The Waiting Game

At the beginning of a real estate transaction, both buyer and seller have a lot to do and plenty of paperwork to sign. After the contract, there's the inspection period and possibly even more paperwork! Next is the appraisal, scheduled through the lender, which takes a bit more time and the buyer and seller don't end up signing anything more unless it comes in too low. But once that's settled, most buyers and sellers feel that the excitement has suddenly dropped off...it could be weeks before closing. What should the buyer and seller be doing after the appraisal?

Essentially, during this period you're waiting for the title company to research the title on the property. They're also communicating with lenders from both sides of the transaction to prepare the necessary closing paperwork. The buyer's lender is also working to pass the file to underwriting, the magical department that gives final approval for your mortgage. Your Realtor is the conduit, communicating regularly with the lender, the title company, and you. However, just because you're waiting on all those people to do their jobs doesn't mean the buyer and seller are done.

Now is the time to really focus on your upcoming move. Pack those boxes, pick a mover, notify the utility companies, file your change of address with the USPS, and make all or your plans for pet care, child care, and time off work to make sure you are ready for moving day. If you already know that you plan to make repairs or renovations at your new home, you can start talking to contractors to determine who will be available and within your price range.  You can also inform your credit card companies and your employer that you will have a new address as of the occupancy date in your contract. Most importantly, you don't want to be that person who is still cleaning the house at 5:30am the day of closing, so find a cleaning company to give the house a thorough once-over if you're the seller (or if you're the buyer of a distressed property)!

The Listing Agreement (Or, I'm paying you how much to do what?)

First off, a disclaimer: I'm only going to talk in general terms about listing contracts, because the language will differ from state to state. I'm in Ohio. If you're not and any of this sounds strange to you, check with a local Realtor (I'm happy to refer you to one if you like!). Also, we're going to assume that all the agents you interview follow ethical guidelines and have your best interests at heart. Hopefully that will make it easier for you to weed out the ones who don't!

If you've decided to list your house with a traditional real estate brokerage like most sellers, you're going to end up signing a listing agreement. It's a standard contract with small variations from brokerage to brokerage and area to area, but the basics are the same. The primary purpose of a listing contract is to outline the agreement between you (the seller) and the brokerage (not the agent, even if they sign it): you agree to allow the broker to market your home for sale at a specified price for a limited amount of time, and to pay the broker a percentage of the sales price when a willing and able buyer is found. Notice I didn't say "when the home sells." More on that in a minute.

PRICE: By the time you decide which broker to use, you should have already received some sort of market analysis to help you understand how to price your home (if not, go back to my previous post and get a CMA!). Based on this information, discuss with your agent at what price you'd like to list in the MLS. Personally, if I meet with a seller who either needs or wants far more money for their house than it's worth, I lay down the honesty as nicely as I can. But if they want to try to sell their home for $185,000 when I think the top of the range is $180,000, I may agree to take the listing as long as we write into the listing agreement that the price will be re-evaluated in two weeks' time with showing feedback and market activity. Those numbers are close enough, and since real estate pricing is not an exact science there's always a chance I could be wrong. Note: if that same seller had wanted to list at $200,000, I would politely decline the listing.

TERM: A listing contract can be any length of time you like; I've heard of anything from 90 days to 7 years. The CMA should tell you the average length of time homes stay on the market, and the broker may have a default amount of time on the listing agreement. Basically, the broker wants to ensure that you allow enough time to justify their expenses on your behalf: marketing, photography, staff, website maintenance, syndication agreements, E&O insurance, etc. The broker is betting that their highly trained agent can sell anything if given the appropriate tools and amount of time. But if you have a reason why you'd like to limit the term of the listing agreement, talk it over with your agent. Everything is negotiable.

COMMISSION: There is no standard commission rate, so don't ask your agent that question. In fact, even if there was a rate that most area brokers used, we're not allowed to say/hint/imply/suggest that to anyone. We don't even discuss it with each other due to anti-trust laws. Some brokers will have a predetermined commission rate that they never adjust. Others may have a range based on the price of your home or the services you require (drone videos, listing agent present for all showings, experience level of agent, etc.). There's nothing wrong with comparing the rates, and chances are they will be somewhat similar. BUT...I strongly believe that if someone offers to list your home for a substantially lower commission rate than other area brokers offer, you are probably talking to a limited service broker, which means that you may not receive the same level of service. And by that I mean they will do pretty much nothing except put it into the MLS, which may be absolutely fine for you if you'd like to handle all your own showing requests and not get much advice or support. PRO TIP: If all it took to sell a home was putting it into the local MLS, there wouldn't be so many listings that expire.

So, I'll bet you're wondering about my comment earlier about a willing and able buyer! Well, there are people out there who agree to list their home for sale, but even when they get an offer (or several offers) near their asking price they refuse to sell. Technically, you didn't hire the broker to sell your home -- just to market it and find a buyer. So the broker has fulfilled their end of the deal! Obviously, this situation is extremely rare and brokers don't usually follow through on their legal rights to commission under these circumstances or you'd hear about it a lot more. 

The listing agreement should also specify the type of representation. Most common is the exclusive right to sell, which means that there is only one listing broker who will get paid the listing commission. Other types exist, according to my instructors in real estate school...but I've never seen them. Still doesn't hurt to read carefully and ensure you fully understand what you're signing! And as with any legal document, if you have any questions about the legal implications of what you're signing, don't ask the agent -- talk to a real estate attorney. While we're on that topic, I'm not an attorney (don't say you haven't noticed) and none of the above should be interpreted to be legal advice. Just real estate advice!

I Want to Sell My Home! Now what?

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No matter why you want to sell your home, chances are you have a pretty good idea of how much you owe on your mortgage, what price the home down the street sold for last month, and that if you use a real estate agent you'll have to pay them commission. I'm not here to debate whether you should go with a REALTOR or try to sell it yourself -- there are situations where either option wins. But how about a little overview of the process?

When a potential seller asks to meet with me, I'm often asked how much I know about the neighborhood. This knowledge is important, which is why you may see so many signs with the same name in your neighborhood -- those agents have proven that they're familiar with and active in the area. However, a good agent can easily research MLS listings, national websites, and agent-only tools and over the course of a few hours have just as much information, if not more. I use market statistics and a personal tour of a seller's property to determine how the home compares to others in the area, both active and sold. There are several factors that affect the price range I provide:

1. Nearby sold prices: Always keep in mind that you need to sell your home to a buyer AND to their bank, so chances are it needs to appraise at or above your sold price in order for the deal to go through. If similar homes within 1/2 mile of yours are selling for $150,000, you're going to need something pretty amazing to list it for $180,000.
2. Time frame: You'd like to sell, but how soon do you need to sell? If you're relocating or if you've already found a new home to buy, speed is important. Homes priced competitively will sell the fastest in any area. If you have a little more time on your hands, or if getting top dollar is most important, you can start at the top of your price range and see what happens.
3. Amenities: Granite counters, finished basements, oversized garages and private pools are examples of upgrades that could increase the value of your home to potential buyers. A listing agent should be able to tell you whether the upgrades you've made will have a positive impact on your home's value.
4. Market activity: How quickly are homes selling in your area? What size home is most popular? How much competition would you have? Are there special financing opportunities that could affect a buyer's ability to buy?

A comparative market analysis (CMA) should include all of this information. Don't be shocked if an agent hasn't seen all of the comparable properties in your area; there are so many homes on the market that it would be nearly impossible for us to tour them all unless we had a reason to be there. You could be that reason, though! After a preliminary CMA, I often tour competing properties on my own or with clients so we have an honest picture of how our listing compares to the rest of the market.

No one has ever asked me this, but in case you're wondering why you can't just go with the value estimate from Zillow, Trulia, Redfin, or any of those other sites...it really depends on your area. Automated valuation models (AVMs) depend purely on statistical analysis of nearby market activity. There are plenty of problems with this: listings are often sorted by zip code rather than by things like municipality or school district, AVMs require a large amount of activity of very similar homes for accuracy, and they rely quite a bit on price per square foot (which in greater Cincinnati means practically nothing if you look at historical sold data).

I'll be back next time with information on listing agreements! If you have specific questions about selling your home or choosing an agent, let me know in the comments.

Privacy forever!

Did you know that your real estate agent has a legal obligation to keep all details that are not public record regarding your sale or purchase private? Forever?

Public information varies depending on where you live, but in the Greater Cincinnati area the public has access to the following details about residential transactions:

• When you purchased or sold a property and to whom
• What the property taxes are on the property and whether they are current
• Your tax mailing address

In addition, real estate agents, lenders, appraisers, and other real estate professionals have access to some additional data. This is to assist us in making fair evaluations of properties and their values by providing us a more complete picture of how real estate transactions usually happen:

• The type of financing used to purchase a property (e.g. conventional, FHA, cash)
• The amount of time the property was on the market
• Any additional incentives offered as a part of the sale (e.g. seller-paid closing costs)
• Whether the property has any history of foreclosure action, even if it was resolved

Have I left anything out? If you have questions or comments about privacy in real estate, let me know in the comments!