but sometimes it is a result of the Realtor and the client not seeing eye to eye on the marketing efforts for a particular property.
This may seem to be the area of the Realtor but it is something that should be spelled out clearly in the Listing Contract. You do not have to list every method in which the property will be marketed. You can, instead, get away with a clause that gives general obligations and then list methods that are “above” what is normal.
In particular, you should have language in your contract that spells out that the Realtor will aggressively market the property through normal channels. Some of these normal channels would include the local MLS, real estate association papers, newspapers, etc. These should be clearly listed on the Listing Contract.
You should, then, clearly list the special places that the Realtor has agreed to market your property. Maybe it is a listing on the Realtor’s site, a link to the property on his homepage, a link to your home from his company’s site or an advertisement in the real estate section of the newspaper. The second question that has to be addressed is as to who will pay for the ads if payment is required.
Another thing that should be clearly spelled out includes open houses, how many open houses there will be and when they will be conducted, if at all.
Paying the Costs of Ancillary Items?
Typically, a home seller will be required to pay for items like legal fees, title insurance, surveys, bylaw compliance certificates, etc. These are just part of the costs involved in the closing of a real estate deal.
Occasionally, though, Realtors offer to pay for some of these items as part of their negotiation with you. If they haven’t offered, you can sometimes get them to offer this as part of their package to get you to list with them.
If you do receive an offer to have these things paid for it is absolutely vital that you get this offer in writing and preferably within the Listing Contract as an amendment. By placing this within the Listing Contract you protect yourself against it not being recognized by a number of parties including factoring companies that give advances against real estate commissions.
Conclusions
The Listing Contract is written on paper… not stone! This means that it should be an important part of your overall discussions with your potential real estate agent.
Though you might face pressure to do otherwise, you should treat the Listing Contract as your opportunity to protect yourself from potential disputes about marketing, commissions, your overall relationship with your Agent.
The list of potential issues is long and you will not solve each and every potential problem. But don’t let this dissuade you from dealing with it as an opportunity to iron out potential questions.
By doing so, both you and your Agent are better protected against possible problems that might deteriorate the important relationship that you have with your Agent. If you have any questions on the wording of a clause in the Listing Contract you should contact a real estate lawyer to get a clear understanding of what things mean or how to word a potential clause. After all, it is your home and you should do everything you can to protect your investment.
Previous Article Next Article
Back
