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.

What's Inside: Contract to Purchase

You've found the right home! Time to get with your agent and write up an offer. While differences in language will be found depending on your location, the basic parts of a real estate purchase contract are pretty similar across the board. Here's a run-down of the most important points to discuss.*

1. Purchase price: Seems like a no-brainer, right? Make sure that your offer is not so low that it offends the seller, but not so high that you have no room to negotiate. Talk to your agent about the current market conditions (More buyers than sellers? You may need to be aggressive.) and this particular property to arrive at a number that works for you.
2. Earnest money: While not required by law, in Ohio and many other areas it is customary for a buyer to offer earnest money as a show of good faith. This money is deposited in a special trust account by one of the brokers involved once the contract is final, and is held there until closing. Talk to your agent about what makes sense for the property you are interested in.
3. Financing: Making an offer contingent upon your ability to secure financing for the property is widely accepted. That means that if you can't find a bank to give you a mortgage, you won't be obligated to complete the sale. This is why it's a great idea to get pre-approved by at least one lender before making an offer.
4. Seller contribution: If you know that you're going to have high closing costs, or if you only have enough for the down payment without the other fees associated with buying a home, you may want to ask the seller to pay for a portion of your closing costs. Again, talk to your agent about this -- if it's a seller's market, it may be in your best interest to forget about this request.
5. Inspections: Unless you're an experienced home inspector, you should get a home inspection for any home you make an offer on. The contract will allow you to specify how long you have to schedule inspections, and how long you'll have to negotiate any repairs or credits with the seller. Your agent should know how busy local inspectors are to make sure you have enough time to get this done and carefully consider your options.
6. Inclusions & exclusions: Know what you're buying! Just because you saw appliances and window treatments at your showing doesn't mean that the seller plans to leave them for you. Make sure your agent has stated in the contract exactly which items you would like to be included in the sale.
7. Closing: The date of closing, when the property officially transfers ownership, is going to depend on clear title and loan approval. Your loan officer and your agent should be able to advise you whether the closing date should be 30 days away or longer; if you need additional time to sell a home or for school to let out, make sure you specify that in the contract.
8. Occupancy: It used to be customary in Ohio to allow the seller 30 days after closing to move their belongings out of the home, but today we're seeing more and more buyers requesting occupancy at closing due to liability concerns. Talk to your agent about what's customary in your area to determine what works best for you.

This definitely doesn't cover everything in the contract, but hopefully provides a nice summary of the big things to consider when making an offer. As with any legal document, you have the right to go over it with an attorney to ensure your rights are protected.

* I'm not an attorney, and this article is not legal advice. It merely describes what one might read in a real estate purchase contract.

Well, this is embarrassing...

The summer real estate market is definitely busier and hotter (sorry) than winter and spring! Amidst all the hubbub I seem to have neglected my blog; while it's super that I've been super busy with existing and new clients, I'd like to take a moment to breathe. Inhale. Exhale.

One part about real estate you don't often read about is how we're held accountable to the codes and laws that govern our behavior. Naturally, a client or another agent could report a violation*, but there is also what we call testing. Most frequently used to enforce fair housing violations, testing involves fair housing groups contacting agents or landlords, usually posing as prospective clients or a series of prospective clients, to ensure that the agent or landlord is following established guidelines...and that they follow those guidelines consistently for every client regardless of their status or class. There are several protected classes under Ohio law:

It is illegal, pursuant to the Ohio Fair Housing Law, Division (H) of Section 4112.02 of the Revised Code and the Federal Fair Housing law, 42 U.S.C.A. 3601, as amended, to refuse to sell, transfer, assign, rent, lease, sublease or finance housing accommodations, refuse to negotiate for the sale or rental of housing accommodations, or otherwise deny or make unavailable housing accommodations because of race, color, religion, sex, familial status as defined in section 4112.01 of the Revised Code, ancestry, military status as defined in that section, disability as defined in that section, or national origin or to so discriminate in advertising the sale or rental of housing, in the financing of housing, or in the provision of real estate brokerage services. It is also illegal, for profit, to induce or attempt to induce a person to sell or rent a dwelling by representations regarding the entry into the neighborhood of a person or persons belonging to one of the protected classes. (Emphasis mine, Source)**

I'm pretty sure I was tested this week. I'll never know for sure, unless I made a mistake, but I was contacted by a woman who wanted more information on one of my listings, and expressed an interest in scheduling some additional showings with me that would include that property. I set up a custom MLS search for her, from which she chose her favorites (I don't usually recommend specific properties without showing someone all possible matches for the search criteria -- that could be construed as steering a client to or away from a particular area). I was just waiting for her to confirm the showings, which would have started tomorrow.

But today, her email address is no longer valid. I never got a phone number because I'm an idiot who forgot to ask for it, and when she called me it showed up "No Caller ID."

I was disappointed for about 30 minutes. No one likes to feel like they've done work for no reason. But then the testing theory occurred to me, and I realized that this could have been my chance to prove that I'm a friendly, honest, ethical agent who just wants to help someone buy a home. And that actually makes me feel pretty good.

P.S. If the person I'm writing about is an actual client and we've just had a communication breakdown, thank you for inspiring a blog post & give me a call when you have a chance!

* If you feel that an agent has treated you illegally or unfairly, you can report their actions to their broker, the local Board of REALTORS® (if they are a member), or the department in your state that governs real estate licensing. In Ohio, this is the Ohio Division of Real Estate & Professional Licensing.

** The Code of Ethics adopted by the National Association of REALTORS adds sexual orientation and gender identity to the above classes; those above are protected under federal or state law (or both). I'll save explaining that distinction for another post.