Our Fix and Flip Academy will go through how to source a good Realtor, this will be an important point. But once you have found one, how does the process work?
First step will be a Listing Agreement. A realtor listing agreement is a written, binding legal document between you as the seller of your property and a real estate agent who will help handle the sale of your home and earn a commission from it once the sale is made.
It is up to you to decide how long you would like to list your home with that particular realtor. You can negotiate with the realtor in terms of duration and payment of commissions. I have no issue paying Realtors commission for sales, if they are good! I never sign a listing agreement for more than 90 days. Often they will attempt to lock you in for 6-9 months! I believe it often can takes some time, particularly in the mid-west US to build interest, the market is nothing like Australia or NZ where you may get 100 people show up to an open house. But 90 days gives you enough time to feel comfortable that the agent is doing what they can, but gives you a chance to change agents if needed without struggling for 6 months or more and yet gives the agent time to build some momentum on the property.
The realtor earns their commission through marketing your home in a range of ways and handling a lot of the important paperwork involved.
The average commission on a home is 6% of the final closing price of the property. However, you might be able to go lower if the house is in good repair and in high demand due to its location and desirability as a property. Again, I have no issues paying for service, but you may be able to get a discount.
It is important to note that in some cases you might still have to pay commission even if the listing has already expired. If the person who eventually buys is someone that the realtor brought to the table, the clause will usually state that the commission is payable for up to 90 days after the contract has expired. This helps protect realtors from having all their hard work taken advantage of by unscrupulous sellers and buyers trying to cut them out of the deal and save money.
If you have been in discussions with other interested parties prior to the contract with the realtor, such as family members, colleagues or other investors you know who might want to buy your house, you can include the names of these people in order to show you are bringing in the sale and therefore there is no commission due to the realtor. Sometimes if you can contact the neighbours, it’s surprising how many homes are sold to people who already live in the street!
Early Cancellation of Contracts
Your contract with the realtor can be cancelled early for a number of reasons. If you don’t feel the realtor is doing enough to market your property effectively, you are legally entitled to ask for an early cancellation. Be clear about the responsibilities and obligations of each party, and see if you can get them to be more proactive on your behalf. If they are not meeting the terms of the agreement, ask to cancel.
It might be difficult to cancel prior to the end of a 90-day contract as the Realtor might claim (legitimately) that he has not been given sufficient time to sell. But if you need to get out of a 6 or 9 month contract, if careful, it can be done.
If they make a fuss, remind them that word-of-mouth referrals are important, and they certainly would not want to hold you to a contract when you are so unhappy with their services.