When taking calls from prospective sellers more and more the first question is “what is your real esate commission?” Perhaps it would be better worded if they asked, “what is it going to cost me to sell a property?”
Answering this question is best anwered by focusing on what they will net from selling their home. “Net” being the money in their pocket after the mortgage, mortgage pay out penalty if any, lawyer fees, selling fees, taxes owing, etc. have been paid in full providing the home sells at all.
Cost is a combination of several factors adding up to an outcome. These factors include but are not limited to money, time, effort & exposure to liability.
Sellers can now choose from a number of selling models knowing one’s choices fully including the pros and cons of each will allow you, the seller to manage your money, time, effort and exposure to liability thus reducing surprises and disappointments so that your home selling experience is a pleasant one.
One of the first things you should be familiar with is “Agency”. I’ve attached an article from the Alberta Real Estate Association entitled “Agency Relationships“, Please read through this before reading further.
Now that you know what your options are when dealing with a REALTOR® let’s review a little.
You can choose to be represented or not.
If you choose not to be represented anything you say can and likely will be used to the benefit of the other party be that a buyer or seller. This is because you have waived your right to be advocated for, which would include confidentiality.
When being represented the REALTOR® must remain loyal to you and any conflict of interest must be disclosed. The REALTOR® must put your interests above their own.
The REALTOR® must use reasonable care and skill and what is often overlooked is that this care and skill can mitigates liability simply by the REALTOR® knowing what pitfalls to avoid, the least of which is knowing what and when to disclose certain facts about the property before any offers to purchase are signed. This in itself can save you 10s of thousands of dollars.
After reading the Agency Relationships guide you can see that being represented or having someone advocate for you includes a number of duties all with the intent that your best interests are served.
Let’s now look at my business model and the underlying principles that built the Seller’s Guide..
Full representation, performance based model – Here you have a REALTOR®, working on your behalf for your best interests with all the fiduciary duties enacted as covered in the Agency Relationships guide. A contract is signed commonly referred to a a “listing contract” which lays out the obligations of the REALTOR® to the seller and vice versa. A performance based commission is paid only if the home is sold within a given time period and this amount usually a percentage is less if the home is sold for less. The percentage amount is negotiated between the seller and the REALTOR®. All monies for marketing your home are usually born by the REALTOR®.
Pros – the REALTOR® does the bulk of the work, mitigates any liabilities, works to reduce the time on market and increase the net amount of money to the seller. All this without requiring in most cases any money up front and money is only paid to the REALTOR® if the home sells. The home sells only if an offer acceptable to the seller is received, the seller is under no obligation to sell the home or accept an offer if they choose not to. Furthermore most REALTORs® have a seller’s guarantee stating that if for some reason their client is not satisfied the unfulfilled contract can be terminated. Ask to see this guarantee in writing and make sure it is explained to you fully.
Cons – if the house sells the commissions are deducted from the proceeds of the sale. You may have difficulty getting that smile off your face as you move on with your life.
How does a buyer’s agent get paid?
When the seller signs a listing contract part of the commissions being paid out are allocated to the buyer’s agent if different from the seller’s agent. Many buyer’s agents will have a contract signed with their buyer laying out their obligations to their client and vice versa much like the “listing contract” discussed earlier. This way the buyer can be assured loyalty, knowing that any home whether on the market or not will be approached by their agent equally with the knowledge that they will be compensated their fee whether the seller is offering any compensation or not. Where the amount being offered by the seller is less than the amount the buyer has agreed to ensure their agent gets paid the offer to purchase can be written asking that the shortfall be paid to the buyer’s lawyer so the buyer can fulfill their obligation laid out in the agreement they signed with their agent.
There are often two REALTORs® involved in a sale, the seller’s agent and the buyer’s agent. Ensure your REALTOR® discloses the potentiality of an offer coming in which allows for the buyer’s agent to get paid from the proceeds of the sale their full fee if the amount you as a seller are offering is less than the buyer’s agent’s fees.
My bias is towards the full representation, performance based model as I like to advocate for my clients ensuring at the end of the day I’ve done everything I can to see that they get the most they can from their home with the least amount of effort, time and exposure to liability. So I apologize for any slanting of this article in that direction,
The take away point of this article I hope you get is be informed and if at all possible seek professional advice from someone who stands to gain the most from you getting the most.
Here’s to a pleasant home selling experience.
Kevin Grenier ABR, REALTOR®
P.S. Whether you decide to use a REALTOR
® or go it alone as in an FSBO (for sale by owner) I wish you all the success.
This article is not intended to solicit anyone already under a written exclusive service agreement with another REALTOR®