If you are a homeowner who is going to sell your home, you probably have some questions. One of those questions concerns hiring someone to help you. Some homeowners decide to undertake the marketing, sale and all other details of the sale transaction on their own. Others, however, choose to hire a real estate broker or agent.
A "real estate broker" is someone who, for a commission or fee, is employed by home owner to negotiate the sale, purchase, lease or exchange of real property to a third party. The legal relationship between the real estate broker and the home owner is that of an agent and principal; an agent is someone who acts on behalf of someone else, the principal.
Most states require people who provide services to buy or sell real estate (other than their own) for a commission to be licensed as real estate brokers. Real estate agents and salespersons must have a sponsoring broker, with whom they are associated, and who supervises their activities. Commissions on sales must be paid to the agent's broker. In lay terms, "real estate broker" and "real estate agent" are often used interchangeably. However, these people may have different authority and licensing requirements under state law. Often the advice of a real estate broker is very valuable. Some things that you can expect from a real estate broker are as follows:
- Information on the home sale process beginning with preparation of the home for listing through settlement
- Advice on how best to prepare the home for sale
- Assistance in setting the sale price for the home
- Facilitating showings
- Presentation of offers and advice on evaluating the strength of each offer
- Assistance in negotiations
- Representation at closing
If you are comfortable going through this process on your own, you might decide to do without the services of a real estate broker or salesperson. However, you should consider factors such as the time and effort required to sell your home and your ability to market your home against the services to be provided by a real estate sales professional. The money saved on sales commissions might be less than you think if you consider the services to be provided by a real estate sales professional, and the chances that a broker or salesperson will be able to find a buyer faster than you would alone.
Types of Agreements
You can employ the services of a real estate broker by entering into an agreement with the broker. There are several possible types of agreements, including:
- An open listing, which is an informal verbal agreement through which the owner retains the right to sell the property himself and to hire other brokers
- A net listing, which is an agreement whereby the seller lists the property for sale at a specified net amount to be paid to the seller and authorizes the broker to retain as commission the difference between the sale price and the specified net amount to be received by the seller
- An exclusive agency, which is an agreement under which a particular broker is employed to sell the property
- An exclusive right to sell, which is an agreement that only the named broker can sell the property during the time specified
- A multiple listing, which is an arrangement whereby individual real estate brokers in a particular area pool their exclusive listings and any of the brokers in the service can sell the property
The agreement that you enter into with your broker is called a brokerage agreement or a listing agreement. Unless the agreement is an open listing, it should be in writing. In addition to information identifying the property to be sold, the agreement should set out the extent of the broker's responsibilities in selling your home. You can limit or extend those responsibilities, with a concurrent adjustment to the broker's commission for the sale. Unless you have some particular knowledge or experience in selling a home, it's a good idea to allow the broker to conduct the sale process from beginning to end.
Of course, you will have to cooperate with your broker. There is effort in keeping a home neat, clean and ready for showings, ongoing communication with your broker and taking steps towards closing the sale once you have a sales contract.
For Sale by Owner
Sometimes, homeowners decide to sell their homes on their own. This is called a "For Sale by Owner" or "FSBO." This is possible to do although it requires a lot more work on the part of the homeowner. If you decide to sell your home yourself, you will need the services of an attorney. Although you might be able to handle the marketing yourself, you will need legal documents like a contract of sale to complete the transaction. You will have to deal with inspections, financing and other issues that you may not have thought about. Additionally, an attorney's services can be invaluable when negotiating the details of the sales contract or handling counteroffers-home buying and selling can present emotionally-charged situations, and communicating through your attorney can smooth the path to the closing of your sale.
Selling your home can be complicated. If you hire a real estate broker, you may want an attorney to review legal documents to make sure that everything is in order. If you are selling your home on your own, you will need an attorney to give you some guidance and to provide you with necessary legal documents.
Questions for Your Attorney
- I've decided to list my home for sale with a real estate broker, but I previously showed the house to several prospective buyers. Does the broker collect a commission if one of my prospects ends up buying my house?
- How can I specify the actions that I want my real estate broker to take?
- Can I sell my home completely on my own?