The Process: Completing a Listing Agreement
The following is a general description of the selling process.
What is a Listing Agreement?
It is a contract between you and the brokerage company that the agent represents.
It is a framework for subsequent forms and negotiations.
It's important the agreement accurately reflects your property and clearly spells out the rights and obligations of all parties and what is included and what is not included in the transaction.
Both you and the listing agent sign the listing agreement and each receive a copy.
The agreement binds both parties to its terms and conditions.
Whether or not you wish your lawyer to review the agreement, you should in any case let him or her know that you're selling your home.
The Fine Print
Generally, in the agreement:
- you appoint the brokerage company as your agent and give its representatives the authority to find a purchaser,
- the duration of the agreement is indicated; and
- the compensation is set out (generally, you pay this only upon closing or when the house changes hands).
The agreement also:
- sets out the listing price; and,
- describes the property you are selling - lot size, building size, building style and materials, floor areas, heating/cooling systems, rooms sizes and descriptions.
Here you decide what you are taking with you and what you are leaving with the house. Generally, unless stated otherwise, fixtures remain with the property, while chattels - things which are moveable - aren't included in the sale. If necessary, what stays and what goes are listed under "inclusions" or "exclusions."
And finally, the agreement gives the financial details:
- mortgage balance;
- monthly payments;
- due dates for all mortgages;
- any easements, rights of way, liens or charges against the property.
Types of Listings
Open Listing: The authority to sell the property is given to one or more REALTORS®. You also have the right to sell the house yourself, without having to pay a fee for service, and without dealing with the appointed REALTOR®(S).
Exclusive Listing: You appoint one firm to act as your agent in the sale of your house. This firm usually has the sole, irrevocable and exclusive right to sell your house for a given period of time.
MLS® Listing: This is a type of exclusive listing, allowing the REALTOR® to work with other REALTORS® through your local board's MLS® system and give your property maximum exposure. This type of cooperative effort may result in the listing agent sharing the commission with the selling agent.
What is the MLS® System?
The MLS® system is a cooperative listing service operated by your local real estate board. Your property --and other properties-- are listed on it.
How can the MLS® System Help Sell My Home?
Complete details of your home are sent to all the REALTORS® in your area, usually within 48 hours, via modern technology;
Your property gains more exposure, because it reaches the majority of the real estate professionals in your community; and,
Through the national MLS® Internet web site (Realtor.ca), participating local real estate boards can advertise their listings to potential buyers across the country and around the world.
Setting the Asking Price
Although you may have an idea of how much your house is worth, it's important to have your home valued by a professional on its own merits. Be careful not to price yourself too high or too low. If it's too high, there's no sale; too low and you lose on your investment.
Marketing Your Home - The Basics
Open Houses - There are two types:
- An agent's open house, where sales representatives from the listing company will be invited to view your house. If you have signed an MLS® agreement, other REALTORS® may also be invited. Remember, each of these REALTORS® may have a prospective buyer.
- A public open house, where members of the public are invited to walk through your home and have a look. It's an efficient way to show your home to many potential buyers at once. The listing agent will act as host, answering any questions.
This internet has greatly changed how homes are marketing (such as full picture tours available on line). This has in some respects changed the usefulness of public open houses. Prospective buyers are able to gain much information about the home before they view it.
Discuss with your REALTOR® if public open houses are effective in the marketing of your property.
Other Tools Your agent also has other tools at his or her disposal:
- The "For Sale" sign on your front lawn. Your lawn sign is a "silent salesperson", constantly telling everyone that your home is for sale.
- Advertising your home in the real estate section of your local newspaper or in your local real estate board publication. Even though your home may not be shown in every issue, you can count on your agent to always suggest your property to buyers who are looking for a home like yours.
Renewing the Listing Sometimes a home doesn't sell right away. Avoid the urge to pull your home off the market - be persistent! Generally, there are three reasons why a home may not sell as fast as others:
Naturally, you can't change your home's location, but you can fix the condition of your home and you can, of course, adjust your price. Throughout the listing process, you need to be constantly comparing your asking price against those of similar properties in your area. It may be time to adjust the price of your home.
Review your selling strategy regularly with your listing agent:
- Is your house being shown regularly?
- Are you receiving the feedback from prospective buyers?
- Are you in touch with the marketplace?
- Is your property competing well? If not, what else can you do?
The offer outlines:
- how much the buyer is willing to pay;
- when the buyer would like to take possession;
- any conditions attached to the offer; and
- when the offer expires.
As an act of good faith, the buyer will make a deposit with the offer. A good deposit will often show the buyer's sincerity.
Along with this, the buyer may:
- attempt to "low ball" you, and submit an offer much lower than your asking price; or,
- attach conditions to the offer.
You don't have to accept the offer. You may wish to make a counter offer that comes part-way to meeting the offer's conditions. The counter offer is one more step along the way to negotiating the final terms and conditions of the sale.
The offer, once signed by everyone, is a binding contract. Make sure you understand and agree to all of the terms in the document. You may want to have it reviewed by your lawyer before signing.
If necessary, and if the buyer makes it a condition of sale, you may be asked to:
- provide a current survey, or a "real property report," showing the location of the house on the property owned by you and that there are no encroachments;
- prove that you have title to the property (the buyer's lawyer will check this out when he or she conducts a title search to see if there are any liens on the property, easements, rights of way or height restrictions); and,
- provide a health inspection certificate, if there is a septic system, stating the system meets local standards.
The buyer may also make the purchase conditional on an inspection by a qualified building inspector. This is generally done at the buyer's cost.
Closing the Sale
On or before closing day, this is what happens:
- The lawyers representing you and the buyer will set up a trust account for the money coming from the sale and will pay off any mortgages you owe on the property. After these are paid, you will receive any money you have coming from the sale.
- You must deliver the property deed or transfer documents and mortgage details to your lawyer and keys to your REALTOR®. Your lawyer will register the mortgage discharge and transfer the deed at closing; and,
- Your lawyer will ensure that you receive compensation for prepaid expenses such as property taxes or other bills. If there is any heating oil left in the tank, you should let your REALTOR® know so he or she can collect a check on completion.
Some lenders make it possible for your mortgage to be portable, so you can take your mortgage with you when you move to your new home.
Finally, two things to remember:
- The capital gain from selling your principle residence is tax exempt. This means the profits from selling your home are not taxable; and,
- Protect your investment and the deal by keeping your insurance policies in force up until the date of closing.
Here, your responsibilities under the listing agreement end. You'll have paid your listing agent the agreed-upon compensation. This can be done by your lawyer who can arrange the payment from the proceeds of the sale.
The above information is courtesy of CREA: the Canadian Real Estate Association.