7 questions to ask before signing contract

Friday, March 16, 2007

By Robert J. Bruss
Inman News

Spring is the best time of year to sell your house or condo if you want to receive top dollar. The reason is March, April, May and June are the months when the largest number of prospective home buyers are in the market.

If you want to take advantage of the 2007 peak home sales season, now is the time to get ready. Presuming your residence is cleaned, repaired and painted in preparation for selling it, the next vital step is to interview at least three successful realty agents who sell homes like yours in your vicinity.

Even if you think you might like to try selling your home without a professional realty agent, interview three agents anyway. They won't mind, as they know most "for-sale-by-owner" (called "fizz-bo") home sellers within 30 to 60 days realize how difficult the task is and phone to list with one of the agents already interviewed.

Because of the difficulty selling a home alone, especially in today's "buyer's market" in most communities where there has been a slowdown in sales volume, more than 80 percent of home sales involve a real estate sales agent, according to the National Association of Realtors.

THE SEVEN KEY QUESTIONS TO ASK EACH AGENT BEFORE LISTING YOUR HOME FOR SALE.

To avoid selecting a "bad agent" or a "lazy agent" when interviewing at least three successful local agents, don't hesitate to ask each one lots of questions. It's best to write down your questions before the interview so you don't forget any.

Select the agents to be interviewed by (a) asking friends, relatives and business associates for their recommendations; (b) including agents who have recently sold homes like yours in the vicinity; and (c) visiting nearby weekend open houses to meet agents and inspect competitive homes to see how yours compares.

After inspecting your home, during their listing presentations each agent should anticipate the most important questions smart home sellers ask. Here are the seven key questions each agent should answer:

1. HOW MUCH CAN YOU GET FOR MY HOME? Any agent who doesn't answer this question as part of his/her listing presentation is off to a bad start. Each agent interviewed should give you a written "comparative market analysis," called a CMA.

This CMA form shows recent sales prices of homes like yours in the vicinity, the asking prices of nearby similar homes (your competition), the asking prices of recently expired neighborhood listings (usually overpriced), and each agent's recommended listing price for your residence.

Be sure to keep the three (or more) CMAs to compare them. Check to see if each agent used the same "comparables" to reach their estimate of your home's market value and probable selling price.

Watch out for any agent who estimates a very high sales price without written justification. This is called "buying the listing."

Similarly, beware of any agent who estimates an abnormally low market value, possibly indicating the agent is out of touch with the current market or might be trying to get a quick easy sale.

2. WHAT ARE THE NAMES, ADDRESSES AND PHONE NUMBERS OF YOUR FIVE MOST RECENT HOME SELLERS? HOW MANY DAYS ON THE MARKET DID IT TAKE YOU TO SELL EACH HOME? You need this vital information so you can judge the skill of each interviewed agent.

Before signing a listing contract, smart home sellers phone each agent's previous sellers to ask, "Were you in any way unhappy with your agent and would you list your home for sale again with the same agent?"

3. HOW LONG HAVE YOU BEEN SELLING HOMES IN THIS AREA? DO YOU SELL REAL ESTATE FULL TIME? WHAT PROFESSIONAL COURSES AND DESIGNATIONS HAVE YOU COMPLETED? WHERE DO YOU LIVE? The answers to these questions will help decide if this is the type of agent you want to hire.

However, don't necessarily dismiss a relatively new sales agent who might have more time to devote to your listing compared to an "old pro" agent who has many years of home sales experience but who has become lazy and perhaps might even be semi-retired.

Occasionally, you will find a part-time agent who has excellent seller recommendations and who has connections with many prospective buyers.

For example, I know a schoolteacher who is a part-time realty agent, working with a full-time partner agent. She sells real estate full time during vacations and is very successful.

But, as a general rule, listing with a part-time agent means you will get less than the best service.

4. WHAT IS YOUR MINIMUM LISTING TERM? The best answer is 90 days. That means the listing agent has confidence in his/her ability to get your home sold quickly. If an agent insists on a longer listing, make certain it contains an unconditional cancellation clause so you can cancel without any reason after 90 days. This prevents getting stuck with an ineffective agent.

When an agent says something like, "The average number of days on the market for homes in this area is 123 days," your immediate reply should be, "Well, I will be paying a large sales commission and I don't want to hire just an average agent."

5. WHAT IS YOUR MARKETING PLAN FOR MY HOME? The best agents will anticipate this question by including a written marketing plan as part of their listing presentation.

Each written marketing plan should include at least (a) immediately putting your home listing into the local MLS (multiple listing service); (b) promptly holding a weekday open house tour for all MLS member agents; (c) weekend open houses once or twice a month; (d) newspaper ads at least once each week; (e) Internet promotion at www.Realtor.com and on the agent's personal Web site (some agents include a separate Web site for each listed home); (f) brochures (ask to seek samples of the agent's brochures for past and current listings); and (g) depending on the sales price, advertising in other publications, such as local and national home sales magazines.

6. HOW MANY LISTINGS DO YOU HAVE NOW? WHAT ARE THEIR ADDRESSSES? DO YOU HAVE AN OFFICE ASSISTANT? Related questions include asking (a) what day of the week do you take off; (b) who covers for you when you are gone; (c) how promptly do you return phone calls and e-mails; (d) will I be dealing with you or an assistant; and (d) are you planning any vacations during the next three months?

When an agent has too many listings (called a "numbers agent") he or she might not have adequate time to devote to marketing your listing. For this reason, smart home sellers ask, "What percentage of your listings sell and what is the average number of days on the market?"

If you learn the agent works as a "team" with another agent or two, that is usually a good sign. Having a full- or part-time office assistant to handle details, such as arranging inspections, appraisals and sales closings, should be considered a bonus if the agent has a large number of listings.

7. WHAT SALES COMMISSION DO YOU CHARGE FOR A LISTING LIKE MINE? Although a recent survey by Real Trends reports the average home sales commission is 5.1 percent, home sellers should be aware of the pitfalls of cutting a listing commission if similar local listings carry a higher commission rate.

Sales commissions are negotiable. But suppose nearby homes like yours are listed with a 6 percent sales commission. Reducing the sales listing commission to 5 percent or 4 percent could put your home at a serious disadvantage in the current "buyer's market" when there are more homes for sale than there are qualified buyers in the local market.

While discussing the sales commission, be sure your listing specifies how much will go to the listing agent and how much to the buyer's agent.

For example, if you list your home for sale at a reduced 5 percent commission, be sure the buyer's agent will receive a 3 percent commission (to be competitive with other nearby listings) and the listing agent will receive 2 percent of the commission. In some abnormally slow housing markets, eager sellers offer 7 percent commissions with 4 percent going to the buyer's agent.

Other commission alternatives might include a flat fee, such as $5,000, with a so-called discount broker where the seller does much of the work, such as holding weekend open houses and paying for advertising. The big drawback of highly discounted commissions, even if the listing is in the local MLS, is buyer's agents won't be interested in showing such low-commission listings.

In addition to the sales commission, be sure to ask if the listing agent charges any extra fees to you or the buyer. Some brokerages attempt to charge an extra "transaction" or "administration" fee. Be sure such fees are waived if you sign the listing.

SUMMARY: Spring is the peak sales season for homes. But be sure to interview at least three successful local realty agents to select the best one for your home. Ask lots of questions of each agent to determine which agent will be right for you.

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