The Role of Real Estate Brokers
They can be a big help when you buy or sell, but before jumping on board understand the legal dimensions of your relationship with them.
What is the real estate agent's role in a home sale?
Typically, two real estate agents are involved in the sale of the home-the listing agent, with whom the seller lists the property, and the agent who shows the property to prospective buyers.
For the buyer, it is important to keep in mind that both the listing agent and the agent showing properties are agents for seller. This means that both of these individuals work for and on behalf of the seller, not for the buyer. For a prospective buyer, this is an absolutely crucial point. It means, for example, that neither the listing agent nor the showing agent is permitted to disclose negative information to a buyer about the property-that is, information that is adverse to the seller's interest in selling the property.
As a buyer, you can avoid this information gap by hiring a buyer's agent. Because this individual represents you as the buyer, he or she will be required to disclose to you all relevant information-the bad as well as the good-about the property you are considering. In addition, a buyer's agent is there to negotiate the best possible purchase terms for you.
What is the role of the seller's agents?
The seller's listing agent helps determine the price of the home, suggests how to market the home, schedules advertising and open houses, shows the home to prospective buyers, and otherwise facilitates the sale. The showing agent works with buyers to show homes, contacts the listing agents, monitors the transaction, and, perhaps, helps to obtain financing. In most cases, the seller pays the sales commission that is shared by the two agents.
What is the listing agreement?
Once signed, the listing agreement is a binding contract between the seller and the listing real estate firm. Its provisions include length of the listing period, commission rate and payment date, responsibilities of the firm and its agents, and who is responsible for the cost of advertising and the other costs associated with the home sale.
Read the listing agreement carefully. Do not hesitate to discuss any provisions you would like to change. To further protect your interests, don’t sign an agreement until your attorney has reviewed and approved it, especially if you have requested changes that have been resisted.
One final suggestion could save you lot of money. Before signing a listing agreement, let your friends and neighbors know you're selling. If any of them express an interest in buying, exclude them from the listing agreement. Then, if one of them ultimately buys the property, you will not be required to pay any commission at all.
What fee will I pay on the sale of my home?
Typically, real estate firms charge 5 to 7 percent of the sale price. On some higher-priced homes, a firm may charge the full commission on the first $100,000 or $200,000 and a lower percentage of any amount above that price. If the agency that lists the home is also the agency that sells it, the commission is shared by the agency and the individual agent who actually handled the sale. If the listing firm and the selling firm are different, the commission is shared by the two firms.
Keep in mind that all commission agreements are negotiable, particularly in a seller's market.
What other terms in the listing agreement are negotiable?
In theory, they all are. At the very least, the real estate agency should be willing to negotiate provisions on:
- The length of the contract. Many of the standard forms provide that the contract renews automatically. Many firms want a six-month listing. If you're in a hurry to sell your home, try to get a 60-day or 90-day listing.
- When the commission is earned. For example, this might occur only when the seller and buyer actually complete the sale, not when they sign the purchase agreement.
- Who will be responsible for the advertising expenses—the seller or the agency.
What legal protection do I have after signing a listing agreement?
The listing agreement between a seller and a real estate firm carries a fiduciary responsibility. The firm and all of its agents act for the seller. They owe the seller the duties of care, obedience, accounting, loyalty, and notice.
Is the real estate agent liable if a potential buyer steals something from my home?
Unless the agent showing your home was negligent, such as giving your house keys to a buyer, it's unlikely that he or she is responsible for thefts. Sellers should take the precaution of securing small, valuable items. If your agent wants to use a lock box, which allows agents access to keys to your home, make sure the agent uses an electronic lock box. Unlike a manual lock box, an electronic lock box gives a printed record of all the agents who have shown the home. This deters any agent who might be unscrupulous.
What can I do if my real estate firm doesn't seem to be working very hard to sell my home?
The best way to prevent this problem is to limit the term of the listing agreement to 90 days or less. If your home doesn't sell in that period of time, you're legally in a position to try another firm.
What is the fee relationship with a buyer's agent?
Most buyers prefer to have their agent's fee paid by the seller to avoid additional costs. But, remember, this preference may commit the buyer to the traditional arrangement in which the listing and showing agents both work for the seller. Any buyer who is uncomfortable with this situation may enlist the help of a buyer's agent who will represent only the buyer.
A buyer's agent may require a nonrefundable fee, which will vary with the length of the home search and the extent of the services provided. If you choose this option, you will want to have a specific contract which, as with all written contracts, should be reviewed and approved by your lawyer. The contract should specify the services to be provided and the fees you will pay. If possible, avoid having the fee connected to the purchase price of the home. You do not want to provide an incentive for your agent to encourage a more expensive sale than you want. It may be possible, however, to specify in your purchase offer to the seller that your agent's fee will be paid by the seller at closing.
To find a buyer's broker, check the yellow pages of your telephone book or call the local real estate association for referrals.