Guide for Hiring a Realtor. When Selling Your Home
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1 Guide for Hiring a Realtor When Selling Your Home 1
2 If you are thinking about selling your home, you are likely also in the process of identifying the right realtor to manage your listing. If so, there are several advantages in hiring a real estate agent. Among these benfits are: knowledge of the real state game, professional familiarity with the market and neighborhood trends, a wide network of buyers brokers, and keen negotiation skills. These are important assets of which the average for-sale-by-owner (FSBO) sellers do not have access. Moreover, listing agents have the most up-to-date data about comparable home sales, and know how to best market your house with staging techniques and professional photographs. Their primary tasks are to help set the price for your home and to market the sale to targeted, interested buyers, but they also shortlist clients for you, so you only have to deal with serious prospects. Once you have decided to use a realtor for your home sale, there are several steps you should take to prepare for the professional partnership, choose the best agent to sell your house, formalize the contract and initiate the sales process. 2
3 Table of Contents 01 Things You Should Do Before Hiring a Realtor /4 02 How to Determine Your Budget for Hiring a Realtor /7 03 Questions to Ask Potential Realtors Before Hiring Them /8 04 Tips for Comparing Realtors /11 05 How to Get a Quote for Realtor Services /14 06 What to Discuss with Your Realtor After Hiring /16 3
4 01 Before Hiring a Realtor Things You Should Do Choosing to use a real estate agent is the first big task on your home sale to-do list. While you may be receiving a lot of advice on how to choose a realtor, you may not be thinking about what you need to do before you even meet prospective agents. Selling your home is one of the biggest transactions you are likely to make in your life, and taking a few steps to make the job of your partner (i.e. the realtor) easier can potentially save you money in the long run. 4
5 Research Comparable Home Values You can wait for your realtor to tell you his or her valuation of your home and accept the offer blindly, or you can do your own research to be familiar with the current market. Looking at sales prices for comparable houses that is, those in the same neighborhood, with the same number of bedrooms and bathrooms, with similar amenities, and in a comparable condition of upkeep allows you to have a more conscious discussion with your realtor about setting the listing price of your house. Doing this before hiring an agent, moreover, can prepare you for a listing estimate that might be lower than you would otherwise expect. Know How Much You Owe on Your Mortgage Your realtor can only advise you adequately if he or she is aware of all the details relevant to the legal operations of your house. Tidy up the Place Do not wait for your real estate agent to come in for the first visit and tell you to clean up your house for potential buyers. Be aware of your own home environment and know that clutter makes a house look unappealing. Do your homework first, and put away your laundry, clean the stove top and make sure toiletries are neatly organized in the bathroom. With everything looking tidy, your realtor can give you better advice for effectively staging your home to improve your chance for a home sale. Depending on how much you still owe on your mortgage, you realtor may approach your home sale with a different strategy. This is especially true if you owe more than your home is currently worth on the market. Be sure to collect all the proper documents before meeting your agent. Gather your loan records and run an amortization check, which considers how much your loan was originally worth, when you received the loan, how much you have already paid, and the interest rate, to determine exactly how much you still owe. Identify Disputes and Liens Housing disputes and credit liens can potentially be bad news for a home sale. Make sure you know the details of any of these issues before you hire a real estate agent, and be prepared to be upfront about them. All outstanding concerns should be settled before the sale. These may include: Property disagreements with neighbors. Disputes with contractors. Tax fraud. Unpaid debts of previous owners. 5
6 Do Not Make New Improvements, But Do Take Stock of What You Have That being said, do wait for your realtor to advise you on what improvements to make to your home in order to increase its value or quicken the sale. Your personal tastes may not align with market trends, and buyers may only have a limited budget for paying premiums on renovations. It is important, however, to make a list of renovations you have already made to the house since purchasing it. This assessment goes into determining the listing value of your home, as compared to the original purchase price and to similar, but non-renovated, houses on the market. It is not necessary to provide your realtor with the exact expenses you have put into updating your home though, because the added value is often more than the investment, anyway. Know Your Schedule Check your schedule and know how much time you have available to maximize showings and sales opportunities. Be upfront with your listing agent about your availability from the very start of your partnership, so he or she can effectively plan the best strategies for marketing your home. You should also be prepared to make minor adjustments to your schedule to accommodate open houses and potential buyer visits. Be sure to consider the need for boarding pets with family or neighbors, or arranging a babysitter for young children during open house hours. Scout Your Options Finally, when you believe you are ready to select an agent to list your house, do some neighborhood scouting to determine your best options. Drive around town, and scope out real estate signs, noting down the names and numbers of the realtors. Notice which realtors are doing the most business for homes similar to your own. You may even choose to drop in on an open house to get a feel for how the realtor interacts with potential buyers. After you have narrowed down your list to two or three local agents, call and ask them to provide a listing presentation for your home. 6
7 02 How to Determine Your Budget for Hiring a Realtor The average commission for a real estate agent is six percent. To put that in perspective, if your house sells for $250,000, you pay $15,000 of that to your realtor. Of course, those fees do not go directly into your agent s pocket. About half of that (around three percent of the total sale) typically goes to the buyer s real estate agent, and a portion may also go to the realtor s agency, as well. As real estate agents do not earn a fixed salary, the rest of their commission pays for the time they spend with you, and the work they put in to market the house, including any fees to post your listing on websites or in local publications. Keep this commission fee in mind when you are budgeting for how much you will be earning from your house sale. Remember, as the seller, you will also be required to pay a portion of the closing costs. This can average out to be about two percent of the home s purchase price. These fees may include any escrow expenses, notary fees, transfer taxes, prorated water and sewage bills, the remainder of your mortgage, and any outstanding property taxes. These figures should also factor into your budget for selling your home and hiring a realtor. 7
8 03 Questions to Ask Potential Realtors Before Hiring Them Before hiring a real estate agent, be sure you interview at least a couple of potential options. This is the best way to get a sense of how comfortable you feel with the realtor s qualifications and ability to sell your home. Of course, remember some agents may not be willing to sit down for a long, formal interview, nor are they likely to meet you at your home to give free advice before you officially hire them. Take some time to meet your prospective agents at their offices or chat over the phone, and have a list of a few key questions to ask them. What are your top three qualities that make you different from your competitors? This is an important and easy question to ask. It gives you a very clear demonstration of what the agent perceives to be his or her skillset, and provides three, clear reasons why you should hire him or her over someone else. Most realtors are also prepared to answer this question, and know what kind of responses you may be looking for honesty, availability, negotiation, assertiveness, friendliness, for example. Be sure to follow up and ask for a situational example of how the realtor uses these qualities during a sales process. 8
9 How long is the contract period? What other professionals do you work with? Signing the shortest possible contract, perhaps one to two months, allows you to get a good sense of the agent s marketing strategies. If the house is well-marketed, you should reach most serious buyers in that timeframe, as well. If the contract time passes, and you still have not sold the house, you may choose to cancel the agreement or extend the contract, depending on how satisfied you are with the agent s performance. How long have you been in business? Because there is no bar examination nor a professional training school for realtors, agents gain their knowledge and experience on the job. Of course, not all realtors who have been working for 20 years are experts in the field, but it is likely they are better equipped to understand the nuances of the market and the best techniques to sell your house. Take experience into account with all other factors of your interview to determine whether or not the realtor meets your qualifications. Most realtors have a list of housing professionals in their networks with whom they prefer to work. These may include: Mortgage brokers. Title suppliers. Home inspectors. Ask how the agent knows these vendors, and why he or she chooses to work with them. Be aware if any of these network contacts are affiliated to the agent or the agency; it could mean the vendor is providing compensation to the realtor for choosing to work with him or her, and for this, you may be paying hidden premiums. Clarify any doubts you may have about these professional contacts, and be sure you understand the relationships, and how they may affect your sales environment. 9
10 On average, what is your list price to sales price ratio? What guarantees do you offer? You want this number to be as close to 100 percent as possible. This means your house is likelier to sell for its fulllisted value, based on the realtor s experience in negotiation and feeling out the market. Depending on the state of the market, however, do not put too much emphasis on this number. While it is important to understand how successful potential agents have been in selling homes for top dollar, housing markets are fickle, and there are often factors beyond the realtor s scope of influence. Can you provide references? It is also a good idea to consult references and reviews of realtors you are considering hiring. Most agents will be prepared to offer references, though some experienced realtors may be offended you would ask. Check online, first, to see if the agent has been reviewed by previous sellers, and if after that you are not convinced, ask the realtor to provide references from non-relatives. You can also request permission to contact the references for further information. This question is your key to knowing how to get out of a realtor agreement if you become dissatisfied with the agent s service. Be sure to ask what your prospective realtor s policies are for canceling agreements, and whether he or she is willing to guarantee the service. Ask if any previous clients have canceled their agreements, and how the situations were handled. Is there anything I should know that I have not asked about? You last question should be sure to cover anything that might be left. There is often at least one thing you have not thought of that you definitely need to know. Moreover, the way your potential real estate agent answers this question can reveal a lot about how compassionately he or she is willing to work with you. Your agent should take the time to make sure you understand all of the logistics and formalities of your relationship with him or her, and the sales experience, and you should feel you can trust the agent to be honest and transparent about any issues that may arise. 10
11 04 Tips for Comparing Realtors One of the biggest mistakes you can make in comparing realtors is only considering the list price offered for the house and the commission rate. These two factors can often be distorted, and besides the questions listed above, there are other considerations to take into account. List Price There are a lot of factors that go into deciding the sales price of your house, including modern amenities and updates in the home, the location, and of course, the market. Pricing is an art, and your realtor should be able to provide you with a value range for how much to list your home. Of course, the truth is that realtors can only tell you a comparable price for a home like yours, but in the end, you are the one who sets the price. If an agent gives you a particularly high list price, it could be an exaggeration to try to get your business. Always remember to ask to see the data from which the agent is basing the listing, and if the compared homes are not in the same neighborhood, for example, it could be a sign the realtor is overvaluing your house. This can be potentially detrimental, because if buyers are turned off by the list price, you will not be likely to get an early offer (within three weeks of listing is ideal). Having to subsequently lower the price may unintentionally blacklist your home as buyers believe there is something wrong with it. 11
12 Commission A realtor s commission typically reflects how much work is put into marketing the home. An agent with a larger advertising budget and the backing of a reputed real estate firm can likely reach a wider range of buyers, and have a greater potential of selling your home at full-value. This service may come at a higher commission. Alternatively, you can consider how well you would make out if you choose an agent with a lower commission, but have to reduce the listing price by two percent, because of poor marketing strategy. Track Record One of the more important factors to consider when choosing between realtors is comparing the successes of their most recent home sales. Ask to see records of original list prices and final sales, as well as the number of days the houses were on the market. Price reductions are a sign of a realtor who may be less experienced, a less competent negotiator or unfamiliar with the nuances of the market. Moreover, a realtor may offer a lower commission, because he or she has not made many sales lately, and is desperate for business. If this is the case, you probably cannot trust his or her skills in the industry, and may want to choose an agent with more successful experience, even if the commission rate is higher. Alternatively, some real estate agents offer discounted commission rates under specific circumstances. These might include the following: You are selling more than one house. You are using the same agent to sell your home and buy a new one. You promise to refer more clients to the agent. You agree to do the marketing and advertising yourself, taking on those costs out-of-pocket. The agent is willing to accept a lower commission in exchange for yard signage. Additionally, you may receive a discount if the agent feels he or she will lose your business to another realtor if he or she does not lower the commission rate. Sometimes, the realtor will lower the rate if you do not have enough equity to cover the full commission costs, or if the agent agrees to work pro bono. 12
13 Marketing Strategy When comparing real estate agents, remember that effective marketing is what is going to sell your home. Review the full strategies for each of the realtors you are considering, and be sure the agent you choose has at least a basic plan for success, which may include: Targeted digital marketing. Staging strategies. A virtual online tour. Professional photographs. Direct mail to nearby and out-of-area brokers and buyers. Additionally, the real estate agent should offer at least two open houses, listings on major websites, incentives for broker previews, and professional signage, including the agent s cell phone number. You should expect you will receive follow-up reports after a showing to a potential buyer, and updates on neighborhood trends. A combination of all of these can lead to a successful home sale. General Characteristics Because you are going to be working with your realtor for at least a month or two, it is also important to choose someone you like and can trust. Your realtor should be honest, have good communication skills, and know how to network. Professionally, be sure to ask about degrees, certifications and experience selling homes in a similar market. Someone who is more qualified gives you more confidence in his or her ability to make a sale. Also, consider the negotiation skills of each agent you are comparing. Be sure the agent is prepared to drive a tough, but balanced, negotiation, and is not just looking for a quick sale, which may not be to your benefit. 13
14 05 How to Get a Quote for Realtor Services With your preparations complete, budget in mind and list of potential realtors narrowed down, you can be prepared to ask for an estimated cost for your listing agent s services. Remember, the realtor s quote should align with the commission fee this is how much he or she will charge you for his or her services and the commission is a percentage for how much your house sells. Ask your prospective agent to give you a range of the highest and lowest values estimated for your home. Depending on the market, the difference could be up to $10,000, or even more. Then, ask the agent for his or her commission rate. While this is commonly about six percent across most states, it is important to understand it is not a fixed rate. Moreover, it is always negotiable. Of course, not all real estate agents, especially senior realtors, are willing to discount the fees, and generally, real estate listings follow the adage, You get what you pay for. After giving a cut of the commission fee to the buyer s agent, another cut to the brokerage agency and paying for marketing, listing agents often barely squeak away with minimum wage rates, even if they are charging you the full, standard six percent. This means that if you are expecting him or her to do the same work for a discounted commission, you might be disappointed. To better assess whether the agent s fees align with what you feel you should be paying, do not hesitate to ask what goes into the commission rate. If he or she is charging a higher fee, it could be, for example, that the agency takes 14
15 a larger cut. The rate an agency takes from the realtor s commission varies, on average, between 25 to 40 percent, which the agents, themselves, have no control over. On the other hand, your realtor s fees might include provisions for hiring a professional photographer or exclusive access to real estate marketing platforms. If you feel confident in your own photography skills, or those of a close friend or family member, or are willing to pay out-of-pocket to list your house on the multiple listing service (which may end up being less than if you pay your realtor to do it for you), then it can be to your benefit to negotiate a lower commission. For sellers who are less tech-savvy and need to rely on the agent for marketing, however, requesting to pay less has a high probability in resulting in more limited exposure and a lower, final sales price. Once you have agreed on a value range for your home and on a commission rate, your prospective agents can give you official quotes for the cost of their services. This will also be a range proportional to that of the expected sales price of your house. Be sure to get these quotes in writing, and remember to ask for a personal guarantee. If your home sells for less than the lowest expected value, with your agent s guarantee, you may not have to pay commission. 15
16 06 What to Discuss with Your Realtor After Hiring After you officially hire your listing realtor, there are a few conversations to have to ensure you are both on the same page about the selling process. Understanding Legal Forms One of the most important items to address is that you fully understand all of the forms you may need to sign. Do not be afraid to ask questions. While real estate agents are very familiar with their own filing documents, they know you may not be, and they should not hesitate to explain them clearly, if needed. 16
17 Expectations for Communication and answer any questions during the appraisal process, to ensure a more accurate valuation. Before you part ways after signing your contract, make sure to agree on a preferred mode of communication. Is it best to reach you by calling, for example, or do you do better with texting or ing? Similarly, how often do you expect to hear from your realtor? After your house showings begin, you should probably be in touch at least once a week. Appraisal Even though your realtor has estimated the value of your home based on comparable sales and the current real estate market, it is always a good idea to bring in a professional appraiser. Moreover, your agent should plan to be onsite during the appraisal. Often, the official will need to know a full history of the home, including any recent updates and repairs, in order to fully evaluate a reasonable sales price. Your realtor should be familiar with this information, and can therefore provide clarifications Home Inspections Most serious buyers will pay for your home to be inspected for any potential damage that may warrant a price reduction, pre-sale maintenance or reduced closing costs. Your listing agent should already be prepared to attend those inspections, and if that is not normally his or her policy, it is within your bounds to request it. When the listing agent attends an inspection, he or she will get to hear, firsthand, what the home inspector is advising the buyers. The inspector might assess, for example, that the roof will need to be replaced within the next five years. The buyer might translate that to the seller as a request for the roof to be replaced immediately. There are certain requests that can be negotiated as part of the inspection process, but for negotiation to go as favorably as possible, it is important your agent is able to represent you properly by knowing exactly what the inspector reported. 17
18 Staging Qualifying Potential Buyers After hiring your real estate agent, you can begin to discuss the details of staging your home for sale. This goes beyond cleaning, decluttering and applying a fresh coat of paint, and rather focuses on setting an appealing and attractive mood that makes buyers fall in love with the home. Your agent s commission might include fees to hire a professional stager, if the market in your location has such demands. These services can cost anywhere from a few hundred to a few thousand dollars. Other agents know enough basic strategies to help you stage your home, yourself. These include such tactics as: Arranging minimal furnishings in small vignettes. Presenting lush fabrics as carefully laid throw blankets or neatly hung bath towels. Setting out polished fruit bowels or eclectic knickknacks in sets. Be sure to discuss the needs of your home for effective staging to increase its sales value. Showings and Presentation Another one of your listing agent s responsibilities is to interview potential buyers for pre-qualification, so you only need to meet serious prospects. Discuss with your realtor what the strategies are for the qualifying process. Does it certify only that the buyer can afford the house, for example, or does it extend to credit approval to ensure the buyer will qualify to receive a mortgage? Troubleshooting If, after a few weeks, you are not having any luck with your home sale, it is definitely the time to have a conversation with your agent about what might be holding things up. First consider factors that are in your control, like how you have been maintaining the house or whether you have made it adequately available for showings. You might also need to discuss your agent s marketing strategy. Ask for a list of all possible platforms, and an evaluation of the extent to which your realtor is using them, in comparison to other successful, comparable homes sales. If you cannot seem to find any obstacles in these discussions, you may need to jointly revisit the listing price. A good real estate agent will work hard to sell your home. Be sure you are on the same page about how house showings will be arranged. Ask your realtor for strategies, and be sure he or she plans to meet all serious buyers onsite. While some agencies still make use of lock boxes to allow potential buyers to visit your home on their own, this is not always an effective strategy, as it does not allow the agent to do last-minute staging or answer questions onsite. Your realtor should be prepared to arrive at your house at least 30 minutes prior to a showing, and make sure the rooms are tidy and neat. He or she may also tell the prospective buyers what is unique about the home that the potential buyers would not otherwise know about (a new sprinkler system, for example), before letting them roam around on their own. 18
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