Real estate brokers and sellers

Services provided to seller as client

Upon signing a listing contract with the seller wishing to sell the real estate, the brokerage attempts to earn a commission by finding a buyer for the sellers’ property for the highest possible price on the best terms for the seller. In Canada, most provinces’ laws require the real estate agent to forward all written offers to the seller for consideration or review.

To help accomplish the goal of finding buyers, a real estate agency commonly does the following:[citation needed]

  • Lists the property for sale to the public, often on an MLS, in addition to any other methods.
  • Provides the seller with a real property condition disclosure (if required by law) and other necessary forms.
  • Prepares necessary papers describing the property for advertising, pamphlets, open houses, etc.
  • Places a “For Sale” sign on the property indicating how to contact the real estate office and agent.
  • advertises the property.
  • Holds an open house to show the property.
  • Serves as a contact available to answer any questions about the property and schedule showing appointments.
  • Ensures that buyers are pre-screened and financially qualified to buy the property. (Sellers should be aware that the underwriter for any real estate mortgage loan is the final say.)
  • Negotiates price on behalf of the sellers.
  • Acts as a fiduciary for the seller, which may include preparing a standard real estate purchase contract.
  • Holds an earnest payment cheque in escrow from the buyer(s) until the closing if necessary. In many states, the closing is the meeting between the buyer and seller where the property is transferred and the titleis conveyed by a deed. In other states, especially those in the West, closings take place during a defined escrow period when buyers and sellers each sign the appropriate papers transferring title, but do not meet each other.

The listing contract

Several types of listing contracts exist between broker and seller. These may be defined as:

  • Exclusive right to sell

The broker is given the exclusive right to market the property and represents the seller exclusively. This is referred to as seller agency. However, the brokerage also offers to cooperate with other brokers and agrees to allow them to show the property to prospective buyers and offers a share of the total real estate commission.

  • Exclusive agency

Exclusive agency allows only the broker the right to sell the property, and no offer of compensation is ever made to another broker. In this case, the property will never be entered into an MLS. Naturally, this limits the exposure of the property to only one agency.

  • Open listing

The property is available for sale by any real estate professional who can advertise, show, or negotiate the sale. The broker/agent who first brings an acceptable offer would receive compensation. Real estate companies will typically require that a written agreement for an open listing be signed by the seller to ensure payment of a commission if a sale takes place.

Although there can be other ways of doing business, a real estate brokerage usually earns its commission after the real estate broker and a seller enter into a listing contract and fulfill agreed-upon terms specified within that contract. The seller’s real estate is then listed for sale.

In most of North America, a listing agreement or contract between broker and seller must include the following:

  • starting and ending dates of the agreement;
  • the price at which the property will be offered for sale;
  • the amount of compensation due to the broker;
  • how much, if any, of the compensation will be offered to a cooperating broker who may bring a buyer (required for MLS listings).

Net listings: Property listings at an agreed-upon net price that the seller wishes to receive with any excess going to the broker as commission are illegal in most, if not all, states.[citation needed]

Brokerage commissions

In consideration of the brokerage successfully finding a buyer for the property, a broker anticipates receiving a commission for the services the brokerage has provided. Usually the payment of a commission to the brokerage is contingent upon finding a buyer for the real estate, the successful negotiation of a purchase contract between the buyer and seller, or the settlement of the transaction and the exchange of money between buyer and seller. The median real estate commission charged to the seller by the listing (seller’s) agent is 6% of the purchase price. Typically, this commission is split evenly between the seller’s and buyer’s agents, with the buyer’s agent generally receiving a commission of 3% of the purchase price of the home sold.

In North America, commissions on real estate transactions are negotiable, there are new breed of marketplaces that facilitate the process of negotiation.[11] Local real estate sales activity usually dictates the amount of agreed commission. Real estate commission is typically paid by the seller at the closing of the transaction as detailed in the listing agreement.

Leave a comment