Hiring a Listing Agent

I. Overview of Real Estate Companies

In this article, we will discuss how to evaluate real estate companies and sales people (Agents) when deciding to place your home on the market.

Real Estate Agent. A real estate agent is a licensed individual that is associated with a real estate broker (company) and legally, the salesperson (agent)  represents the broker (company). You may make your decision based upon the salesperson; however, you are hiring the company. The salesperson represents the firm and the firm represents you.

Real Estate Company or Salesperson. Will you select your agent based upon the Company Reputation or are you most interested in the individual salesperson? Real Estate Companies fall into three basic categories: Nationwide Corporate Companies, Franchise Companies and Locally Owned Independent Companies.

Real Estate Team. This is becoming very popular in certain parts of the country. A ‘team’ is a group within a larger real estate organization. The real estate team is licensed with the state regulatory agency which licenses real estate salespeople and real estate companies. The ‘team’ will market themselves and properties independent of the larger real estate company.

We will not suggest that any one category of real estate company or team structure is superior to another, other than to say the level of representation will be more a function of the individual salesperson. 

II. Understanding Agency Agreements

The Listing Agreement. When you sign a “listing”, you are entering into an agency relationship with the company that will represent you in the sale of your property. Like any other agency relationship, your real estate agent is bound to fiduciary, loyalty, trust, accountability, and confidentiality. In other words, the agent must act in your best interest. This is a contract and you should review the terms such as: (a) When will the agreement expire? (b) What are the terms for cancellation? (c) What are your financial obligations? Generally, under the agreement, you are responsible for paying the agent a commission upon closing.

There are three basic type of listing agreements:

(a) Exclusive Right to Sell. The real estate company is entitled to a commission when a buyer is ready, willing, and able to purchase. The seller can enter into only one exclusive right to sell agreement. This is the most common type of listing agreement and may also be referred to as a ‘multiple listing agreement’.

(b) Exclusive Agency. This agreement is different than the exclusive right to sell, in that the seller retains the right to sell the property without obligation to pay a commission. Otherwise, the agreement is exclusive to one real estate company.

(c) Open Listing. Seller may enter into this type of listing contract with several brokers. It is also known as a ‘showing agreement’. The seller obligates themselves to payment of a commission should the real estate company provide a buyer for the property.

Buyer Agency. It is not uncommon for the buyer viewing your property to be represented by a real estate agent. The buyer’s agent is representing the buyer in the same manner as the ‘listing’ company is representing the seller. Even though the buyer’s agent is not representing the seller, the seller will be obligated to pay the commission to the buyer agent.

Dual Agency. In dual agency, the same Broker (company) represents both buyer and seller. Typically, different sales people from within the company represent the buyer and seller. Generally, the buyer and seller must agree to this arrangement in writing. The individual salesperson cannot represent both buyer and seller as agent.

III. Things to Consider When Hiring an Agent

(1) Listing Commission Rate. There are two different commissions you will pay. One commission rate is for listing your property. The other commission rate is for the buyer’s agent. The listing commission will vary from company to company and also the price of your property. Some companies have a minimum commission rate which the salesperson has little or no control over. While other companies allow the salesperson to set (negotiate) the commission rate.

(2) Buyer Agent Commission. Normally, it is in your best interest to offer a competitive commission to the buyer’s agent. Otherwise, you may discourage showings of your property. You should review ‘coop’ or ‘buyer agent’ commission for properties currently on the market.

(2) Processing Fees. Some companies will charge, in addition to the listing commission, a processing fee of approximately $500. In many companies, the salesperson is receiving over 90% of the listing commission, therefore, the processing fee is a source of income for the company.

(2) Marketing. Beyond the individual company/agent marketing proposal, you should expect Multiple Listing Service (MLS) and Internet exposure. Typically, when your property is listed with the local multiple listing service, it will automatically be uploaded to nationwide search engines such as Zillow, Realtor.com, Trulia, Redfin, and AskChristee.

(3) Experience. Generally, you ascertain the years of experience, for the salesperson you are considering. Years in the business may or may not equate to competency. A relatively new licensed person may possess the enthusiasm and intelligence to provide great representation.

(4) Local. An agent will local knowledge will be helpful in pricing and marketing of your property.

(5) Personality. Salesperson – Most likely, your satisfaction will be based upon the competence of the salesperson notwithstanding the company he/she represents. Therefore, it is vital you be comfortable with the salesperson that will be directly representing you. You should be comfortable in communicating with the agent.

Unless you select the agent based upon a referral, it is important you interview prospective agents. Remember, you are hiring someone for representation in one of the largest transactions of your life. You must be able to communicate with this person and you must feel comfortable with their competency in real estate matters.

IV. Agent Skills

At a minimum, you will be reliant on the real estate agent to provide:

(1) Insight into the valuation of your property. The agent should possess the knowledge to prepare and interpret significant date to guide in arriving at an appropriate asking price.

(2) Negotiation Skills. The agent must possess the knowledge and skill set to represent your best interest in contract negotiations.

(3) Contract Preparation. The agent must have experience in reviewing the offer to purchase agreements so as to best represent your interest.

(4) Follow Up Skills. The agent will need to follow up the contract times for Buyer Mortgage Approval, Termite Inspection, Home Inspection, Ordering of Title, Closing Requirements, and Closing Date.

V. The Listing Presentation

A good real estate agent would also be successful in most other sales positions because they possess the personality dynamics for “sales”. Therefore, you should expect an energetic sales presentation during the interviewing process – referred to as the ‘Listing Presentation’.

It is beyond the scope of this chapter to analyze personality types; however, you should understand that a good sales person is not necessarily the loudest voice at a party. Many extremely successful salespeople are often soft spoken but possess outstanding people skills.

Below are common elements of the listing presentation:

(1) Price. The salesperson should provide a ‘comparable market analysis’ (CMA) for your property. The salesperson should be familiar with the data and provide the most probable sales price. Too often, owners select an agent based upon a very optimistic asking price for the property. The real estate market is not static and as such, a competent sales agent will intelligently interpret the data and the market conditions. Please see ‘AskChristee Real Estate Guide – Pricing Your Property’ for a thorough discussion of pricing your property.

(a) Question. ‘Is it a sellers or buyers market?’

(b) Question. ‘What is a reasonable expectation for time to sell our property?’

(c) Question. ‘What is typically financing for buyers in our price range and should I expect to pay some of the buyers closing cost or discount points?’

(2) Sales Volume. As part of the hiring interview, you may be inundated with company sales figures on a nationwide or local basis. You will need to interpret the data and determine how significant (or insignificant) the numbers are to you. Volume figures in the real estate industry can be confusing. When a property is sold, the listing company gets credit for the sales volume but so does the company that represented the buyer.

(a) Question “How many buyers has your company represented in my community?”

(3) Database of Buyers. The agent may represent they or their company maintains a database of willing and able prospective buyers. You may or may not wish to ask them ‘how many of those buyers purchased homes within your community in the last six months?’. You should also understand that should the listing agent have a buyer for your home, then you would need to agree to dual agency. Additionally, the salesperson cannot represent both buyer and seller. It is most likely a different company will actually provide the buyer for the property.

(a) Question. What percentage of listings does your company actually sell – meaning representing the buyer and seller?

(4) Internet Exposure. Having your property properly exposed on various internet sites can potentially be very valuable. Most, if not all, can provide adequate internet exposure. Most likely, the buyer for your home is living within a 30 minute drive from your property.

(5) Flyers. Some salespeople will provide full color flyers for your property which are helpful for potential buyer while viewing your property.

(6) Pictures. You should inquire as to the quality of the photos – iPhone or professional photographer?

(7) Videos. Some agents offer virtual tours of your property.

(8) Staging. You should consult with the potential agent their view of staging your property.

(a) Is staging required?

(b) Does the agent provide staging services?

(9) Seller Concessions. The agent should be prepared to discuss the probability of seller concessions based upon the value of your property and typical mortgages.

(10) Net Sheet. The agent should provide you with the estimated net proceeds from the sale of your property.

(11) Guaranteed Sales Program. The company may offer a program where they offer to purchase your home immediately or after so many days on the market. You should review the ‘sellers net’ based upon a market transaction and compare it to the ‘buy in program’. How much will it cost you?

You are not hiring someone to actually sell your property, you are hiring someone to represent your best interest in the sale of your property.

Much like a courtroom proceeding, where both sides are represented by opposing counsel, a real estate transaction has opposing agents. Of course, winning becomes much easier when you have the better agent.

VI. Agent Search

If you do not have a good referral, you may research agents in your area on AskChristee.com. We recommend you speak with one of our ‘AskChristee Smarter Network’ agents.